The real estate sector has, for a long time, been reluctant to embrace technology. While the rise of property tech start-ups did go some way to open people's eyes to the possibilities and fuel their imagination, it took something as monumental as a global pandemic to force many, who work within the sector, to move away from traditional (and often outdated) working practices into a more modern way of thinking and working.
Proptech not only played a fundamental role in helping the industry overcome these unprecedented challenges, it will also have an essential role to play in the way people interact with real estate in the future. Whether that be as an owner, investor, developer, landlord, occupier, funder or professional advisor - tech innovation is now part of the daily routine of almost every player in the real estate market.
Before we delve into some of the other forces driving the proptech evolution and some of the key developments in the market, a brief explanation of what prop tech is will help set the scene.
What is Proptech?
Proptech is all the tech tools that real estate experts use to optimise the way people buy, sell, let, research, market and manage a property. It is the alignment between real estate and technology which addresses fundamental questions of how users experience and extract value from real estate.
What has been driving Proptech disruption?
There are a number of key political, economic and social drivers pushing proptech to the forefront of everyone's minds. These include:
1. Environmental, social and governance (ESG)
ESG and sustainability have rapidly moved to the top of many people's agenda and it is clear that property owners need to take action now and adopt a proactive approach to future proofing their buildings and improving their sustainability credentials. Technology will be key to meeting ESG goals as the need for more efficient energy use and sustainable buildings becomes ever more pressing.
2. Employee health and wellbeing
Alongside ESG compliance, employee health and wellbeing have to be near the top of any business's key priorities. As businesses try to entice workers back to the workplace, or to retain and recruit talent, the environment needs to be one which is comfortable and helps facilitate employee productivity, innovation and social interaction. Factors such as air quality, lighting, space occupancy and cleanliness now play a bigger role than ever.
3. Reputation and brand
The ability of a business to lead the way and to demonstrate its best practices and technological capabilities to the world will also have a significant impact on their reputation and brand.
Businesses are now turning to proptech to address these challenges. Let's look at some examples of how they are doing this.
- Big Data
Big Data is about collecting and analysing real-time and historical data about all kinds of assets. Having real-time data on environmental performance via a digital platform across an entire real estate portfolio will help provide accurate and up to date insights on things such as pricing, valuetrends and even potential risks and failures. Big data can help take the emotion out of decision-making, making outcomes more predictable and data-driven which in turn, helps provide a platform for businesses to implement more effective strategies to reduce their environmental impact, improve employee wellbeing and productivity and reduce operating costs.
- AI and machine learning
Needless energy use makes up a large proportion of energy costs for the average commercial building. In most cases, this is because the building's heating, ventilation, air conditioning (HVAC) and lighting are run on a fixed system without any adaptation to real-time conditions in the office. Cutting edge autonomous AI-tech is being used to optimise these systems and reduceenergy use and costs for building owners and operators. It also helps to make data more actionable and allows occupiers to implement strategies to maintain and improve air quality, maximise space and convenience that will again, directly benefit their employees' wellbeing and productivity. The significance of AI and machine learning can therefore be clearly seen in the improvement of energy efficiency of buildings.
- Virtual and augmented reality
The use of digital floor plans and virtual viewing rose significantly during the pandemic as the market had to quickly adapt. Technology now enables anyone with a smartphone to take a virtual scan of their home and produce an accurate floor plan in minutes. From 360 virtual tours of properties, to augmented reality solutions for digitally adding furniture to the interiors of properties and creating prototypes of new real estate projects to help secure financing and sell properties before they are completed, it is clear why VR is seen by many as being at the forefront of proptech disruption. You call also view our recent article on real estate and the Metaverse where we discussed the metaverse and its impact on future real estate.
- Internet of Things (IoT)
The IoT refers to a "smart" network or ecosystem of devices and sensors that are constantly sending and receiving information about a building to track its overall state and predict failures. The use of IoT sensors can provide a simple, one-stop-shop solution to facilitate the measurement of indoor air quality, allowing real-time adjustments to ensure the best possible working conditions for occupants, while saving energy at the same time. Proximity and PIR sensors can also be used to identify room occupancy, allowing optimal use of space and smart cleaning.
- Electronic signatures and other tech-enabled products
Fuelled by the pandemic, there has been a major shift in the requirement for efficient transactions and streamlined processes (including electronic signatures) in real estate. We are going to see more businesses investing in tech-enabled products and services and integrating them with existing structures and platforms to meet these market needs and to improve the efficiency and agility of property deals.
There are other 'techs' which will play a significant role in the development of the real estate market going forward. Constructiontech is attracting a significant amount of funding and is considered ripe for disruption, historically being one of the least digitised industries. Also, plantech has the potential to unlock the planning system and significantly improve how we plan and design cities at all levels. Both will lead to wide ranging benefits for communities, developers and local governments and will have a big impact on the real estate market and how we plan, design and build towns and cities.
No one can deny that technology has transformed how we live and work. It is now an essential function of real estate with huge potential. The proptech sector has become crucial for stakeholders across the built environment to engage with in order to drive growth and investment. Sophisticated digital solutions, underpinning seamless digital processes and customer experiences, has also helped reduce the disconnect among corporate owners and occupiers, leasing agents and property managers when it comes to priorities and property performance.
Those who have embraced proptech will continue to reap the benefits. As we start to see more and more investment in it, the established players will face increased competition as technology becomes more accessible and the race to bring new solutions to the market gathers pace.
Those who re-imagine how their business operates and allocate capital towards technology investment will go from strength to strength whilst those lagging behind will face an uncertain future. The exciting thing abouttechnology is that it can improve almost anything......... if you just let it.
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