PropTech: Pace. Agility. Innovation.
Despite enjoying enormous investment, supporting significant wealth, and attracting considerable entrepreneurial activity, the real estate sector was slow to invest in digitisation and the adoption of future facing technology.
But not anymore.
Like many sectors the industry has been ripe for disruption for years, but the future value of new digital technologies never seemed to be worth the pain of implementation. Then Covid-19 forced the greatest reset of our time and accelerated the growth of innovative digitally led solutions, which supercharged both interest and investment in the PropTech sector.
According to PWC’s report on Emerging Trends in Real Estate, “PropTech will soon not be a novel concept. Technology will be embedded in all aspects of real estate.” PropTech is expected to digitally revolutionise the real estate industry, the same way FinTech took the financial sector by storm, by offering smarter, more connected solutions for both real estate professionals and consumers. The report identifies that as a sector real estate is nearer the beginning than the end of its digital transformation, but the momentum is gathering pace. The report also states that, “to be a winner in the next five years you will need to be faster and smarter and being digital is the key to being fast and smart.” This level of expected investment is shown below:
What do we mean by ‘PropTech’ and just what aspects of the market does it cover?
Forbes defines PropTech as, “Businesses using technology to disrupt and improve the way we buy, rent, sell, design, construct, and manage residential and commercial property.” Although a relatively young field, PropTech start-ups have already raised over $43 billion in funding worldwide since 2012 with 2018 alone seeing an 82% increase year on year. The breadth of PropTech companies breaking through illustrates the scale and value of the opportunity. In the same PWC report, two thirds of the companies involved identified investment in PropTech going forward as a major trend.
Why hasn’t the digital transformation happened sooner?
One thing making PropTech such a compelling opportunity is that the industry has been relatively untouched by technology, so the scope for change is huge but so is the inertia, blocking the adoption of technology-led solutions. In fact, only 10% of global real estate CEOs claim they are concerned by how quickly technology is changing in their industry, compared to 38% across all industries. The key challenge has been more behavioural than commercial with a lack of motivation or resistance to change being a key barrier.
The global pandemic forced a greater dependency on interconnected platforms, remote solutions, and digital innovation, to help us navigate new unforeseen restrictions, but ironically many of the successful digital solutions prove equally useful in a non-COVID-19 setting too. PropTech companies are pioneers and innovators and as in any sector there will be resistance but once the momentum gathers pace, and it will, the use of digital applications will be accepted and expected.
What does it take to innovate the property sector?
It is clear from the scale of investment and range of technology applications on offer, that this is a sector set for serious growth, even if it is currently early days. Whether the investment is in the millions or the thousands, PropTech companies are offering ground-breaking innovative solutions and, in some cases, improving quality of life for professional users and consumers.
As we move towards our conclusion, we thought it would be useful to highlight a handful of innovators in the PropTech space:
Opendoor offers a faster, innovative approach to selling your home via an app. They buy homes for cash (in less than 60 days), then invest in improving the properties before relisting them. Founded in 2014 and based in San Francisco, funding received to date is $1.5bn.
Offr digitise the buying, selling, and leasing process for real estate agents and buyers. Offr claims that in March it enabled the world’s first fully remote, end-to-end, digital property transaction. The property was sold entirely online for 61% over the asking price. Founded in 2018 and based in Dublin, funding received to date is $3.6M.
Movewise uses deep technology helping property sellers identify the most relevant local estate agent to use for a specific property. The software manages the entire sales process for vendors, leveraging unique data and insight. Founded in 2018 and based in London, funding received to date is $1.4M.
State of Place is a walkability and quality of life data platform for cities and developers. The software uses detailed micro-scale to identify the specific urban design changes most likely to maximize the value of projects and deliver the biggest impact on quality of life. Founded in 2016 and based in Boston, funding received to date is $524K.
To emphasise the current size of this developing ecosystem, PropTech today has the same funding size as FinTech did back in 2013. Given fintech’s growth of 44.8% (CAGR) over the last seven years, the prospects for PropTech are encouraging. The pandemic has only amplified the need for innovation and for those companies with the right proposition the PropTech market looks ripe for development and the investment looks set to continue at pace. It is inevitable that the demand for digital expertise and the human capital that can innovate, drive disruption and create growth will intensify with it, and at Norman Broadbent we are already advising clients on hiring and developing the right talent for this next phase of digital evolution.
Norman Broadbent’s agile approach and commercial structure offers clients the ability to create a bespoke solution which suits their needs without any dilution of quality. In addition, our expertise and experience help Boards and Leadership teams identify and fulfil their business-critical requirements. If you would like to discuss this piece in more detail, the wider market, and/or your growth plans or challenges, please do not hesitate to contact Richard Jones, Managing Director, Digital via Richard.email@example.com or on +44(0) 7912 564 797