US$20 million was invested into real estate technology (PropTech) start-ups in 2008, 10 years later in 2018, this number reached to a whopping US$4 billion.
PropTech was barely a topic of discussion a few years back. However, due to digitisation efforts in various industries, the real estate market also attracted its own share of technology incumbencies. Forbes refers to PropTech as “businesses using technology to disrupt and improve the way we buy, rent, sell, design, construct and manage residential and commercial property”. In this specific article, we will focus on trends which may attract future investments in PropTech 3.0’s ecosystem; specific to the commercial real estate sector (estimated market size of $32 Trillion).
In 2018, we were at Munich’s Expo Real and saw some fascinating startups both in the commercial and residential real estate market. In addition to the use of advanced technologies such as Augmented Reality and Virtual Reality (AR/VR), we also noticed startups experimenting with Blockchain, Chatbots, and drones. (some of them have been featured here). Real Estate Innovation Network established a Tech Alley at Expo Real in order to promote dialogue between large players and the PropTech startups. Key observations from Expo Real was the “change of mindset’’. We noticed that these big players from the real estate market were not shying away from new technologies anymore, but were trying to understand and implement them in their existing businesses collaborating with startups. This change of mindset is an assuring factor for 2019’s development in this field.
It is very important to chart out where we are standing as per the PropTech innovation map. World Economic Forum classified the PropTech sector into three major categories:
PropTech 1.0: Growth of online listing sites back in 2007.
PropTech 2.0: Use of data analytics and virtual reality to offer better and more specialised services for customers.
PropTech 3.0: Experimentation with emerging technology such as drones, virtual reality tools, IoTs and blockchain which are observing in recent days.
Major VC firms like Sequoia Capital, Global Founders Capital, Pi Labs, Seedcamp, Seaya Ventures, Passion Capital, Fifth Wall Ventures, Camber Creek and Startwood Capital Group have already invested a substantial amount in this segment. If you are interested to know more about European VC firms who are active in the PropTech sector, this post by PitchBook is just what you need. Needless to say, big players like SoftBank, JLL, CBRE, and Savills have already been in this space for a long time, and we can only expect this trend to continue. It’s also interesting to note that a large portion of 2017’s investments ($12.6 Billion) in the PropTech sector came from SoftBank alone due to their investment in Compass and WeWork.
Now coming to the main question: where do we see opportunities in 2019?
1. Connected properties
WeWork is a prime example of how we can imagine a connected office (more than 335 locations) that is highly intelligent and adjustable based on the users’ and residents’ needs. WeWork provides all the facilities that are expected from an ideal work place. However, we must not overlook the community aspect that WeWork is also trying to tap into: 1.2 billion people aged between 20 to 35 (We Generation as they call it). As per CEO Adam Neumann, WeWork is not a Real Estate company but a Community Company. So, the innovation is not only restricted to providing subscription-based flexible office desks, but also by creating a network of young entrepreneurs who can operate, grow, and expand together. The later has much a stronger impact in the connected world. Not only in the office spaces, but we also see a future of connected properties in infrastructure projects like airports, train stations, and retail properties like retail shops and restaurants, that will give higher importance to community interaction.
The need for connected properties will increase the demand for smart buildings. Smart buildings are the Internet of Things enabled buildings that aim to increase data flow to and from an integrated system. This is expected to create enhanced and efficient management capacities for lighting, security, and other service requirements of buildings. Smart buildings will not only provide a better understanding of the users but will it also reduce the management costs. Czech Republic based Spaceti is one of the pioneers in the European market to offer an all-in-one, indoor, location-based building digitisation solution. Spaceti’s mission is to redefine how people digitally interact with buildings, increase their well-being, and boost collaboration among occupants, while simultaneously providing an effective building management tool. We also expect that technologies like TheOfficeApp will gain significant traction in the market as existing real estate players would explore options to incorporate the community aspect in their commercial properties. A path that companies like Betahaus, WeWork, and Mindspace have successfully tested and established.
With the growth of connected smart buildings, we also believe that the importance of platforms like EverReal, which automates the rental process, is bound to increase. From listing properties to contract management, there is a huge gap for automation, and therefore German-based EverReal is a promising star in this space.
2. Customer experience
Customer experience is key for the digital economy, and visuals come as a main component for customer experience. On the other hand, AR/VR technologies are revolutionising the way customers choose their products. The use of technologies like AR/ VR and drones can radically enhance the customer experience whilst choosing, managing, and using any property. Virtual touring is an example in this case which can not only reduce the sales cost for realtors, but can also provide them with the storytelling tool. These advanced technologies are now reaching their maturity stage where they can be implemented in office design, marketing of commercial spaces, building management, and maintenance.
While conducting a few discussion sessions at Expo Real, we realised that the communication gap between PropTech startups and legacy real estate players are reducing. This is exciting considering the fact that the Real Estate industry is traditionally quite resistant towards change. We are hopeful that in 2019 we will see more PropTech startups in the abovementioned sector, conclusively bringing efficiency and alignment with the existing players. 2019 will definitely pave the way for PropTech development, and we are so thrilled to see what’s coming.
This article has been authored by Arnab Naskar (Co-Founder and Business Lead at STOKR). If you have any queries you can directly reach out to him at email@example.com. We always appreciate your feedback, so feel free to comment down below. We love to hear your feedback.
We at STOKR are really excited about the PropTech market. STOKR will be at Future PropTech 2019 on 13,14 May in London. Would be glad to meet you if you are there. To learn more about STOKR, please follow us on Twitter or join our Telegram channel and subscribe to our newsletter at https://stokr.io/subscribe.