In the third part of this series, Neil Cobbold – Chief Sales Officer at rental payment automation provider PayProp – explores whether PropTech has hit a ceiling or whether there are still unexplored avenues.
There has been quite a lot of discussion in recent years about whether or not peak PropTech has been reached – with critics suggesting the market has become oversaturated with products, meaning the law of diminishing returns has started to apply.
But things change. The Covid-19 pandemic has certainly refocused attention on good tech solutions. Still, are there now too many operators in the market? Or are we still nearer the beginning of the PropTech revolution?
How many PropTech firms are there in the UK?
We only need to go back a few years to reach a point where the word ‘PropTech’ didn’t even exist. It has only been in the last six or seven years that the term has entered the mainstream.
Flash forward to 2021 and it’s difficult to put an exact number to the current pool of providers, as new startups emerge and others potentially leave the sector all the time. However, according to Statista, as of August 2019 there were 805 PropTech firms in the UK, the highest number in the whole of Europe. A Forbes article published around the same time suggested that the UK market was worth a potential £6 billion and responsible for 10% of global PropTech investment.
What happened after that is anyone’s guess, but it seems likely the numbers have continued to rise in the nearly two years since that survey was taken, especially after the launch of a large number of virtual viewing companies and others offering lockdown-friendly tech solutions.
The growth of the sector has also spawned dedicated conferences, meet-ups, WhatsApp groups and roundtable discussions about how best to accelerate the UK property market’s digital revolution – driving the perception that PropTech has become an established market in its own right, and not merely a niche sub-sector of the property industry.
Is the demand there for tech solutions?
Plenty of research in recent times has suggested that consumers – including tenants and buyers – are increasingly seeking out tech solutions inside and outside the property sector. A great deal of our day-to-day lives now happens online – from banking and shopping to dating, ordering food and booking trips away.
The pandemic appears to have supercharged this. Some have suggested the tech revolution has been accelerated by five to ten years. The demand for online, contactless solutions – which became a necessity during the pandemic – is now expected to be greater than ever.
HM Land Registry, too, has been working on various interesting and innovative projects over the last few years to improve and enhance the property market with digital solutions – which has continued during the Covid crisis. This would suggest the government is as interested as anyone in digitalising the industry for greater speed, clarity, transparency and usability.
Is the market too crowded?
The argument is sometimes made that there are now too many providers offering similar products in the same space. Or, equally, that solutions are being offered for problems that don’t really exist. As Emma Vigus from mio pointed out in the previous PropTech Today column, there may also be occasions where agents sign up to products because they feel they need to keep up with the times.
But at its core, PropTech is there to solve everyday problems for agents, landlords, buyers, sellers and tenants. That could be automating rental payments or making the tenant referencing process much more immediate and user-friendly.
Tech products that do that successfully are likely to find their way through and stand above the crowd, regardless of how the rest of the sector performs.
Have we really reached peak PropTech?
Rather than reaching a growth ceiling, the PropTech sector has probably reached a new stage in its natural development. Some of the PropTech platforms adopted by agents in 2020 may indeed have been temporary solutions to a temporary problem.
But the world now looks very different to 15 months ago, and people of all ages have become far more used to online, contactless ways of doing business. You would expect this to be a boon to providers offering such solutions.
It will be fascinating to see how PropTech emerges from the pandemic – and whether the tech solutions adopted over the last year will stick. As ever, it is likely that those offering the most relevant, time-saving and problem-solving systems will thrive.
*Neil Cobbold is Chief Sales Officer at PayProp
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Whilst there are 800+ proptech firms in the UK- proptech is used very broadly and this covers both residential as well as commercial- across sales & lettings. Some are data/reporting focused, some AI, etc and proptech also often blurs the lines with contech (construction) fintech (financial) and legaltech. There are a lot of products and suppliers but these are getting better- both as new products and ongoing refinement. Poorer products are quietly leaving the market, mergers/partnerships/acquisitions are also happening at pace. All of this leads to a better marketplace for agents to choose from- although it can, at times, still feel a little overwhelming.
There are 11,000 Proptechs globally, and real estate is going through what the banking sector globally went through when it through its own fintech digital evolution, and now banking is for all of us efficient, fast and on my Apple watch (that and a talking Mickey Mouse), on my mobile, hastened by cloud computing and the annual doubling of technology's reach.
I am sure many bank staff ushered in the year 2000, globally not understanding that after the false dotcom bust of the late 1990's and early 2000's in digital, the onslaught into their sector was unstoppable, that and a multi billion $ spend to change things.
In the same way proptech, and I mean across CRE, Contech and all the verticals that make up the 'property' asset base, has the tendrils of a digital way of doing things within it. So not a case of do I stay analogue, maybe choose digital, rather what path should I take to de-risk my company's growth.
Why do we see the same huge property companies, keeping close to tech, Coldwell Banker Richard Ellis (CBRE) or JLL - well JLL spark specifically which is ' is dedicated to transforming the real estate industry through technology-based innovation' and turns over $16BN of revenue annually. These companies do not sit on the fence - they are planning how to digitally manufacture and own that fence.
So for residential or letting agents thinking that the digital transformation of the asset class that is property is somehow going to be a fleeting matter - I think maybe you need to take a look around at the big changes in the architecture of your business and plan the best ways to de-risk the next ten years.
If you want some free advice more than happy to help, we helped over 20 real estate companies get their 'heads' around the shape of modern real estate, and I come from a 30 + year background of analogue agency - so I promise I speak in a vernacular all can comprehend. As the lack of communality of language is one of the biggest barriers to change.
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