Real estate is a very large asset type. Global residential real estate is valued around $250 Trillion. Global commercial real estate is valued around $65 Trillion. For comparison, global annual GDP is $78.3 Trillion.
The world of real estate is changing. And it will have an impact on all of us whether we work in the industry or not. This physical space is merging with digital technology in what is being referred to as PropTech, or Property Technology.
Real estate is one of the last to adopt technological change and the innovation that tech can bring. The entrepreneurial opportunities are driven not only by the size of the industry and its lack of tech adoption, but also by industry practices plagued by inefficient processes and unnecessary transactional costs defended by self-interested professionals and institutions.
Real estate is not known as an industry which readily embraces change. The nature of the asset class, which comprises large heterogeneous assets traded in a largely private market, is perhaps a good reason for this. Homes may be too important a part of a private portfolio to take any risks with the process whereby it is traded, held or valued. It may also be the case that there is an agency problem: the professional advisors that dominate the transaction process clearly have an interest in protecting their income sources and not be disrupted. (1)
We are witnessing a wave of innovation, investment and entrepreneurial activity in real estate. Welcome to PropTech and the Future of Real Estate – where technology and real property come together.
Some of the sectors or opportunities that can be classified underneath the PropTech umbrella include:
1. Financial services and transactions tied to real estate to include mortgages, insurance, title and escrow and other purchasing mechanisms.
2. Smart building technology to include smart meters, thermostats, lights, and voice command.
3. Smart city sustainability to include improving traffic patterns, green spaces, and walkable urban environments.
4. Crowdfunding for investment to traditional agency challenges.
5. Construction Technology to improve the process of building to include modular or off-site manufacturing.
6. 3D and Virtual Reality to visualize beyond walls or the ground or to even see what could be prior to undertaking a project.
7. Data and Research Analytics such as Zillow to provide instant information on homes and neighborhoods.
8. Short term rentals such as airBnB
9. Shared economy services such as co-working spaces.
10. And changes in the way single-use space becomes multi-use space.
PropTech refers to the utilization of technology as a solution to challenges in the real estate sector. Specifically, technology is used to create or renovate services offered in real estate to buy, sell, rent, develop, market and manage property in a more efficient and effective way. For most of us, PropTech will change how we find a home, purchase, finance, maintain, secure, and insure it.
The future of real estate will be quite engaging and interesting. And for most of us it will improve the way we live, the way we work, and the way we play. The built environment is becoming more important as more and more people are voting with their feet and moving to locations where they can have it all. And this creates what most of us refer to as ‘home’ or ‘work’ or ‘community’.
Just as we have witnessed laptops and cell phones change the way we communicate, this wave technology applied towards real estate will change the way we live, work, and play. PropTech will change our built environment and how we utilize this space.
References:
1. Oxford, Said Business School, PropTech 3.0 at www.sbs.oxford.edu
