All aspects of our lives are undergoing a digital transformation. From software and automation to VR and machine learning – the future is now. That includes the real estate and property management industries through its own wave of disruption through what has been termed as PropTech.
But before we dive into PropTech, it’s important to understand digital transformation.
Digital transformation is defined as the process of re-imaging how a business operates at its core to meet the demands of our modern world. This is done by integrating new technologies with older business infrastructure, processes, and strategies to create more productive and predictable business models.
Digital transformation has been happening for around a decade now – but mainly for core-business problems that impact every business – think problems that revolve around communication, collaboration, customer support, accounting, and managing customer relationships.
For example, let’s look at a few different traditional business models and strategies, and how those processes have been re-imagined by technology companies and digital transformation:
|Traditional Process||Digital Transformation||Benefits|
Email & traditional communication
Internal communication and instant messaging apps such as Slack, Microsoft Teams, Facebook at Work
Increased productivity, documented history, easier-to-use.
Video conferencing tool such as Zoom, Skype, WebEx, GoToMeeting, Google Hangouts
Face-to-face meetings anywhere, eliminating the need for business trips and allowing employees to work remotely.
Call centers and customer support teams
Live chat tools and chatbots such as Intercom, Podium, Zendesk, Facebook Messenger Bot
Save money on call center staff, can automate basic support messaging, overall better customer service.
E-commerce sites such as Shopify, Wix, SquareSpace and marketplaces such as Etsy, eBay, and Facebook Marketplace
Reduces barrier of entry and eliminates the need for an expensive physical store and awareness campaigns
With the mainstream adoption of digital technologies across general business processes, digital transformation is now increasingly re-shaping the processes of vertical industries – which brings us back to PropTech.
PropTech (or Property Technology) is a term used to define the real estate startups that are offering new innovative technologies and ideas built to re-imagine the core processes and business models of the traditional property management and real estate vertical through digital transformation.
PropTech is also sometimes referred to in a more generalized term, Real Estate Tech (also known as ReTech.)
There have also been additional terms used to describe smaller disruptions that fall under the PropTech umbrella in the real estate vertical, such as:
- ConTech – Construction startups that are reimagining construction processes through new ideas and technologies.
- Smart Real Estate – Real estate startups that are creating new smart commercial and residential buildings, and overall cities.
- Real Estate FinTech – Financial technology startups that are making it easier for real estate professionals to buy, sell, lease, and manage properties and real estate.
Commercial PropTech vs Residential PropTech
There are two main segments of PropTech – commercial PropTech and residential PropTech.
- Residential PropTech re-imagines the processes between individuals and real estate or property management companies, similar to B2C companies but instead of business-to-consumer, it’s business-to-resident. Examples include looking for a new home or apartment, financing new residential purchases, paying rent online, residential amenities, and more.
- Commercial PropTech disrupts the business models between businesses, like that of B2B companies. Examples include lease and sales compensation, property marketing, building operations, building ownership information, property investments, construction projects, and more.
While the majority of PropTech startups fall into one of these categories, it doesn’t have to be mutually exclusive. Some PropTech companies are a hybrid of residential and commercial. An example of this is mailroom management software startups that are helping commercial buildings create a more automated and streamlined mailroom system while also providing residents with a better process to pick up new packages on their own time.
Let’s do the same exercise we did earlier with generalized digital transformation’s impact on traditional business models, but this time let’s look at specifically on PropTech:
|Traditional Process||With PropTech||Benefits|
Collect rent payments via physical checks in the leasing office
Online payments with property management software such as Appfolio or Cozy
No need to write a check or go to landlord office, better tracking and history, more secure
Agents creating personal databases of properties to show potential renters or buyers
Online property search engine such as Zillow
Search for properties yourself online without an agent
Physical mailroom with building staff sorting and inventorying new incoming mail
Mailroom management software such as PackageX or Notifii
Automates scanning in of mail and packages, better organization and process, resident notifications
Call maintenance or visit leasing office to schedule for maintenance and facility issues
Online scheduling with facility management software such as UpKeep or TOPDesk
More organized, resident notifications, no need to wait on hold or visit building office
An exclusive dining amenity – built to meet the needs of multifamily residential buildings
There isn’t an official time that the PropTech movement started – but the market first started to take off in 2012. That year, 72 real-estate startups raised $221 million in venture capital. It was also the year Compass was founded, an online marketplace for buying and selling commercial and residential real estate.
In 2013, Compass raised a $20 million Series A at an evaluation of $150 million – led in part by Salesforce’s CEO Marc Benioff. Compass would eventually go on to become the first PropTech unicorn (a startup with a valuation of over $1 billion.)
The years that followed experienced exponential growth for the industry, with PropTech companies raising over $2.6 billion from VC firms across 235 companies in 2016 – and the emergence of three more PropTech unicorns (Homelink, SMS Assist, and Opendoor.)
Above: Visualization to better organize Real Estate Tech startups into categories based on the problem being solved by RealCrowd.
While not anywhere near an exhaustive list, here is a roundup of the current PropTech landscape, with the process or problem each PropTech segment is innovating and the startup companies fueling that innovation:
- Agent tools – Dynasty, SmartZip, RealScout, Firepoint, HomeSpotter, Riley
- Indoor Mapping – Matterport, Create, Floored
- Facility Management – Happy Inspector, Plotwatt, eMeter, Corrigo, SmartLocals, Isas, AutoGrid
- Construction Management – Procore, Clarizen, PlanGrid, AproPlan, Aconex, Flux, Viewpoint
- Home Services – HelpHive, TaskRabbit, Shyp, Clutter, OpenChime, Thumbtack
- Listing & Search Services – Crexi, 42 Floors, Liquidspace, TenantBase. AppearHere, Zumper, Open Listings, Roomi, HomeSnap, ApartmentList, ZipMatch, Flip, Nestpick, 99co, Bayut
- Portfolio Management – RealCrowd, Fundrise, Daptiv, Ressio, RealtyShares, Cadre, RealtyMogul, CrowdStreet, Fundrise, Brickvest
- Property Management – Appfolio, Buildium, PayLease, SMS Assist, Cozy, RealPage, Happy, ClicxNotices, SMS Assist, ResMan, BuildingEngines, Juniper Square, Accruent, Equiem, Goodlord
- Mailroom Management & Packer Lockers – PackageX, Notifii, ParcelTracker, iLobby, ReceivingRoom, SphereMail, Luxer One, Amazon Hub, DHL PackStation, Package Concierge, SpacerSaver, Parcel Pending, Smiota
- IoT Home – Etia, Ayla, Lyric, Nest
- Tech Brokerage – Squarefoot, Truss, Compass, Triplemint, HouseIsmple, Settler, Reali, eMoov
- Title & Closing – SafeChain, Qualia, JetClosing, Spruce, States Title
- Marketing – Buildout, Sharplaunch, Foyt, Habiteo, Matterport, RealVision
- Leasing Management – VTS, Apto, Nestio, Rescour, Dealpath, Simplifi
- Events & Offices – Bizly, Splacer, HeadBox, Spacious, FlySpaces, Croissant
- Mortgage & Lending – Rockport, Plum, Credifi, Morty, Blend, Habito, Lendo, LoanDepot
- Property Valuation & Predictive Analytics – Bowery, Rentlytics, Compstar, IdealSpot, RedIQ, PropStack, Reanomy
- Energy Efficiency – Entic, Cortex, Rovti, MashVisor, CityBldr, HouseDanery
- Direct Home Buying – Opendoor, Offerpad, Knock
- Visitor Management – piLOBI, MyGate, Veris, Vizmo, Vizitor, Envoy, Traction Guest, SwipedOn, The Receptionist, AskCody, VisitorTrack
- Food Services & Virtual Kitchens – 2ndKitchen, Gather, PearChef
- Resident Engagement & Communication – MobileDoorman, Zego
- Virtual Tours – RoOomy, Kuula, Lapentor, Animoto, TourWizard, LiveTour
Above: While outdated (2016) – this real estate techscape map from Inman does a great job of visualizing how much innovating is being done by PropTech.
10 Biggest PropTech Funding Rounds in 2019
- WeWork – $6.5 billion
- WeWork – $5 billion
- Knock – $400 million
- Knotel – $400 million
- Compass – $370 million
- Opendoor – $300 million
- Sonder – $225 million
- Easy Knock – $215 million
- Lyric Hospitality – $160 million
- Better.com – $160 million
In general, digital transformation will continue to impact every nook and cranny of society. As it innovates and brings certain segments of the population and different business processes into the future, it will move on to new industries and problems that have yet to be disrupted. Its impact through PropTech will be no different.
5 PropTech Trends to Watch for in 2020
- COVID-19’s Continued Impact
- Big Data Applications & Its Ethics
- Virtual & Augmented Reality (VR/AR) in Real Estate
- Predictive Maintenance & Smart Improvements
- Multifamily Innovation
1. COVID-19’s Continued Impact
There is uncertainty across all industries because of COVID-19’s destabilization and disruption. However if anything, this will only further PropTech’s reach and speed up its adoption.
Expect to see new, innovative startups rise up from the ashes of COVID-19 to help residential and commercial property management and real estate companies re-imagine their core processes with safety and health at the forefront of these innovations.
2. Big Data & Its Ethics
Big data takes the emotion out of decision making, making outcomes more predictable and data-driven. This is already impacting housing markets and value through real-estate online marketplaces such as Zillow. Look for big data to weave its way into aspects of property management.
While big data itself is not inherently good or evil, it does provide the toolset for companies and individuals to use it unethically.
An example of this is using big data in the tenant screening process. Soon property managers and landlords will be able to use predictive analytics and big data to pre-screen potential tenant applications and predict if that tenant is likely to miss a future rent payment or damage the property. This will present an ethical problem for the industry, as it creates a sense of self-fulfilling prophecy for these prospects – judging them based upon actions they have yet to take.
3. Virtual & Augmented Reality (VR/AR) in Real Estate
VR and AR have been slowly inching its way into PropTech for the past few years, and COVID-19 has increased adoption rates of virtual tools.
With AR/VR, leasing agents and sellers can record 360 virtual tours of properties and upload them online for prospects to view as an alternative to visiting the physical property.
There are benefits for VR/AR PropTech solutions across personas:
- Prospective Residents – It allows prospects to tour properties virtually, without scheduling a time to visit the physical location.
- Current Residents – It means current residents do not need to leave their apartment every few days to allow someone to view the unit.
- Leasing Agents – Agents have more time with tours now being automated and helps weed out potential “lookers”
PropTech tools such as roOomy allow real estate professionals to virtually stage a property, and then record 360 VR tours of the unit with tools such as LiveTour and Kuula.
Additionally, AR/VR has real estate applications for virtual renderings and prototypes of new construction projects to help secure financing and sell properties before they are completed, as well as the tools to offer virtual communities for resident and community engagement.
4. Predictive Maintenance & Smart Improvements
Smart devices collect data via smart sensors from applications in a home or building and send that data to the cloud which sends data back to those applications from the Internet of Things (IoT.)
Look for smart devices to help property managers identify problems in their buildings through predictive analytics to spot maintenance problems before they happen – as well as help homebuyers uncover potential problems or faults in properties to help them make more informed and better buy decisions.
IoT and smart devices will also help both commercial businesses and at-home consumers save money through more energy-efficient processes.
5. Multifamily Innovation
The first PropTech innovations came to the commercial side of real estate. The second wave came in landlord-tenant relationship management, with solutions such as online rent collection, virtual lease signing, landlord-resident communication with systems such as property management software.
The next wave of innovation is in multi-unit buildings, and updating the processes these residential buildings use to manage communities. Nothing in a multifamily residential building will be left untouched.
Examples of multifamily trends and innovations already underway:
We’ll leave your with a few final tips for real estate professionals evaluating new PropTech:
- Stay informed on new trends and innovations in real estate and property management on sites such as CBInsights, CreTech, and our blog.
- Be an early adopter and invest in PropTech solutions.
- Don’t be intimidated by new technology, because those that are will be left behind.
- Compare current processes to new PropTech processes to determine the value and benefit added by these ReTech startup solutions.
- Communicate with your community of residents – especially the younger ones – to find pain points in your current processes.