It’s no surprise that real estate, as the world’s largest asset class, offers ample opportunity for institutional investors and individuals willing to pursue it. Even as new trends emerge, like the shift to remote and hybrid working, real estate maintains its importance as a fixture in society. According to IBISWorld’s latest report, the commercial real estate market is poised to grow by 3.8% in 2021, with a $1 trillion market valuation. Proptech, or property technology, will continue to drive real estate’s rapid growth by unlocking new efficiencies for real estate professionals across all verticals.
All capital markets rely on technology to accomplish things in a faster, more accurate and seamless manner. While real estate, and particularly commercial real estate have historically lagged behind adjacent markets when it comes to technology, proptech has propelled the industry forward. Read on to learn more about what proptech is, and how this technology continues to shape both the real estate industry and the built world.
What Is Proptech?
Proptech, or property technology, encompasses all of the real estate-specific tools that industry professionals and individuals use to work faster and more efficiently. Various proptech tools, software platforms and databases service every corner of the commercial and residential real estate worlds, from investment deal management, to portfolio management, property management, and beyond. Simply put, proptech connects people and information to simplify how we own, sell, manage, operate, research, rent, buy and invest in real estate.
In many ways, proptech is similar to its more realized financial services counterpart, fintech. Short for financial technology, fintech has played a significant role in modernizing finance-related industries like banking, payment processing and lending. In the same vein, proptech trends have uprooted traditional workflows, which were largely based in Excel, to create more efficiencies through digital, often cloud-based tools. It’s similar to, but distinct from construction technology, or contech, which relates more to the building process itself. Proptech has already changed how the real estate world transacts, and will only continue to develop a stronger foothold as firms adopt these digital tools and new technologies emerge.
The Proptech Landscape: Business- And Customer-Facing Solutions
Property technology is available in both business-to-business (B2B) and business-to-consumer (B2C) forms. Dealpath, the leading commercial real estate deal management software, is used by institutional investment management teams to streamline workflows, collaborate across teams and simplify reporting. VTS, a virtual tenant leasing and asset management platform, is another popular proptech platform that helps landlords and brokers to achieve their goals with more connectivity and in less time.
B2C proptech software helps both businesses, landlords and others to earn additional revenue and conduct more through research. Redfin and Zillow both connect home buyers and sellers or agents, expediting a previously lengthy and disconnected process. Airbnb gives owners another way to monetize their homes, and travelers a convenient, comfortable and fun way to find accommodations.
Proptech will never eliminate or invalidate the deep industry knowledge required to thrive in the real estate industry. But by purposefully connecting the real estate world, it makes information more accessible and helps professionals to make procedural decisions in a faster, more efficient way, driving revenue as a result.
The Real Estate Proptech Industry is Booming
As decision makers realize the impact of connectivity, seamless collaboration, and centralized data, proptech news continues to surge in popularity as the market size grows. According to Statista, proptech companies have received $18 billion in funding worldwide as of 2018. Between 2013 and 2019, there have been over 100 mergers and acquisitions in the proptech space. Finally, proptech deals exceeded $7 billion between 2013 and 2020. There’s no end in sight; property technology companies continue to set the scene for a digitally connected future with seamless transactions by developing game-changing technologies.
In many ways, proptech has already accelerated growth for lean powerhouse investment management teams of 15. Small teams, which previously relied on legacy methods like Excel for data management and email for deal communications, have utilized property technology to refine their processes for increased scalability. Because these technologies allow them to collaborate and make decisions more efficiently, they can review more deals with ease. Time and again, firms have realized that data speaks volumes about past performance and future opportunities–part of proptech’s mission is to centralize that data for simpler, more efficient processes.
While smaller firms have modernized their processes, proptech is also accelerating growth for institutional giants, many of which have already earned a sizable market share. Blackstone, already a leader in the real estate investment management space, relies on technology like Dealpath to automate and track data streams and identify mega trends. Based on these mega trends, or reflections of rapidly evolving business and consumer habits, Blackstone can allocate its funding in promising markets. Even during the pandemic’s peak, when real estate was in a precarious position, Blackstone made many decisions that could only be justified by vetted data.
Understanding Proptech’s Impact on the World & Market of the Pandemic
Before moving to proptech, many large CRE investment management firms relied on a combination of industry-agnostic tools and proprietary technology solutions. This approach helped them accomplish efficiency-related goals, but ultimately primed them for proptech solutions that would drive their goals and workflows in a more holistic way.
Now, proptech presents new opportunities to centralize and gain insight into real-time data, which was previously delayed or disconnected. This newfound window into the rapidly changing real estate market enables professionals to tap into their proprietary data’s full potential. For example, as the pandemic progressed, it became clear that retail’s role in society had changed. In fact, Jeff Kaplan of GCP noted during a NAIOP panel discussion that their data illustrated the growing importance of eCommerce warehouse distribution centers, long before Amazon’s earnings exposed its massive growth. While multifamily will always be a viable investment as a basic necessity for urban living, real-time data also foretold its shift during the pandemic’s urban exodus.
How Do Real Estate Professionals Use Proptech Software?
Depending on the real estate vertical it services, proptech software can fulfill a variety of different needs. For example, the specific software a building operator uses to monitor lighting or occupancy would differ dramatically from proptech that investment managers use to gain visibility into their deal pipelines. Various solutions provide different value across the industry.
These are some of the ways that both businesses and individuals are using proptech:
- Sourcing and managing new deals, from new home rehab projects to multi-million dollar commercial investments
- Connecting buyers and sellers, landlords and tenants, and investment managers and investors via online marketplaces to expedite transactions, including virtual property touring software
- Identifying revenue-driving opportunities and add-ons for existing customers or tenants
- Optimizing operations by saving time and money through new efficiencies and streamlined processes
- Delivering a stronger tenant experience with digitally connected homes and buildings and smart building technology
- Aligning companies by providing visibility into upcoming deals, tasks, data, communications and much more, especially on the institutional side
- Accessing third-party market data to set a baseline for future decisions
- Gleaning insights from and centralizing data-driven analytics, including simplified reporting
- Responding to and tracking maintenance requests in a more organized and timely manner
As the industry continues to evolve, proptech companies will rise to the challenge of providing intuitive solutions for new needs.
Understanding Deal Management’s Role in Your Tech Stack
Among other proptech categories, deal management has quickly risen to the top as a necessity for investment management firms seeking to centralize their data, invest more strategically, and simplify workflows. Download our free e-book to learn more about deal management’s importance, and how it drives organizational success.