Proptech has become one of the many tech related industry buzz words out there, it’s heard more and more in the property and real estate space, but what does it mean?
What is Proptech?
The word ‘Proptech’ itself is jargon, combining the words of property and technology. As a movement, it is part of the digital transformation that is impacting a number of historically traditional and conservative industries; finance with fintech is well recognized, but there’s also regtech (regulatory), insurtech (insurance), and lawtech (legal). Industries which are not only undergoing a technological change, but also a mindset shift that is being driven by emerging technologies and evolving customer expectations i.e. a digital transformation.
The ever-changing digital landscape, new and shifting demands, and small nimble players, are forcing legacy industries to embrace new ideas. Most recently property, or Proptech, has simply been one of these traditional industries which has been garnering more and more attention. Between 2013 and 2017, investments in Proptech reached close to USD8 billion worldwide, with Asia receiving around 60 percent of those investments.
Proptech is already affecting many sectors of the property and real estate space, anything from the office side of things, to residential and retail, and even industrial. This digital transformation movement is changing the ways we think about our spaces and how we interact with our environments, it is exploring our homes, workspaces, and even the cities of the future.
The evolution of Proptech
Proptech has been around since the late 80s, it just wasn’t called that and it didn’t have the same level of attention – it existed as a slight challenge to what the industry was back then. However, with the rise of the internet the first wave of Proptech, Proptech 1.0, began to gain strength. The industry’s first sign of an oncoming digital transformation began with consumer-focused websites that acted as aggregators or marketplaces. Websites like Zillow in the US, Zoopla in the UK, and Lianjia in China changed the way consumers search for property. People no longer had to meet 15 different estate agents while carrying a plethora or property flyers, one could simply go online and find out pretty much every property in an area.
Property 2.0 became more technically challenging and had a greater business focus. The movement saw the entry of thousands of startups exploring new ideas and possibilities to disrupt specific processes and segments of the market. The second wave also relied on many existing technologies and concepts, trends like the shared economy, fintech, smart technologies, virtual and augmented reality, and energy efficiency among others. Proptech 2.0 brought new ways of thinking and technologies that existed elsewhere into the property space.
Proptech tools are categorized into either a sales tool, technologies that drive and facilitate transactions and deals, or infrastructure and service tools focusing on reducing costs, adding value, and building or incorporating the shared economy and wellness values into the business.
Proptech 3.0, the current wave of Proptech, has an enterprise focus i.e. radically transforming the transparency and liquidity of the property space, and using new and emerging technologies and mindsets to accelerate the rate of change regarding the digital transformation of property. Now Proptech incorporates anything from the Internet of Things (IoT), to big data and analytics and artificial intelligence (AI), to co-living and co-working spaces, health and wellness in the office, and new business models.
IoT and AI have the potential to drive intelligent buildings that measure and control space efficiency, and health and wellness in workspaces, all while supporting low headcounts and high-value human roles to drive productivity. Cryptocurrencies and blockchain could implement digital currencies that are specifically used to buy and lease property, while creating a more transparent, secure, and accessible marketplace that would allow for full transactions to be done online and remotely. Co-working and co-living trends, as well as demographic changes, will drive cities to go higher, becoming vertical communities where work, play, and living are all housed in one massive mix-use complex.