Contrary to ‘populist’ opinion, ‘globalisation’ has not stopped. Digital convergence, oblivious of boundaries, has moved it ascendantly to the clouds. Vast streams of information and data constantly wash around our communication systems connecting everything, everywhere to everyone. This onslaught of the ‘Internet of Things’ is transforming the very way we live, work and play. So much so, that ‘connectivity’ has become the 4th utility, just as vital for subsistence, productivity and pleasure as water, gas and electricity. Ahead – perhaps even already – artificial intelligence, digital disruption and cyber systems will reorder the world.
Such hyperbole has become almost hackneyed over the past few years, especially in the fields of finance and banking where ‘FinTech’ is now familiar lexicon. The new buzzword around the realm of real estate, however, is ‘PropTech’, and though some aficionados in the spheres of property technology and innovation are showing some signs of PropTech fatigue, it is becoming clear that the next few years will witness some of the most thrilling and radical transformations and transitions that the real estate industry has ever seen. Truly, it is the Dawn of PropTech.
What is PropTech?
Whether it is in finance, banking, health, tourism, travel, energy, transportation, or even education and leisure, the prime reasons for using technology platforms are to speed things up, make them cheaper and the process more efficient. Despite some emergent signs in the early 2000’s, when the residential property market started to recognise the potential of technology to deliver ubiquity, transparency and efficiency to sales and lettings search in the sector, the real estate industry has seemed relatively slow to innovate and adapt.
Beneath the surface, however, significant change has progressively been taking place, and the complex, multi-various, competitive and high-value world of real estate is swiftly emerging from its outmoded and maladroit slumber as one of the hottest and fiercest fields for innovation, investment and entrepreneurship. Thus the term ‘PropTech’ is now sweeping around the media, innovation and real estate circles, spawning a multitude of new proficiencies and specialist start-ups concerned with inventing, adapting, refining and enhancing the range of services provided by the property industry in finding, funding, buying, selling, renting, sharing, building, occupying, heating and managing residential and commercial property.
The Driving Forces
Alongside speed, cost and efficiency, some of the major drivers and manifestations of change caused by technology on commercial real estate can be summarised as follows:
- Smarter, and more holistic, tools are increasingly available; simplifying, synchronising and streamlining various stages of enquiry, selection, negotiation, completion and occupation throughout the property disposition and delivery processes.
- The self-service culture permeating so many business sectors is impacting more and more upon the real estate industry. First, with residential, and more recently, commercial.
- There is a changing dynamic in the nature of work and the needs of the workplace. Flexibility, adaptability and connectivity are the modern maxims in terms of location, layout and leasing. Wellbeing at work a developing watchword. And the pursuit of common standards, shared data sources and transactional transparency is quickening.
- Blockchain, as “a platform for truth and trust”, could be set to revolutionise the world economy. An immutable, distributed database of digital assets, it is already transforming the financial services industry, and seems certain to impact on the commercial real estate business. It will: verify data swiftly and efficiently between collaborating parties; accelerate and authenticate workflow throughout real estate transactions; and, generally add value to all concerned through a seamless centralised system.
- The power of artificial intelligence (AI), together with virtual and augmented reality (VR & AR), already familiar in the design and construction processes, is now spreading to sales, lettings and management functions across the real estate sectors. Cutting-edge and compatible user-interface (UI) technology, in the form of apps and chatbots, is speeding-up enquiry and decision-making procedures. And, AI will assimilate ‘players’, preferences and performance to predict demand and supply, as well as pricing, probability and priorities.
Apart from a hope and expectation that people will stop talking and writing about the ‘Uberization’ of the workplace, and a welcome inevitability that the very term ‘PropTech’ itself will start to disappear from the professional lexicon as technology oriented property usage becomes the norm, there are a number of issues and trends worthy of mention. Here are our top 10:
- First, and perhaps foremost, the promotion and implementation of ‘sustainable development’ in all its forms across the built environment will be fostered and furthered (e.g. location, transport, design, funding, energy, materials, space efficiency, and the like).
- Locational choice will be broadened, and split operations facilitated, with prospective occupiers able to site much, or even all, of their business operations in fringe central city areas or smaller towns.
- Adopting flexible work solutions such as co-working, live-and-work and serviced spaces, occupiers can adjust size, tenure and situation to meet their specific business development needs and generally use their property assets more efficiently.
- Smarter energy systems regarding both use and storage will give building owners and occupiers greater and greater control over costs and contingency.
- Advanced management frameworks and platforms will assist landlords in two ways: locally, by providing feedback from both the building services dashboard systems, as well as the more personalised tenants experience about the working environment (e.g. WeWork); and, universally, by reference to common platforms providing comparative evidence (e.g. Infabode).
- Whilst the world of work is succumbing to successive bouts of technological progress, corporations across the globe are having to compete in the ever-intensifying ‘war for talent’. Smarter spaces are also having to be made healthier, collegial and more convivial — humanised! Millennials, who will make up three-quarters of the workforce by 2025, constantly seek a more civilised as well as connected workplace. Again, however, the boundaries are blurred, for much of their desired cultural ambience has a technological source.
- The concept and practice of ‘crowdfunding’ for property investment and development has already commenced, initially in the residential sector (e.g. Property Partner), but there is likely to be massive growth across all sectors of the real estate industry over the next few years, especially in the commercial field (e.g. Transcendent Real Estate). The lending market, moreover, is already seeing the emergence of ‘frictionless’ mortgages, where digital technology has completely streamlined the process of house purchase through the use of online portals, easily accessible property data and electronic contracts.
- The title, role and function of “controllership” will burgeon. Not only will controllership be responsible for overseeing the integrity of an organisation’s financial processes, systems and delivery models; but, as a leading management consultancy avers: “increasingly world-class controllership functions will strategically leverage technology to improve the efficiency and effectiveness of operations, manage risk and control costs to help drive enterprise performance through value-added capabilities.” (Deloitte Tech Trends, 2016).
- Unquestionably, as the impact of technology on property expands and develops, so too will the need for appropriate legislation and regulation. Money laundering, fraud, market manipulation, burglary and invasion of privacy, with a direct link to PropTech, have all been witnessed over the past few years. Collaboration and transparency between all parties within the real estate milieu must surely be the keywords for a sensible and secure framework to be devised and governed.
- The debate will continue to rage over whether AI is going to create or destroy jobs for humans!
The next few years will almost certainly witness a storm of start-ups, a deluge of data and digitisation, torrents of technological innovation, a maelstrom of mergers and a positive plethora of platforms. Above all, most assuredly, ‘agility’ will be the hallmark of successful property professionals over the period, combined with a mindset of collective endeavour and mutual enterprise. PropTech is, at heart, a collaborative community, and a new connected age has dawned for all.
Jon Lovell, co-founder of Hillbreak, will be moderating a panel at the ULI UK Tech Conference on 20 June, exploring the impacts of the tech revolution on the urban realm and ways in which cities, property organisations and government can harness the potential benefits.