Proptech can be both a disrupter and enabler for the incumbent real estate industry. Simon Todd looks at its growing role in the sector
Proptech firms use existing and evolving technology to nurture new, innovative ideas to enhance transparency and operational efficiency within real estate, as well as to improve tenant experience and information flow. Siemens Building Technologies, for example, has consolidated numerous digital platforms into a single app that controls the physical environment of a building. By bringing together all the data points, Siemens creates insights into their user experience, which in turn helps to extrapolate returns in real estate and building space for commercial property firms.
Despite this wealth of information on hand for real estate firms, it seems that being able to work with and assimilate this new and evolving technology is taking time. Companies like WeWork, for example, are often viewed as disrupters rather than as potential sources of collaboration. In a 2018 poll conducted by Apto – the commercial real estate CRM brokerage – 51% of commercial real estate brokers said that WeWork posed a threat or a severe threat to the traditional real estate business. Apto’s founder, Tanner McGraw, stated that WeWork serves as “a reminder that the only constant in business is change, and that we should never be complacent with any of our approaches to business”.
The current situation certainly serves as a major vindication of McGraw’s statement, although the disrupter here has not been WeWork, to which he was originally referring; COVID-19 has shifted the traditional workspace paradigm, and social distancing policies have led many analysts and commentators to speculate on the demise of the office, in all its various forms.
Whether or not this transpires, the situation has shown that technology is integral to the continuity of business, the economy and so many other aspects of our lives in general. Any proptech firm, therefore, which embraces and indeed advances technological innovation should be welcomed by the more traditional market participants.
This is not to say that all proptech firms face animosity from traditional companies. Some are hailed as pragmatic, rather than problematic. Built-ID and its Give-My-View platform, for example, collaborate with the real estate industry, working with developers from the earliest stages of planning and construction. Built-ID polls local communities to get insights into projects from people on the ground by seeing what types of services they would be interested in. This helps to bring assumptions forward and to empower the silent majority to have an influence on projects in their neighbourhood, which can help de-risk assets. With a focus on built environment and social infrastructure projects, the platform reduces the barriers to community engagement via visually engaging consultation tools.
Despite differing opinions regarding proptech firms, there is one unassailable factor underpinning their success – the rise of big data. This is something that permeates all aspects of modern life, and the real estate industry is no exception. As platforms, sensors and smart devices continue to advance, the amount of data produced by buildings is increasing exponentially.
This data can give real estate market participants, such as investors, asset managers, property managers and tenants, a competitive advantage. It helps them to avoid disruption if they use it effectively to develop data-driven services and new business models focused on the specific needs of users, owners or the property.
Raw data alone, however, provides no utility and adds no value to the industry. Systems need to be in place that are capable of processing this data and using it to increase efficiency for the firm and quality of experience for the tenants. These services are increasingly facilitated through the availability of technology and the growing prevalence of smart buildings, which allow companies to centralise the management of their buildings. This allows them to see what users are doing in the building in real time and provide value-add services, perform predictive maintenance based on the data gathered from sensors to reduce cost and downtime, and enhance the overall tenant experience.
Artificial intelligence (AI) is playing an ever-greater role in carrying out these services. It is being used in property management and predictive maintenance, investment selection and valuations. This enables companies to make smarter, faster, data-driven decisions throughout their business. There are potential benefits to this, such as delivering better and more targeted services to customers, increasing business efficiency and agility, and improving building performance and management. Better-quality data can also enable AI solutions to learn more effectively and ultimately automate processes to free up human resources for more value-add activities.
One company embodying the successful translation of data into deliverable results, via technology and AI, is Equiem. The firm leverages technology to enhance customer experience by looking at tenant engagement in buildings. It then use the data gathered to help landlords execute a customer strategy, resulting in greater tenant retention and attraction.
It operates under the premise that landlords often talk about the needs of tenant but these are based solely on a vocal minority, whereas about 70-80% of tenants will engage with an app that asks the same questions. They spend around three months helping to understand who the customer is through the use of online polls and interesting content. Equiem converts data and uses the tenant engagement platform to create better value by looking at how to monetise space, achieving faster leasing deals as a result of live platforms.
However, there are potential hindrances to the seemingly inexorable rise of tech within real estate – namely, a perceived invasion of privacy. Some tenants object to their data being collected and potentially misappropriated, and dislike sensors measuring what they do. This is especially the case if communication has not been properly managed at the outset. Some tenants have gone so far as to pull the sensors out, or simply refuse to live in buildings with such technology.
The right balance, therefore, lies in a symbiosis between man and machine. Technology is an important tool, but the human factor for communications is still key.
Simon Todd is group head of real estate services at Crestbridge