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DEVELOPMENT, 8 MIN READ

What Is Proptech
and Why Is It
Gaining Momentum


WHAT IS PROPTECH
AND WHY IS IT
GAINING MOMENTUM

DEVELOPMENT, 8 MIN READ
ALEXANDRA LOZOVYUK

Need to start a project?

The development potential of PropTech called a "2020 game changer" is impressive. And it's good news: we have a lot of opportunities to discover new digital real estate tools, combine it, and provide a great experience to all parties. Tenants, house owners, and property agencies, as well as developers, all stand to benefit from a complete picture of PropTech. Challenges, however, with full adoption of technologies still some way off.

In this post, we aim to make you aware of the possibilities and advantages of real estate digital innovations. We focus on the value and challenges PropTech brings, and discuss the real estate trends and expectations, followed by insights from industry experts.
PROPTECH MARKET OVERVIEW

Proptech Market Overview


PropTech is a coinage of words "property" and "technology" and has plenty of synonyms such as RealTech, CREtech, RealEsTech, and ConTech that are used to describe this concept or some of its сomponent.

In a broader sense, PropTech is a booming evolution of digital solutions aimed at assisting and redefining the process of researching/selling/buying/managing real estate. Earlier we've already given a PropTech definition by James Dearsley:
what is proptech meaning property tech
The PropTech concept has existed for years and is currently upgrading, updating, upswing and more and more UPs are going on right now. :) Today it harnesses the power of existing inventions to optimize existing approaches and create advanced business-models and tech tools. 2019 survey findings demonstrated a huge potential of PropTech. Thus, over 80 % of commercial real estate investors noted within Statista research that they expect PropTech to have a significant or moderate impact on the industry. In turn, 58% of real estate companies have a digital strategy in place per 2019 KPMG survey.
PropTech definition chart Property Tech
But there are many challenges and issues on the PropTech runway. 2019-2020 pandemic temporarily curbed its exponential growth. Such PropTech solutions as alternative accommodation, ibuying, coliving, coworking are now under pressure. At the same time, the investment in Proptech has hit an all-time high in 2019, "a performance nobody could have anticipated in the depths of lockdown", quoting Lucian Cook, Savills's head of residential research.

Investment in IT and PropTech cooperation is driven by a need for:
  • 65% improved efficiencies;
  • 47% cost-reduction;
  • 44% enhanced decision making.
(2019 KPMG PropTech survey)

Key Trends of the Proptech

Currently, the real estate industry seems to be rebounding per Housingwire analysis report. The World Economic Forum, in turn, has observed that consumers are increasingly expecting property innovation and transformation. For example, Italy, where the real estate sector's estimated drop in turnover is between €9 billion to €22 billion compared with last year, is already experiencing a growing demand for high-quality properties that offer a safe and efficient living and working environment. This reaffirms that the core merits of PropTech upgrading are optimization and relief to today's real estate digital challenges.

Working environment transformation is one of the high-demending field, given the workspace is becoming more and more flexible. Corner offices turned into a legacy of the past and egalitarian coworking landscapes have taken its place. According to Statista, in the first half of 2020, 54 % of PropTech startup CEOs surveyed said that they were targeting office real estate, whereas only 31 % said the same of hospitality real estate.

The Views of Proptech Experts

It's always better to learn from the experience of expert players. That's why our team has interviewed industry experts and business owners to discuss PropTech trends and expectations. Let's check out their answers together right now. ;)

Olga Nechaeva No White Walls PropTech
What are the key trends within the Proptech marketplace for today?

Probably, one of the trends for the near future is funding by PropTech startups. There will be significant growth of conglomerates and the emergence of complex multifunctional products and services in each niche.
PropTech Funding Statistic Europe 2020
What Proptech sectors are the most promising up-and-coming?

  • The bundle of FinTech and PropTech sectors: digital transformation of different types of transactions, investments, installments, mortgages, etc.
  • A combination of LegalTech and PropTech: digitalization of the entire document flow. As an example - Legal for Landlords, legal services for landlords, and real estate agents in the UK.
  • Repurposing, which means revamping and converting buildings for the new functions, i.g., using former factories/offices as living quarters.
"With the red-hot economy that we have right now, it's so much easier to buy something with good bones that you can transform into what you need – you'll save a fortune."
Bill Menish
CAI, AARE, Managing Director of SVN | Premier CRE & Auctions in Louisville
What technologies are in demand?

  • Smart technologies contributing to space optimization to maximize the use of space and optimize costs.
  • Technologies for building a user-connected ecosystem, for example, online interaction between house owners\tenant\support stuff (cleaning, repair, construction, maintenance).
  • FinTech and InsurTech toolkit improvement within PropTech business processes.
Pablo Garnica Arextech Canada PropTech
What are the key trends within the Proptech marketplace for today?

Proptech is one of the FinTech offshoots. The difference between the two being nearly 5 years after arrival in the mass market. FinTech is mostly an alternative to several offline solutions, for example, banking systems and being provided for end-users, whereas PropTech is transforming the whole real estate business ecosystem and creating a lot of new solutions for intermediate users. That is the main quality difference between FinTech and PropTech and the benefit of the latter.

The real estate market is a sufficiently profitable one. There are a lot of new solutions appearing in the Prop Tech marketplace, including very specific highly specialized solutions currently undergoing the consolidation phase.

Boost of the Space-as-a-Service concept precipitated and increased by the pandemic of Covid-19 is one of the trends for today. For business owners and managers, it's become crucial to transform and adapt their offices to carry out different functions. There's also a growing demand for complex applications that provide a line of services. For example, it could be an app allowing purchase/repair/rent of housing or service allowing purchase/repair/sale of real estate.

What technologies are in demand?

  • Business process automation for more successful and efficient decision-making that is crucial especially for big players of the real estate market.
  • Improving the scalability of retail websites and smaller transaction sites to support the required load and high-level of usability.
Chris Ribolho HOMERRY Portugal PropTech
What are the key trends within the Proptech marketplace for today?

PropTech is a brand-new destination in Portugal. The main issue is the distribution strategy. People are only just beginning to understand all the benefits of implementing Proptech. This market hasn't been digitalized yet, that's why technology implementation is still expensive. One more problem is incomplete access to data. Information is not transparent, for example, people don't know the real price of housing.
What Proptech sectors are the most promising up-and-coming?

The combination of Proptech and Fintech will continue to be in demand within the commercial real estate sector. Let's mark that this sector already addresses more specific problems and become more Fintech-related.

Regarding the residential sector, demand for home management approaches will grow.
What technologies are in demand?

AI is going to be a core technology in the future. The main expectations from AI are providing fast management of housing search, automated price comparison, fast and simple access to data for users, and, as a result, market openness.
Andy Bodrog Property Partnerships Cover Genius USA
What are the key trends within the Proptech marketplace for today?

Managing partnerships with leading proptech firms at Cover Genius has enabled me to see the newest trends and where these new firms are developing. For instance, the iBuying sector is one of the growing trends due to the rapid rise in online convenience. We will see more platforms for instant buyers like Opendoor, Zillow Offers, Offerpad, Redfin Now, Orchard. We also see a lot of development in security deposit alternatives - being a major friction point in renting where many tenants have low credit and can't find rentals.

We will also continue to see growth in digitalization of real estate agencies like RexHomes for example - which has accelerated over the past decade but even more so during Covid - and virtual showings like Rently, keyless entry technologies, 360 virtual tours like Matterport where buyers can see apartments remotely. People have become comfortable with the new digital environment and are expecting their favorite online brands to keep up with the pace.
    What Proptech sectors are requiring digital transformation the most?

    One of the key themes since the rise of iBuyers has been around cutting out and chipping away at the middlemen agents' commission related to buying and selling houses and real estate agents services. Also, anything related to financial transactions such as rentals, loans, mortgages are in real need of digital transformation (see better.com for example). The intersection of fintech and proptech can deliver true benefits to consumers.

    But above all, real estate management systems with data collection solutions can leverage digitalization. For example, home security systems like Ring, Nest, Simplisafe that constantly gather data and have sophisticated analytics and AI mechanisms to even predict the safety of living with one or another neighbor, neighborhood crime alerts real-time etc.
    What technologies are in demand?

    • Drones: these devices are very important for real estate buying/selling and especially for its insurance aspects for surveying roof damage, floods, construction project management.
    • Technologies that use Big Data, Machine Learning and AI are in high demand as they can offer proptech businesses and their customers a lot of peace of mind; a few companies use it now, but eventually it all comes down to it because accumulating data is essential especially during the property buying/selling stage due to fragmented MLS systems nationwide. For instance imagine using the renters' data to offer them all of their additional services within their platform (companies like HelloAlfred.com) such as utility payments and personalized insurance offerings that best fit their needs, or in the iBuyers case building a more robust dataset of a certain city's buildings, zoning, codes so they can better price home values.
    • Blockchain and IoT are leading technologies in the future, but only a few real estate businesses actually work with them at this stage. Property transactions ie. escrow, title insurance are still done the same way since decades, while ecommerce is now cashless and often digital currency enabled.
    Alex Turner CBRE United Kingdom
    What are the key trends within the Proptech marketplace for today?

    That is an interesting time for PropTech. Model "Space-as-a-Service" is gaining momentum right now because it's a really convenient and profitable concept, precipitated and increased by the pandemic of Covid-19. For business owners and managers, it's become crucial to transform and adapt their offices to carry out different functions. There's also a growing demand for complex applications that provide a line of services. For example, it could be an app allowing purchase/repair/rent of housing or service allowing purchase/repair/sale of real estate.

    Specialized companies offer solutions for office resale and repurposing, improve online purchase features, and other tools that can make users experience comfortable and efficient.

    Remote work tools, smart buildings, office apps are today trends that gain popularity under the influence of pandemic. Today applications should be PHD (physical, human, digital), i.e., complex and multifunctional to meet all user's needs. The real estate market is a sufficiently profitable one. There are a lot of new solutions appearing in the Prop Tech marketplace, including very specific highly specialized solutions currently undergoing the consolidation phase.
    Dora Szabados CxO Beyond Visual UK PropTech
    What are the key trends within the Proptech marketplace for today?

    The main impact of this year is the pandemic that influences the real estate and PropTech market, which resulted in the need for digitalization of processes and slowing down of financing at the same time.

    Speaking of negative trends within the PropTech market it should be noted lack of adoption and low willingness to change.
    Where do companies search for new solutions?

    In the real estate market what I see very often is that companies are searching for new solutions within their trusted existing group of suppliers first.
    Yohan Florez Pulido Rapicasa Colombia PropTech
    What are the key trends within the Proptech marketplace for today?

    There are many established market players with recognized 20+ years standing in Colombia. But the last years were marked by the appearance of tech startups (for example, LaHaus) that implemented cutting-edge technologies for the organization of real estate purchase processes.

    The effects of the Covid-19 pandemic facilitated "traditional" businesses modification with the implementation of innovative technologies, for example, 3D-technologies for creating an effect of presence for exploring a place without being there. Before the pandemic, a lot of people simply printed large advertising banners and put them up on the window to sell the housing. Now they've started to use specialized online platforms.

    PropTech marketplace is very competitive, and at the same time, it is very large. That's why everyone will find here a suitable field of action.
    What Proptech sectors are growing in the Colombia marketplace?

    • Multifamily business;
    • Construction of new properties.
    The Colombia government contributes to people purchasing real property. It introduces many programs with loyal conditions because only 40 percent of the population has its own housing.
    Benedek Toth, Сo-founder at Proptee, United Kingdom
    What are the key trends within the Proptech marketplace for today?

    The property market in the UK is booming. People are investing in real estate, taking out mortgages, because real estate prices are expected to rise. Many PropTech companies are in pole position now. The combination of PropTech and FinTech is especially popular today.
    What Proptech sectors are the most promising up-and-coming?

    Real estate agencies may become one of the most suitable segments for us, since many of them are outdated and, as a result, are requiring transformation.

    Businesses have to provide individual offers for every PropTech segment and this will increase the conversion.
    What technologies are in demand?

    "Blockchain", "AI", "ML" are buzzwords that increase the level of sales, but only a few companies really use these cutting-edge technologies in the market.
    "People are fascinated by shiny new technology, and everyone is talking about artificial intelligence and big data but they still aren't automating their processes. There's a real disconnect, because AI and big data are entirely dependent on good data sources, and good data sources are dependent on good process."
    Bernie Devine
    Regional director at Yardi Systems

    What is the Future of Proptech?


    Despite the pandemic influence the next few years are expected to be a good time for reevaluating the importance of technological advancements and its impact on consumer experience, as well as the deployment of real estate technology.

    Houses are upgrading with new BMS systems, such as intuitive HVAC systems, and IoT connected devices. Tenants seek to embrace cost and use space-optimizing property tech tools such as Room Reservation Systems and Parking Optimisation. The CREtech survey shows that 65 % of respondents expect that the combo "real estate & innovations" is to have a significant direct influence on commercial real estate worldwide. That's why we should expect the storming of new real state tech approaches, consolidation of already existing tools, and the emergence of new opportunities for stakeholders.

    So, PropTech is beneficial from a holistic perspective and offers a lot of possibilities. Here are some future Prop Tech solutions that we might expect to expand:

    • Space planning;
    • Touchless asset control;
    • All-in-one building management platforms;
    • Real estate appraising software;
    • Smarter platforms for brokers and agents;
    • Tenant-supportive solutions;
    • Construction documentation platforms;
    • Analysis of multiple interconnected assets;
    • Technology-assisted property tours.

    Moreover, software creators provide a variety of AR/VR services allowing the "remote visits", for instance, an online open house, with the agent showing the property virtually. A property purchase is almost always emotional. Therefore it's essential to maximize interactive user experience within the buying process,. Real estate companies will gain great value from implementing digital tools that will enrich customer experience via innovative services and options. AR and VR tools help the visitor to receive a lot of information and implement the so-called 'rapid prototyping'. For instance, it allows projecting a draft custom design of new dwellings or remotely assess landscaping and interior/exterior elements of a particular real estate object.
    According to the 2019 Global PropTech KPMG survey, only 25% of respondents have a well-established data strategy that enables the capture and analysis of the right datasets. We want to help PropTech companies to implement suitable technologies and to provide the best experience for their customers. Get in touch with us via the website form or on LinkedIn. Freshcode team is happy to help and make your ideas happen!
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