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What is PropTech? Unchaining PropTech fundamentals
PropTech has seen significant growth in the past 40 years, despite facing economic challenges. It is a driving force in the real estate industry, providing digital solutions for reducing paperwork and increasing investment opportunities. As such, the emergence of property technology (PropTech)unlocks new proficiencies across diverse verticals. The real estate industry has been slow to adopt technology in the past, but increased pressure from economic and social factors has led to a significant increase in its use, propelling the industry forward.
What is PropTech?
PropTech refers to the use of technology in the research, design, analysis, and management of residential and commercial properties to make the process more efficient, secure, financially viable, sustainable, and streamlined. This technology is also known as Real Estate Tech, RealTech, Retech, or CRE Tech.
Property technology (PropTech) harnesses real estate assets to strengthen the operation of retail properties, using property management platforms for the systematic control of residential, rental, and office properties. It involves the integration of technology and real estate to improve property management platforms, ease financial transactions, simplify reporting, and enhance collaboration.
The PropTech landscape
In the past 10 years, more than 9000 proptech companies have emerged worldwide has been driven by significant technological advancements. These companies are often categorized based on their tech integrations.
To understand the scope of the PropTech ecosystem, it can be analyzed through three approaches.
1. PropTech as the overlay of ConTech, Fintech, Shared Economy, and Smart Real Estate• ConTech (Construction Technology)Construction Technology (ConTech) refers to the use of sustainable methods and advanced materials in the construction process, including the integration of planning, design, and building with the production and installation of technology to improve efficiency. PropTech generally deals with a single, controlled environment, while ConTech covers a variety of unpredictable and changing settings.
- ConTech (Construction Technology) Construction Technology (ConTech) refers to the use of sustainable methods and advanced materials in the construction process, including the integration of planning, design, and building with the production and installation of technology to improve efficiency. PropTech generally deals with a single, controlled environment, whileConTech covers a variety of unpredictable and changing settings.
- Fintech (Financial Technology)
Fintech is a technology-driven sector in finance that facilitates access to banking and financial services for businesses and consumers. Real Estate Fintech is where the Fintech and PropTech industries intersect, streamlining financial procedures in the real estate industry. Fintech relies on advanced algorithms and platforms to improve financial management and operations.
- Shared Economy Real Estate
PropTech companies like WeWork and Airbnb use shared economy principles to allow multiple users to access a single property. This creates opportunities for P2P interactions and can benefit companies by promoting loyalty among tenants, customers, and staff.
- Smart Real Estate (Smart Home)
A PropTech subsector utilizing the Internet of Things (IoT) involves using internet-connected appliances and devices to simplify the management and remote monitoring of homes. Examples of this include intelligent lighting systems from Philips and advanced kitchen appliances from companies like GE and Samsung
2. PropTech space can be divided into two stakeholder domains: the individual resident and the business
a. Residential Property Tech
Residential property tech encompasses digital products used to simplify the process of owning or renting homes and apartments.
These include platforms for short-term rentals, such as Lyric and Airbnb, as well as tools for property sales and marketing, alternative financing, property search and management, Mortgage Lender Software (Loan management and application), and loan management systems.
One example of a residential property tech company is Opendoor, based in San Francisco, which offers streamlined services for buying and selling homes, including relisting and repairs.
b. Commercial Real Estate Technology (CREtech)
CREtech, or commercial real estate technology, involves using innovative tools of companies for CREtech professionals to efficiently search, sell, purchase, and manage industrial and retail office property assets to efficiently search, sell, purchase, and manage industrial and retail office properties.
Examples of companies in this field include Biprox and LoopNet. The focus of CREtech is to drive efficiency and improve the overall landscape of commercial property management. It includes property management tools such as IoT, evaluation and financing tools, asset utilization, management and construction planning tools, and property search platforms.
An example of a CREtech company is Ascendix Technologies, located in Dallas, which specializes in CRM systems to help commercial real estate market partners improve their sales processes and data research.
3. PropTech Market Map
Pitchbook has developed a new method of categorizing the PropTech industry, which includes five segments: property management, asset utilization, maintenance and renovation, finance and investments, and transaction solutions. This classification captures the full range of PropTech.
Changes introduced by technology in Real Estate Sector
PropTech has brought significant advancements, affecting the operations of all participants in the real estate industry.
For property owners and tenants, PropTech impacts the following areas:
- Quality communication. Property owners can easily communicate with tenants, maintenance teams, repair workers, and other parties. Past conversations can be tracked and reviewed due to efficient data storage and organization.
- Detailed 24/7 insights. Tenants can access the platform with the help of smart devices and sensors connected to the network. Property owners can monitor their properties remotely as building maintenance and security information can be accessed on mobile devices.
- Virtual reality technology allows for the removal of geographical limitations on real estate boundaries. This means that property owners and buyers can conduct tours, viewings, and inspections of properties remotely and without the need for physical travel. This allows for a more convenient and efficient process for both parties, as well as the ability for buyers to view properties in different locations without the need to travel.
For brokers, the innovation has delivered:
- Cost savings brought on by the automation of paperwork. Brokerage procedures are streamlined via automation, which is crucial for time and resource savings.
- Efficient data collecting and AI-driven marketing used for screening and assessing the purchasing, selling, leasing, and development processes. Data analytics solutions that are effective in structuring and documenting data sets support the data collection operations.
- Direct interaction with little physical contact. Through contactless technologies like touch and facial recognition, virtual interactions on high-end interfaces restrict physical connections.• The assurance of security in remote transactions and contemporary contracting as a result of a more manageable and efficient purchasing process due to the high amount of papers that must be reviewed, signed, and agreements closed.
For Investors, PropTech has made sure that the following are realized:
- Better leasing, investing, buying, and selling opportunities monitoring in market research.
- Careful planning reduces the likelihood of costly errors that might occur during construction.
- The assurance of solid contracts due to the absence of any middlemen, who would have had conflicting interests in the sale and purchase of properties
Technology offers new resources for reducing costs and inefficiencies and can offer environmentally friendly solutions.
Reonomy, for instance, offers the following remedies:
- Ownership and occupant data
- Predictive and AI analytics
- Detailed information about the property combined with the full transaction history
The fundamentals of how big data is affecting the real estate sector
Every task's data sets grow in size as the firm expands, and they all come together to generate big data. A key element in improving performance in the real estate market is the way data is gathered.
As a result, the following ways that modern technology is enhancing property management:
1. Accurate Property Assessment
With the help of property technology, even start-ups can forecast property values in the future utilizing massive amounts of data. For instance, a multifamily building in Seattle's rent for the next three years was anticipated using a large database of traditional and nontraditional data, with an accuracy rate of above 90% according to the McKinsey report.
2. Data-driven real estate development
The development and value of residential properties have increased as a result of the use of big data in real estate. Tech-savvy real estate developers may create a property and add appealing features by using granular data analysis.
3. Improved analytics
Using geography and pre-selected variables, real estate experts may draw precise images of predicted future dangers and possibilities. Big Data Analytics in property technology makes research methods possible that otherwise wouldn't be possible.
4. Digitization of administrative tasks
PropTech experts are assured structured data in customizable data sets through thorough data analysis, minimizing time-consuming, back-office tasks that are onerous and repetitive. To simplify and improve property administration, all back-office procedures are linked together via standardized interfaces.
Advantages of Residential Property Tech
1. A rise in investment
Innovations in the PropTech space increase value, resulting in potential gain when real estate assets are sold in the future.
2. Borrowing is useful.
Debt can be utilized to boost purchasing power while investing in real estate, particularly when many properties are involved. When a property's value rises, an investor might use it as leverage to purchase a different one with their cash.
3. Taxes deductible
Even if rental income is taxed, there may be future tax deductions that make it useful. Cash costs including association dues, electricity, upkeep, repairs, and insurance premiums might limit rental revenue.
Advantages of Commercial Real Estate (CREtech)
1. Improve accessibility
Adopting CREtech platforms lowers irrational real estate expenses, whether in project finance or construction, boosting the affordability of properties.
CREtech integrates environmental, social, and governance aspects into real estate using highquality data standards, guaranteeing that sustainability goals are met.
3. Spontaneous integration
Through CREtech platforms, people may access uniform models and interfaces when properties are evaluated. The newest technologies have been organized and incorporated into interfaces made of 3D models and designs to increase their appeal and functionality.
PropTech advancements lead to a more efficient and sustainable strategy that prioritizes transparency, marketing, occupancy, communication, and value. With the increasing importance of data, PropTech utilizes data analysis to improve these areas.