The year 2020 was pivotal with the coronavirus pandemic accelerating technology adoption in the real estate industry. The phenomenon is similar to how the global financial crisis led to the rise of fintech.
Of course, over the past decades, technology strategies have been a catalyst for change across every major industry and business, and the real estate market is no exception.
According to a recent EY survey of industry leaders on the status of real estate technology and its overall adoption in the industry,
“We surveyed over 100 real estate market participants worldwide, and more than two-thirds of them stated that adapting to new technology solutions is a strategic priority,” says Umar Riaz, EY Real Estate, Hospitality, and Construction Consulting Leader in the US (1).
There is no doubt that the real estate and property space has seen a monumental disruption amid the pandemic. Like many other industries, the move to digital and virtual alternatives is being adopted worldwide, giving rise to a whole new space called property technology, PropTech for short.
The Impact of Pandemic on Real Estate Industry
The coronavirus pandemic underscored the need for all facets of the real estate industry to embrace technology (2).
In the pre-pandemic era, many players in the real estate sector were adapting tech solutions. The aim was to protect the business by maintaining ongoing operations remotely.
Today, however, embracing technology has become necessary for real estate companies to build value in the post-pandemic economy.
The suddenness and urgency of nationwide lockdowns in major parts of the globe showed the need for innovation in the real estate market. Businesses that fail to meet their customers’ changing needs are at risk of losing their long-term resiliency.
Even though many players have started working towards innovation, these companies’ biggest challenge is finding and implementing tech solutions that fit their purpose. It is a major impediment to the wide-scale technology adoption in the real estate market.
We believe that 2022 will lead real estate technology companies to find ways to overcome these hassles and position the industry for a phase of rapid technology innovation and adoption.
It is also worth noting that many prominent real estate firms have emerged as major tech adopters over the past two years. In certain cases, they have also been codevelopers of state-of-the-art technology tools to help increase building operational efficiencies, improve how people work, live, and stay in better-built spaces.
Rising VC Funding in Prop Tech
Funding in VC-backed proptech companies has surpassed pre-pandemic levels, as per Crunchbase data (3).
As per the report, VC-based real estate technology companies have secured over 10.6 billion USD as of July 2021, up from the 8.3 billion USD raised during the same period last year and higher than any year over the same period in the last decade. Construction tech (1.9 million USD as of July 2021) and property management tools and solutions (2 billion USD) are leading the way.
“One of the things that have helped the growth is the rise in activities in the real estate industry, which had a ripple effect across Prop Tech,” says Koda Wang, co-founder of Block Renovation (4).
There has also been notable publicity for proptech companies in 2021 with SmartRent, a property management startup going public via a special purpose acquisition company (7), and Procore, a construction management software company doing a traditional IPO (8).
A report by Housing.com published in March last year highlighted that the Indian Prop Tech sector is also rising despite the pandemic (9). It attracted 551 million USD in investments in 2020, slightly more than 549 million USD in 2019.
Even though most of India’s real estate industry transactions, worth over 1.4 billion USD, happen offline, over 50% of purchasing decisions start with an online search. It indicates a growing influence of Prop Tech companies in India. The report also estimates that the potential market for Prop tech companies can be over one billion by 2025.
(Prop Tech startups in India include 99acres, NoBroker, NestAway, Magicbricks, PropTiger-Housing, among others.)
The success of these early adopters indicates the value of investing in technology and innovation. We believe that it is time for all real estate stakeholders to consider leveraging technology to unlock new potential and value.
The Lack of Fully Integrated, End-to-End Solutions
Compared to other industries, the real estate market has been slow to adopt new technologies. It seems to be because of underinvestment and skepticism around the value of new tools.
There seems to have been a shift in attitude over the past years, with more real estate companies opening up to technological solutions. The reason behind it could be people starting to recognize the values that technology can bring to their businesses.
At the same time, it also seems that they are struggling to find out which technologies are best for their businesses, which indicates a lot of room for opportunities.
Another challenge in the rapid tech adoption in the real estate industry is the lack of fully integrated, end-to-end Prop Tech solutions.
And in an era when customer expectations are evolving at a rapid pace, there is a major opportunity for businesses to shorten the value creation path for themselves and investors.
Various tenant engagement systems are available in the market that promises to enhance their experiences. However, only a few integrate seamlessly with a building owner’s current system.
It means that real estate companies need to adapt to true customer-centricity to unlock their long-term values. And we believe that Prop Tech companies that can offer it have the potential to be the winner.
There is a Need for a Customer-Focused “Hyper Care” Support
Wide-scale technology adoption in real estate will need entrepreneurs and investors to collaborate with real estate developers, owners, and operators to deploy fully integrated technology solutions that meet end users’ expectations.
It’s because, as you may have guessed, new digital technology tools and solutions need post-implementation support and ongoing product development in order to ensure customer satisfaction.
It means that Prop Tech companies need to utilize a customer-focused hyper care support approach when building platforms, apps, and solutions for tenants, construction work, management softwares, and other leading solutions to drive better adoption rates. The key is constant innovation to minimize challenges and issues with every system.
“I think we will see continued momentum in the Prop Tech industry. We are still in the early phase of modernizing real estate. Today, most of the construction is done in super old ways, so are property management and most transactions. Hence, there are a lot of untapped spaces for Prop Tech companies to build and grow,” says Clelia Warburg Peters, Venture Partner at Bain Capital Ventures that focuses on investing in Prop Tech platforms (10, 11).
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Real Estate Can Leverage Technology to Be More Sustainable
The real estate industry is not known to be an early mover in digital transformation. Yet, the industry is in a good position to draw upon lessons other industries have embraced technology to build personalization, improve their operating efficiency, and deploy environmental-friendly solutions.
For example, since the introduction of smartphones, airline firms have started to use technology to alleviate travel stress by streamlining the booking and payment process, which includes the ability to complete the booking procedure on a variety of devices.
It also allowed airlines to facilitate post-booking interactions like seat selections, positioning amenities, customizing the in-flight experience, and offering content updates like flight status and weather.
Thankfully, most real estate industry leaders have emerged from the tech world today. They have also brought a desire to streamline processes and facilitate innovations in the industry.
For instance, BluePrint Power is a New York-based real estate tech company that transforms buildings into revenue-generating clean power plants. Talk about bringing disruptive and innovative strategies into the real estate industry!
Robyn Beavers, CEO of BluePrint Power (12), real estate owners are one of the best partners because buildings themselves are one of the most valuable pieces for the future energy grid.
Building owners can reduce costs and set forth sustainability targets for carbon neutrality as more institutional investors have started to demand ESG focus (13).
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Here are some of the major sectors within the Prop Tech industry that you can focus on:
- Home/IoT devices
- Property search
- Property management tools
- Real estate agent tools
- Investment and portfolio management
- Home services
- Mapping technology
AI plays an important role in the real estate industry with its ability to process huge data generated in real-time and gain valuable insights from it. Besides understanding customer needs in properties, realtors also use AI-based virtual assistants and chatbots to connect with customers and improve their overall purchase experience.
For instance, Gabbi.ai (14), a Canada-based startup, leverages AI technology to help real estate agents to improve their customer journey. Gabbi is an AI assistant that helps nurture leaders, respond to clients, and keep track of important communication. It also helps eliminate tedious tasks, improve team collaboration, and convert cold leaders.
Another similar platform is Again X (15), based in Norway, making buildings more sustainable by improving their longevity using AI technology.
VR and AR technology have skyrocketed as a key property technology trend in the real estate industry to improve buyer experience amid the pandemic. Many businesses have started offering virtual tours of their properties which allow people to tour multiple properties in a short time from anywhere worldwide. With AR, property owners also show different furniture setups to different clients based on their preferences to help them envision their future property.
Overall, immersive technologies enhance the purchase experience and help customers make quicker decisions.
For instance, Hyperreality Technologies (16) transforms the real estate industry with their VR real estate tours. An Australian startup RealAR is another company that uses augmented reality to enhance the client experience (17).
Most property-related transactions involve various third parties like agents, banks, and others, which also need paperwork. The rise of property prices is also among the key challenges for the real estate industry.
Meaning, young generations are less likely to invest in property since they cannot afford it.
We believe that blockchain as a property technology trend can address these channels in many ways.
Blockchain-based smart contracts remove the need for any third-party involvement and make the process more secure and transparent.
Another application of blockchain technology we see in the real estate industry is tokenization. It allows people to invest a small amount of money in real estate in tokens. It enables real estate investments to be more accessible, incentivizing people to invest.
One such startup is Dyvare (18), based in Spain, which uses blockchain technology to democratize access to real estate assets. Dyvare develops AI-based smart contracts and tokenizes residential and commercial property units.
Mevi, a US-based startup, also uses smart contract technology to transform real estate transactions into digital transactions (19).
Before people decide on purchasing any property, they tend to examine it thoroughly from different perspectives. Even though it was not always possible, the scenario has changed since drones entered the real estate industry.
Drones allow people to view properties they are interested in from an aerial perspective. It makes the overall property purchasing experience more engaging. It also ensures buyers make a more informed decision.
In addition, drones have use cases in property maintenance. Since smaller drones can fly and reach places that may not be possible for humans, it allows for efficient monitoring of residential and commercial properties.
For instance, Triad Drones is a drone company based in the United States specializing in real estate. It offers customers two main types of drone services: aerial videos for property development and maintenance and photographs for marketing (20).
LibelLab, a France-based startup, is another example of drone technology offering services to the real estate industry. LibelLab is a content creation agency that built its drone arm, Lib-Drone. It offers services like aerial photography, aerial videos, and virtual tours. The company uses 360-degree cameras to create virtual tours that allow people to look at properties in much more detail from any part of the world (21).
There are also multiple use cases of technologies like data security, examples like Totem Buildings (22) and Ktech Labs (23), property aggregators like EquityDoor (24), building management systems, big data, and IoTs.
All in all, Prop Tech is one of the young industries that we can expect to grow dramatically in 2022 and beyond. As the world becomes more comfortable with new-age technologies, we are also likely to expand possibilities, applications, and use cases.
If you are a realtor, we are not recommending you to use every single new technology in your business. While some changes are needed, some are not. Some cases will also need you to conduct a thorough market analysis before you decide to implement real estate technology trends in your business.
All in all, you need to be careful about not keeping up with the latest technologies while also being careful enough not to waste resources on offering unnecessary features, and you will need to decide which of them are most appropriate for your business.