2017 seems to mark a turning point. Proptech has been building such mass and momentum that it will change the world.
Will we soon be able to buy a house with the click of a button? My report PropTech 3.0: the future of real estate, published by Saïd Business School, University of Oxford on May 10th, takes an expansive look at property technology (proptech), and its findings detail the dramatic changes facing the real estate industry. The 95 page report uses data from proptech venture capital firm PiLabs and interviews with over 50 real estate professionals.
Proptech came from fintech (financial technology), which brought us online banking, peer to peer lending and the crowdfunding movement. Why have we not seen a similar revolution in real estate? We all know that real estate tends to be conservative and closed off to innovation. Following the internet’s growth spurt in 1995-8, I think we saw the brief flourishing of what I have called PropTech 1.0 during the dotcom boom of 1999-2000, followed by crashes, disappointment, mergers and a few large survivors (CoStar and Argus, for example). Crawling tentatively from the wreckage came Rightmove, Zoopla, Trulia and Zillow. But these are just online lists – hardly game changers.
Right now, thousands of extremely clever people backed by billions of dollars of often expert investment are having another go, working extremely hard to change the way real estate is traded, used and operated. It would be surprising, to say the least, if this burst of activity – let’s call it PropTech 2.0 – does not lead to some significant change. No doubt many proptech firms will fail and a lot of money will be lost, but there will be some very successful survivors who will in time have a radical impact on our slow-moving, conservative industry.
The report describes how proptech is opening doors within the industry. Real estate has typically lacked diversity, but that is now changing because of proptech, and we are seeing people from a variety of backgrounds breaking into a sector that was previously inaccessible to them. Also, underlying this huge capitalist and social endeavour is a clash of generations. Many of the startups are driven by, and aimed at, millennials. Sometimes they look to baby boomers for advice; more often, they look to them for money. It’s a challenge – we feel we need to be involved, but we know we are going to lose money.
It is not surprising, given this, that there is some disagreement about the level of disruption that PropTech 2.0 will create. In this research I interviewed 50 real estate professionals, entrepreneurs and capital providers. From one side, I heard that none of these startups know what they are doing and that young entrepreneurs regard real estate as a sure thing. From the other, we heard that real estate people are not good at strategy, always extrapolate the present and miss turning points.
In the report I suggest that there are three main proptech movements. Smart Buildings describes technology-based platforms which facilitate the operation of real estate assets. The assets can be single property units or entire cities. The platforms may simply provide information about building or urban centre performance, or they may directly facilitate or control building services. This sector supports real estate asset, property and facilities management.
The Shared Economy describes technology-based platforms which facilitate the use of real estate assets. The assets can be land or buildings, including offices, shops, storage, housing and other property types. The platforms may simply provide information for prospective users and sellers of space, or they may more directly facilitate or effect rent- or fee-based transactions. This sector supports the real estate occupier markets.