Proptech is powerful; its mission is to fuse the digital world with the built environment to create a competitive edge.
The interest in proptech was seen earlier this month, when US data giant CoStar bought Realla, a two-year-old, UK-based start-up offering a free-to-list search engine for commercial property.
CoStar is placing a bet that commercial property will follow the market for homes and move to online portals, like the market has done in the US. The pickings stand to be rich, especially with a proposed expansion across Europe.
US$12bn of funding for proptech companies in 2017
Last year, proptech globally saw venture capital investment triple to US$12.6bn, compared with US$4.2bn in 2016. A large slice of the 2017 pie came from SoftBank’s investments in Compass and WeWork (source: The Real Deal).
Constance Freedman, Founder & Managing Partner of Chicago-based Moderne Ventures, an ‘early stage’ venture fund, believes that this figure is in reality “significantly higher”. This, she says, is because it does not include ‘horizontal applications’: for example, DocuSign’s US$4bn initial public offering, which clearly has applications in and outside of the real estate sector; Perq – AI for creating lead generation; and platforms such as Envoy – all of which are not considered ‘true’ proptech. Global Real Estate Expert had the opportunity to ask Constance Freedman about how she sees the ability of proptech to create ‘durable growth’ in the real estate sector.
How can proptech help in ‘Engaging the Future’ over the next 30 years?
Over the next 30 years, technology will provide the tools to help the real estate industry to not only build faster and at a reduced cost – with no compromise on standards, but also with less waste and use of resources.
The industry is also evolving to act as an enabler in a way that has never been possible before; helping to link the creation of long-term economic growth with quality of life and optimal use of resources. This will have a tremendous impact for the industry and for its customers.
“As customers look for economic return, community cohesion and sustainable performance where they work, live, shop, and play, they are helping to push the industry and its technology partners to find ways to solve these issues.”
Technology is in a position to spearhead alternate means to address many of the current issues in real estate, from the way the digital economy has changed how end users view their physical space requirements to the massive shortage of affordable homes.
Many times, customer behaviour dictates industry change. As customers – whether real estate companies, owners, operators, investors or consumers – look for economic return, community cohesion and sustainable performance, where they work, live, shop, and play, they are helping to push the industry and its technology partners to find ways to solve these issues.
To what extent is the real estate industry being challenged by ‘disruption’?
For most of the last century innovation was brought to us by a few large, incumbent technology players, and at the pace they decided.
Outside capital is now allowing into the market smaller, more nimble entrants, who do not have the same constraints as the big players.
“Disruption isn’t always happening to the real estate sector; it is also happening for the real estate sector.”
We need to remember that disruption isn’t always happening to the real estate sector; it is also happening for the real estate sector.
Take the example of DocuSign; ‘DocuSign’ is now a verb in the real estate space. Or digital mortgage companies such as Better and insurance companies such as Hippo in the US housing sector, which can decrease transaction times by as much as 30 days.
On the multi-family residential side, we see companies in the US such as LeaseLock and Nova Credit allowing property managers and owners provide housing to people who might not otherwise qualify for an apartment, with no additional risk to the property.
These are all disruptive technologies creating enormous value for all players in the industry.
Many proptech firms will fail. How do you spot the survivors who will go on to have a radical impact?
Our Moderne Network has around 700 members, all investors, mentors or advisers, corporations and executives, looking for technology and innovation to create a competitive advantage.
We work closely with our Network to assess and then to spot the tech companies who they believe will have a radical impact on the industry; they look to understand the tech companies’ true value in their execution abilities and operational attributes.
How is proptech bridging the gap between the different players in the real estate industry?
Technology has enabled multiple constituents in the value chain or transaction process to share data and information quickly and often in real time.
In the past, data was siloed internally within companies and there was minimal transparency to the customer about a transaction.
“Technology has allowed integrated data flow to and from internal systems, which in turn creates operational efficiencies, as well as enhancing and increasing the speed of financial decisions.”
In the housing sector in the US, online search portals such as HomeSnap and tech companies connecting consumers with on-demand and local services, such as Hello Alfred, are providing greater transparency and better communication in a way that has never been conceivable before.
Technology has allowed integrated data flow to and from internal systems, which in turn creates operational efficiencies, as well as enhancing and increasing the speed of financial decisions.
Is the proptech industry doing enough to protect its customers from cyberattacks?
As we speak to companies and industry partners, the threat of cyberattacks is becoming a greater concern, especially in the IoT (Internet of Things) sector where an exponential rise is predicted in the number of connected devices on the internet.
Many new digital technologies are still vey nascent, so the true cyber threats are unknown. IoT devices will be installed inside a home or workspace, and connected to other connected devices, leaving multiple entry points for attack.
“All parties need to be involved in accessing any vulnerable systems and co-designing the necessary steps to safeguard the system.”
With so many links in the chain, it is hard to pinpoint who is responsible for safeguarding against any potential attack or breach. That is why all parties need to be involved in accessing any vulnerable systems and co-designing the necessary steps to safeguard them.