- How the real estate sector can engage with PropTech to bring the built and digital environments together
KPMG opens its report with that evermore relevant Bill Gates quote: “We always overestimate
the change that will occur in the next two years and underestimate the change that will occur in the next ten”.
Early on it tells us that 92% of those asked think that digital and technological change will impact their business. Good to hear, but not surprising.
What certainly is surprising is that just 30% of firms in the Americas and Asia Pacific believe that PropTech’s impact on the sector will be ‘very significant’, compared to 64% in Europe.
This doesn’t line up with the huge success for MIPIM PropTech New York this year, where the venue was bursting at the seams with you ‘realtors’.
Is there a divide in the States, with those on the East and West Coast adapting to technology but those inland not so much? I’m intrigued to know.
KPMG dedicates a lot of pages here to the subject of collaboration. Some 74% think collaboration between property and technology has increased over the past 12 months, and 62% believe that attitudes towards technology have shifted to now view it as an opportunity and enabler. A further 5% still view it as a threat.
When asked how they plan to best develop their digital innovation capabilities, 49% said they would collaborate with a partner, only 17% expect to build their own system.
Also interesting, by far the most common answer when asked what aspect of their business technology is most going to affect, was data and analytics - 44% to be exact.
“Large corporates are set up to engage with and procure from similarly large businesses, and that rigid framework often isn’t suitable for fast-growing start-ups. Corporates are starting to realise that if they want to engage with fast-growing technology start-ups, they are going to have to change some of their core procurement processes.”
“There is a clear risk that real estate players which do not convert their acceptance of PropTech into adoption, will be overtaken by rivals that do.”
“The global real estate industry has been slow to put in place strategies to take advantage of the latest PropTech developments. But it’s not too late to innovate.”
“Collaboration gives businesses an opportunity to take small steps in their PropTech journey, allowing them to experiment and work together to the benefit of the corporate and the tech company.”
Emerging Trends in Real Estate: Europe 2018, PWC and Urban Land Institute, October 2017
- Reshaping the Future
This mammoth, 86-page report opens by telling us that Europe’s real estate industry remains ‘cautious but positive’ in the post-Brexit economy.
There is less of a focus on technology in this one, compared to the rest, instead it delves deep into the belly of today’s property market to report on the current state of play.
But when it does cast an eye forward, the insights are fascinating. When asked what factors they believed would most affect real estate strategies over the next 3-5 years, 34% of those surveyed said that ‘the overall importance of workplace environment for attracting and retaining talent’ was going to make the most significant impact on the industry. Flexible working and quality of commute also appear towards the top of the list.
Space as a service is another key focus for this report, with 55% of those asked agreeing that institutional investors need to develop new and diverse skill sets in the new world of space as a service.
Technology is going to essential for this to happen, just as it is for providing a desirable workplace, but as this report stresses, innovation must arrive to truly help, not simply disrupt, and caution remains the word of the day, rather than running full pelt to simply win the innovation race.
“Changing human behavior, technology and the evolving needs of the built environment are driving a rethink of the world of real estate from four different perspectives: its nature as a product/service, as an investment asset class, as part of society’s critical infrastructure and as an industry sector.”
“As with parallel investments in technology, however, PropTech acquisitions can be expensive and are not without risks. Industry leaders canvassed by Emerging Trends Europe raise some concerns here, pointing to the need to ensure that investment meets defined strategic needs, rather than just being part of the rush to become tech-enabled.”
“The pace of change and the openings that come with technology are reflected in a strong sense of urgency and excitement across the interviews conducted for this report. These shifts also heighten complexity and risk, however. The once clear and linear invest, design, build and let model is giving way to an industry with more moving parts and more moving targets."
The technological revolution and the future of residential property, RICS, November 2017
This RICS report has been complied in partnership with Houzen, the online letting agent. In fact, it was authored by Houzen’s Founders, Saurabh Saxena and Angelica Donati.
In the executive summary that opens the report, six areas of property are highlighted as being particularly ripe of technological innovation:
1. Property management,
2. Building Information Modelling (BIM),
3. Research & business analytics.
4. Listing services & tech-enabled residential broking services,
5. Building mobile applications for stronger business integration,
6. Residential lending & mortgages.
If you only read one report in its entirety, I strongly recommend it be this one. It is a comprehensive overview of how technology and property intertwine, including a summary of innovation definitions, explaining everything from Deep Learning to Blockchain.
The graph above, taken from the RICS report, shows how affected each stakeholder has been by certain aspects of PropTech.
As you can see, digital brokerage has been the most inclusive and effective change to date, but in the near future, platforms that encourage and require ‘360 degree digitalisation of the [property] ecosystem’ is expected to bring a level of digitalisation to all stakeholders never seen before.
I would be inclined to agree because platforms encourage collaboration, with multiple third-party companies coming together to offer their individual expertise to users of the platform.
The future of PropTech is not insular; platforms are the best way of ensuring that technology truly benefits the market rather than muddying and confusing it.
Later on, when surveying professionals about which ‘deep technologies’ they are working on most, the overwhelming winner is algorithms; the implementation of Machine Learning to enable computers to complete tasks and offer insights. We also learn that B2B companies are focussing on this more than anyone.
“Unprecedented urbanisation, changing demographics and the rise of new economic powers are among the trends reshaping the world in which we live and work. New business models, innovative work dynamics, greater connectivity and technological advances mean that we need new skills and different ways of working.”
“Whatever your views, there is no doubt PropTech is here to stay. Globally, property technology received $2.67 billion of funding in 2016, up from only $186 million in 2011.”
“It is important for the residential real estate industry to wake up to the possibilities of deep property tech, and the possible risk for those stakeholders who fail to recognise its potential for the future. To develop such solutions you must assess your company-specific propensity towards innovation and deep technologies and implement change appropriately, and you should do it now.”
“...companies exist in every industry [who] typically will not adapt, regardless of the rate of change in the outside world. If such firms don’t expose their businesses to technological solution, they risk becoming obsolete.”
So there you have it, three major reports on property and the state of technological adoption.
Even though each of them discuss the issue slightly differently, giving focus to varying aspects of the industry, they all have one thing in common: they offer passionate and explicit warnings to those in the property industry who continue to fail to see and act upon the essential need to bring technology into their business.
However, as well as that, all three reports speak with caution as to the way in which property companies approach their technological take-up; it should not be a mad dash, blindly trying to move with the times. They should move steadily and astutely, gradually evolving their eco-system, one bit at a time, to ultimately complete their digital transformation.
*James Dearsley is a partner in PropTech Consult, digital transformation specialists for the real estate sector. To sign up to James’ Sunday PropTech Review, click here.