90 percent of the real estate professionals reading this report will understand that the leveraging of property technology (PropTech) to research, buy, sell and manage real estate, is the future. This report is to help the other 10 percent and to validate what most industry professionals already know.
Before diving into the deep end of PropTech investing, it’s important to define what this new wave of PropTech incorporates. Advancements in the way real estate professionals process data are not new, you see. However, the breaking technologies that have powered up almost all business are set to take off toward a new paradigm. Artificial intelligence (AI), Big Data analytics, Virtual Reality, and Augmented Reality, and more advanced forms of computer-aided design (CAD) are the main areas of the innovative shift. 20 years ago such technologies were considered science fiction, but today PropTech startups are addressing everything from fixing a tenant’s leaking faucet to industry insights and more. Make no mistake, PropTech is not only here, but it’s also becoming as indispensable as the telephone. If you are among the 10 percent, who think your real estate related business can operate without these new technologies, imagine running your store with no phone.
The latest Global PropTech Confidence Index published by New York VC firm MetaProp reveals the robustness of the investor segment. The report also frames the overall maturity of the startup ecosystem from data gleaned from over 500 investors across 1,600 startups. The twice-per-year index also shows that 60% of PropTech investors surveyed plan to invest even more in 2019. With 2018 seeing the most investment ever, this vote of confidence is a significant litmus test. Even with a mixed bag of geo-policy and economic factors weighing on investors, confidence in the segment still runs very high. There are several reasons for this including the quality of investment pitches VC receive. The “maturity” of innovation is reflective of the overall quality advancements innovators are creating. Take so-called “smart buildings,” as a for instance.
In a report for Forbes, real estate innovator, and entrepreneur, Angelica Krystle Donati predicted coming investments in segments aligned with “direct synergies on the concept of “smart cities,” such as AI, IoT, cybersecurity, mobility, and e-commerce.” Her prediction is in line with the more than one-third of major investors who feel smart building tech will take off. The PropTech innovations are like a snowball set to roll over and snatch up anything in their path. The investment landscape mirrors what happened in the mid-2000s with internet technologies and phones.
Then there is the revelation that PropTech sector is maturing. This is best illustrated by the fact there is a sharp division in winners and losers in the space. Just as was the case in the Web 2.0 era, the cream of innovation and value is rising to the top, while the rest end up in what became known as “the dead pool” of technology startups. The best become profitable, and the useless, underfunded, or ill-planned startups end up bankrupt. In such a metamorphosis we can expect these big winners to make the next logical step - to become international companies.
News from Italian proptech startup Casavo is a subtle indicator that PropTech winners will scale globally. The with the goal of decreasing the time it takes to sell a property just snagged a €7 million Series A round from Berlin-based Project A Ventures, Picus Capital, 360 Capital Partners, Kervis Asset Management, Boost Heroes, alongside Marco Pescarmona and Rancilio Cube. At its core, Casava creates a simplified transaction process leveraging the Instant Buyer (iBuyer) model in combination with an s automated valuation engine. The valuation/offer process is greatly streamlined, with the seller receiving a full cash payment with a month. Casavo’s automated valuation engine factors in 70 plus variables to provide the seller with a fair market value for their property - and a buy offer is presented. There are many other examples.
Now, let’s say the Casavo model takes off across Europe. This will create a lot of competition, and things like the negative aspects of the iBuyer model will squeeze Casava and other early adopters. What will fill the value void? This is the big question. You see, the downside of iBuyer models are the losses suffered on account of commissions and discounts built in. The quick and easy sale is at the expense of the seller and not the agents or intermediaries. Here’s where the competition comes in, a competition that will be won by big players like Zillow and the other U.S. players. The end of the story will be innovators like Casavo innovating and finding an exit runway with a huge profit, or failing to innovate and going bankrupt.
Modernizing the transaction process technologies like AI, AR, CAD, and VR are allowing potential buyers to visualize without even visiting the property. The homebuyer can even us CAD and VR alongside Big Data analytics to check demographics, tax incentives, neighborhood statistics, and local amenities without ever leaving their reclining living room chair. Agents can use intelligent machines and big data to streamline much of the traditional transaction process further, and even match investors to a property type, etc. The list of potential PropTech uses is as long as the list of tasks agents, buyers, and sellers have in front of them. At the end of the day, PropTech relieves many pain points encountered by both real estate professionals and potential buyers - and investors know this. That’s why the investing trend is the barometer for PropTech adaptors.
Finally, this report from KPMG in 2017 reveals how real estate professionals can integrate PropTech and bride the gap between the “built” and the digital environment. The research confirms that Big Data and analytics will reap the biggest rewards for adopters, but the IoT that will power smart buildings comes in second, followed by AI innovations. Those surveyed also validate that streamlined process and improved decision making are at the top of the list of benefits real estate businesses will receive from these innovative technologies. What most striking about this 2017 study is the fact that collaborative PropTech ventures are the key to success in adaptation. What this means is, “build your own” solutions will no longer work, not even for the huge players like Zillow. In the end, a collaboration between real estate and technology players will be the future. Almost half of the leading real estate decision makers surveyed by said they would collaborate with a new or existing supplier of PropTech.