Proptech: Disrupting the Norm
What is proptech exactly? It is the approach whereby technology is used to harness and promote more efficient systems rooted in digital solutions and cater to new consumption patterns within the real estate industry; (think property + technology). In short, it is the optimization of all the processes that are involved in real estate: from customers researching, to renting, to buying, selling and managing properties, which means that the cross-section of parties who can benefit from proptech are varied and plenty, from buyers, to developers, to investors, and property management companies. Proptech is now seen as a major tech-driven sector that is making waves in areas such as construction, logistics, payment technology, workspaces, rentals, as well as the increasing array of sustainability pledges that are being made by more and more companies today. This explains why proptech is now the most sought after segment within real estate, growing at breakneck speed when it comes to YoY investments.
Proptech in the US
Proptech companies are booming in the United States, with an estimated six proptech firms for every one million people. Proptech, or, as it is commonly referred to in the States, ReTech, saw an acceleration by 1072% just from 2015 to 2019, according to Forbes, with 81% of real estate companies in 2020 saying they planned to use new digital technologies to boost their traditional business processes. With San Francisco, Boston but especially New York being major proptech hubs, it is estimated that 60% of those proptech companies work within the residential sector, 49% within the commercial sector, and 11% in retail, with every indication that the numbers will only increase. Because proptech is solution-driven, we are still seeing emerging technologies being developed in order to answer the dynamic shifts in, for example, office life, that we are seeing around the world. The pandemic accelerated trends that were already in motion, but nevertheless shifted the way people work, with less office-based jobs available and increasing opportunities for the hybrid office and working from home dynamic, which means proptech companies are delving deep into the ramifications of plunging demand for the traditional, long-term commercial leases. Since 2014, proptech trends have been growing exponentially in the US, from coworking to coliving, with venture capital investments swelling to $12 billion in 2017, a majority of which is going towards companies just in the growth stage.
Proptech in the UK
Although proptech is making waves across the European continent, the UK continues to lead the pack. London is still widely considered to be a major proptech center, with more than 700 proptech companies and an increasing array of high-skilled proptech jobs. Although the pandemic and the aftermath of Brexit affected the level of government backing when it came to tech investment, proptech seems to be going from strength to strength through it all. This is owed in large part to UK proptech companies showing they can actually solve UK real estate issues, cementing their position on the global scale and successfully appealing to domestic and international investors alike.
Many of the UK’s residential problem areas have to do with conveyancing and selling processes, and 21% of UK proptech companies are aimed towards resolving these issues; 22% are catered towards buying solutions, and 26% are geared towards property management solutions. According to studies, one interesting UK proptech trend has been modular housing, which is supposed to enable faster, more accessible and cost-efficient housing to be produced as a means of addressing the UK's ongoing housing crisis.
38% of UK proptech companies are working in the commercial real estate sector, with notable advancements in office space as modern businesses demand more flexible, short-term spaces to adjust to increasing nomadic lifestyles and habits. Going hand in hand with these trends is the growing popularity of innovative investment methods in the UK, with some focusing on tokenisation - investing in small chunks of property in new ways and in small micro investments, which can go as little as £100.
Proptech in Sweden
Proptech has made a gradual but firm presence in Sweden, with over 150 Sweden-based companies today. Of these proptech firms, 67% offer solutions within commercial, 65% within residential, and 11% within the retail sector. About half of all these companies are geared towards resolving management issues within the real estate life cycle, followed by buying (17%), renting/leasing (15%), building (13%), selling (9%) and moving issues (1%). The proptech sector in Sweden has been praised for its highly diverse problem-solving technologies with a true modern take on today’s underlying real estate issues; for example, many of these proptech firms directly work with electricity consumption management, security technologies, aiding virtual real estate agents, and more. It’s no wonder then that the technologies that have received the greatest shares of investment are the Internet of Things, Smart Homes, AI, and sustainability-related issues. EnergyTech maintains its position as the most popular sub-industry on the Swedish proptech market, although proptech overall in Sweden is well supported by local, Nordic and international investors alike.
Proptech in Australia
With over 380 proptech companies spread across the country, Australia’s proptech scene is a budding one, considered one of the most transparent property industries in the world. Between 2013 and 2019, the country saw an incredible 428% increase of proptech companies and was only further encouraged by Australia leaving behind a recession with an extremely strong property market in May 2021, (albeit a slight downswing after this point). Although there remains a robust sentiment among traditional REITs (who own the majority of all buildings) that technology poses risks, there is evidence that the onslaught of proptech will continue to challenge status quo; commercial property giants Charter Hall and Collective Campus, long-standing incumbents in Australian real estate, launched the country’s first PropTech Accelerator in 2018, paving the way for others to soon follow suit. Today, over 66% of Australian proptech focus is in the residential sector, with hotspots being Melbourne, Perth and Brisbane. Current trends show that great interest and investment focus lie in smart cities, smart buildings and the development of co-working spaces.
More than just digital transformation
In these regions and many more, proptech is also proving to be a boon for real estate agents, enabling them to work more efficiently and streamline their processes, especially when it comes to qualifying leads. Real estate firms, even traditional ones, are coming to grips with the opportunities that the proptech sector is introducing, from simplifying property decisions to speeding up transactions, and even greater opportunities for sub-sectors to interact and collaborate with each other in order to provide smoother, smarter and more intuitive solutions for today’s consumers.