What is PropTech? In a Post-Pandemic World, It’s Changing The Property Game
Updated: Aug 12, 2021
Technology is infiltrating the real estate market, forging seamless customer experiences, providing better-informed investment decisions, and helping to protect the environment. Relatively new to the scene, PropTech takes much of its form from its elder brother, FinTech, whereby the latest in technological innovation is spearheaded by Artificial Intelligence and Machine Learning. Although already gaining in popularity before the pandemic, subsequent lockdown’s acted as a catalyst to accelerate the adoption of PropTech services to ensure the safety of public spaces and reliable maintenance information. In other words, PropTech is changing the game - and certainly worth investing in 2021 and beyond.
Digital data-driven smart-offices and homes help alleviate pain points across multiple sectors from building management to planning permission, performance measurement, lease renewals, transactions, data, security, privacy management, and customer experience. However, the need to create valuable experiences with a customer-first approach that seeks to benefit landlords, tenants and investors, is driving innovation and investment.
Commercial property: Incentivising workers to return to the office
The pandemic forced an overdue upheaval of the traditional 9-to-5 working structure that has proved somewhat futile in an increasingly globalised world. With many people growing so fond of remote working, employers now have to make their headquarters a more enticing environment to work that aligns with new demands - mainly the requirement of flexibility.
There is a generalised belief that virtual meetings have an inadequacy to facilitate collaboration, creativity and teamwork. But the allure of freedom that remote working provides proves seductive, leaving business leaders who are keen to rekindle in-person environments to think outside-of-the-box to attract and retain employees. In some cases, such as property firm Bruntwood Works, sleep pods, yoga studios, and a podcast room have been installed at its Manchester office in an attempt to seduce employees back to the office. CEO Ciara Keeling believes that “by bringing some home comforts to the office, businesses can power up creativity, enhance productivity and generate ideas.”
Meanwhile, in Watford, Samuel & Co Trading have spent £200,000 on redesigning their offices to incorporate a meditation space, pool tables, games consoles, a refurbished gym with steam room, and its own cinema. Founding director Samuel Leach explained that the lockdowns allowed him to rethink his office space to "encourage staff to return to an enjoyable environment" that they've not been in for well over a year.
But are rooftop pools and cinemas really what employees want?
Darcy Talks Tech Opinion: Is what the building offers more valuable than the job role, payroll and office culture? A toxic environment built on archaic stigmas, micromanagement infused with hyper-political attitudes and office gossip will most likely deter a voluntary return to the workplace - regardless of all the new, shiny toys to play with.
With freedom playing such a vital component in the affection towards remote working, allowing employees autonomy over their time, harbouring a positive culture, and an aligned ethos might just prove more successful at enticing staff to return to the office - and retaining them, too. After all, people don’t miss the office - they miss the people.
An app-driven digitally seamless smart office
Commercial landlords hope new tenant experience apps will help office buildings stay relevant after the pandemic. By enabling users to personalise their space via their smartphone, workers can book meeting rooms, order from the on-site cafe, create online forums, adjust lighting, monitor air quality, and be assured that Covid-19 safety precautions are being adhered to through touchless access and sanitation insights.
Excitement for tenant experience apps has fuelled investments, starting with Chicago-based Rise Buildings acquired by real-estate software company View The Space for $100m (£71m) in March 2021 and Boston’s HqO raising $60m in series C funding in April 2021. Meanwhile, in the UK, PropTech specialist essensys raised £33.2M in July 2021. Investors are seeking products that complement landlords’ strategies to attract and retain tenants by offering valuable, customer-first environments that bridge the gap between the physical office and the digital workplace.
JLL predicts 30 percent of office space will be flexible in some form by 2030, and market research firm Futuresource Consulting predicts that demand for such apps will continue to increase. Smart technology creates a well-connected and digitally seamless experience for end-users. It allows investors and landlords to gain invaluable insights into how their tenants use the space and harbours measurable real-time data flows to qualify customer needs and filter necessary resources, inventory and staff requirements.
Eventually, however, the process will transform from a demand for flexibility to measurability - where the real-time feedback loop enables landlords and investors to fine-tune their product and build environments that enhance productivity, connectivity and enjoyment of the physical space.
Investment: Data-driven decision making
PropTech enables real-time data reports to inform and facilitate decisions, drive growth, anticipate potential crashes, forecast trends that can better support investment decisions and encourage more sustainable practices.
AMP Capital Real Estate’s Head of Asset Technology, Daniel Lepore, states: “property technologies enable portfolio visibility of building performance, making it easier to capitalise on useful applications such as fault detection diagnostics, performance degradation modelling, and even AI-based autonomous heating, ventilation and air conditioning controls. Investing in solid, smart building foundations such as cybersecurity and data protection is also vital as it can enact current and future trends, as well.”
Advocating for a single-solution approach, Richard Gerritsen, Regional Director of Europe for Yardi, believes that by having managers, external suppliers and tenants all working on the same platform, real estate can experience a complete transformation. Buildings will eventually be seen as a brand - rather than a physical space to be leased, and companies will choose their office based on the services they provide and the environment they want to foster for their employees.
“Technology tends to cut out the middleman,” says Gerritsen. “Therefore, the whole value chain will start to develop into something new. Operating models will be different driven by automation, causing business and revenue models to change as well.”
Residential: A centralised source of information
Prior to the pandemic, our homes predominantly served as a place to sleep in between engagements. Now, in a world riddled with Covid-19, we’ve witnessed the redundancy of the office and watched our homes quickly become our place of work, play, entertainment and exercise, forcing lifestyles to be reimagined and reprioritised. When the commute becomes irrelevant, why not purchase a larger property outside of over-populated urban areas?
Now that demands have changed, and we are spending a lot more time at home, finding (and investing in) a property fit for purpose is vital. Surprisingly, however, the property industry lacks stock because most people become entrenched in their homes, not wanting to endure the pain of moving again.
The problem with expanding your buy-to-let portfolio is the cumbersome process. Delays occur due to the lack of a single source of comprehensive information that takes too long to be produced throughout the transaction, often with misleading information and late disclosure of facts, resulting in nervous buyers retracting their offers.
But what if there was a single source of reliable information?
Matt Gilpin, Sprift founder, has vouched to make the process of buying and selling property quicker, easier and cheaper by monopolising mostly hidden and disparate raw data - that’s usually held by multiple parties with diverse stakeholders - into one system. By utilising technology, data is gathered, translated and cross-referenced from over 28 million properties in the UK across more than 100 data points held in different formats by many people to create a fully interactive online dashboard readily available.
A conscious real estate: taking care of our environment
We’re witnessing an increase in abnormal weather conditions across the globe, and the drive to protect the planet has never been so prominent. The World Economic Forum reported that the real estate sector consumes over 40% of global energy annually, with buildings generating 20% of global greenhouse gas emissions and using roughly 40% of raw materials. The industry is also responsible for high levels of waste production, pollution, water usage and consumption of other natural resources.
But - due to new technology and better data capture, PropTech has naturally aligned with the Environmental and Social Governance (ESG) objectives to build greener, more sustainable infrastructures, homes and workspaces. “These requirements, once developed, will largely shape investment, loan, and even insurance decisions. We will also see further increase in pressure from buyers and tenants for homes, buildings and public spaces that have a positive social impact,” says Sophie Taysom, director at Keyah Consulting.
“Capturing, measuring, and rationalising operational performance using data will be imperative for the imminent and unquantifiable risk of future carbon tax/energy offsets, which will directly affect real estate operational and investment performance,” says Zsolt Kohalmi. Having the ability to track energy performance via AI allows users to reduce their energy use and environmental footprint in real-time. Therefore, property owners and investors can make better-informed decisions on the materials they elect to use and provide better service to their clients without waste.
Conclusion:
PropTech has - and is - changing the way buildings operate. By delivering superior tenant experiences, efficient operations, greater returns and data-driven insights to better inform investment decisions, it’s no wonder PropTech is becoming a key differentiator for property owners, users and investors. When it comes to enticing workers back to the office, PropTech might just be the key incentive, too.
Here are the eight main upcoming drivers for PropTech growth: (watch this space for the PropTech series!)
AI and automation of real estate data
Big data and digitisation of property data assets
Sustainable technology in construction and maintenance
Smart retail
Virtual reality development
IoT with drones and 360-view display
Chatbots for customer-focused interaction
Industry-specific Saas (or PaaS - property as a service).