The property industry is no longer about bricks and mortar. It’s about technology.
Proptech has arrived in a big way and is growing faster than many other high-growth technology sectors. In fact, research predicts proptech will grow 16.8% CAGR in the next 10 years, globally.
So, what’s on the horizon in proptech?
What is Proptech?
Proptech, short for property technology improves how people and organisations interact with the built environment and the real estate sector.
Demand for greater efficiencies and enhanced user experiences are driving new technologies like never before. Proptech companies create innovative software, hardware and other core technologies, including advancements in building materials, fixtures, fittings and systems.
What’s driving innovation in property
Consumer expectations
Today’s consumers have welcomed disruption in other industries and this has heightened consumer expectations in relation to every aspect of life, real estate included.
Rapid urbanisation
With rapid urbanisation resulting in close to 70% of the world’s population shifting to cities by 2050, smart cities will feature integrated technologies and services to reduce environmental impacts, improve efficiencies at scale and gather data across every aspect of urban life. It’s predicted that, by 2025, the smart cities market will reach $1 trillion value.
Mobile first Millennials and Gen Z
We now live in a mobile-first world, and it’s one Millennials and Gen Z have grown up in.
As these mobile-first generations assume middle and senior management positions within the real estate sector, proptech creation and adoption rates are likely to increase accordingly.
Proptech startups already on the disruption-track
Urban planning
Urban planning technology addresses built environment concerns such as rapid urbanisation and smart city development.
For example, Neighbourlytics helps property investors gain real-world insights into who lives in a development, provides advanced social analytics for urban development.
Archistar, helps developers find profitable sites and design feasible buildings for real estate developments using artificial intelligence.
Design and construction
Safety, efficiency, affordability and environmental sustainability are key drivers for innovation in the construction space.
Modulous, for example, enables people to build affordable, environmentally sustainable homes faster through its unique modular home design and construction process.
Simpro offers end-to-end field service management software for construction sites and building maintenance.
Search, sale and acquisition
Companies in this category enhance and simplify how we search for, sell or buy a property.
Property crowdfunding sites have emerged to offer people more choice and control when investing in real estate. A Global Newswire Report states that the real estate crowdfunding market will reach almost USD $870 billion by 2027, with a 58% CAGR.
iBuying (where people buy and sell homes via a digital platform) has experienced an uptick with search growth for iBuying startup Opendoor reportedly increasing 214% in 5 years.
Silicon Valley Web3 startup Propy has processed $4bn in transactions for buyers and agents. Australian startup Pexa specialises in streamlining property settlement.
Leasing and management
Technology in this category focuses on efficiency and customer experience.
E-signing technology platforms such as HelloSign (now DropboxSign) have become the norm since Covid19.
Australian startups Managed and Yardi offer platforms that streamline property management and operations to create efficiencies.
Proptech predictions
Airbnb, WeWork and Amazon have already demonstrated how proptech disruptors can materially impact the markets in which they operate, leaving incumbents scrambling to catch up.
Over the next five years:
Proptech investment will likely outperform fintech investment
Investors are now pouring more capital into the sector than fintech, a trend that is likely to continue. Just in the first half of 2022, the US proptech market attracted $8 billion in growth equity, debt funding and M&A transactions.
Blockchain technology will open up property investment opportunities and liquidity
With the rise of NFTs and the metaverse, organisations are tying real-world assets to digital ones like NFTs and real estate tokenisation. A Security Token Market report states that real estate is the largest growing token sector.
The volume of proptech companies will grow rapidly
Proptech startups have grown from under 2000 to almost 8000 in the last 10 years, raising over $97 billion in equity. As the volume of solutions grows and the market matures, the sector will experience higher levels of competition and more specialisation.
Real estate sector specialists will become more entrepreneurial
Real estate sector specialists will exit the major real estate companies to build new businesses that focus on solving problems familiar to them in more agile, rewarding working environments.
Incumbents will diversify their offerings and embrace emerging innovation
Real estate sector incumbents and those with material exposure to real estate assets will increase their focus on innovation. Major corporates will establish corporate venturing functions and these teams will become as important as the M&A function.
These companies will need to manage the many challenges that come with change—integrating new technology, managing long-term investment risks and driving cultural change.
Many of the world’s largest real estate organisations have already begun this journey. For many others, though, time may well be running out.
Steve Maarbani is CEO of VentureCrowd