PropTech - Key Themes & Trends for 2021
Nadim (MBA 2021) is a former diplomat and venture development associate with the Singapore Government. He has also been involved in real estate investments across Asia and Europe over the past decade, and has a strong interest in the intersection of technology and real estate to address the challenges and painpoints in the industry. He most recently interned at IMMO Capital, a tech-focused real estate investment manager that allows institutional investors to deploy capital and generate income at speed.
Ironically, one of the youngest verticals within the technology space is growing rapidly to serve one of the oldest asset classes: real estate.
Up until recently, technology struggled to penetrate the real estate sector in any meaningful way. This stood in direct contrast with nearly every other industry, which has experienced significant technological disruption. One important reason has been the general lack of a strategic appreciation on how technology can enhance services and bottom-lines. This is compounded by the fact that real estate is a slow-moving asset class, with drawn-out projects and investment decisions taken many years before completion.
However, things are rapidly changing. Investors today want more granular asset level data to evaluate their investments. Occupants also want better quality living and workspaces that offer convenience and flexibility.
This change has been accelerated with the Covid-19 pandemic, which has catapulted the growth of many simmering PropTech (Property Technology) innovations, from the application of virtual and augmented reality within real estate to the democratization and securitization of real estate investments via blockchain technology.
PropTech investment has in turn grown aggressively, with investments in the industry growing from approximately US$2.2b in 2015 to US$8.8b in 2019 (CB Insights). Some of the major VC firms such as Sequoia Capital, Global Founders Capital and Seedcamp have all invested substantial amounts into this sector and are placing big bets on the industry.
As we look ahead, here are some big themes that are worth watching over the coming year in the evolving PropTech space.
Deepening of ESG in Real Estate: This is arguably one of the biggest trends impacting the industry, given the industry’s carbon footprint. Innovation in this space is intensifying as policymakers focus on restricting pollution, waste and emission of greenhouse gases. Major institutional investors are also paying closer attention to ESG factors in the real estate investments. This is creating higher demand for tech solutions that can provide real-time data on the sustainability of buildings and have opened opportunities for automation and digitalisation in the management of built assets. One such example is Measurabl, a US-based company that is helping to simplify the reporting process by collecting and managing sustainability data for properties, which will become a metric investors pay close attention to.
Digitalization of Real Estate Investing: The availability of data will play a key role in the real estate investment landscape. Real estate managers who can effectively integrate this within their portfolio strategies are positioned to outperform. For example, we are seeing the emergence of tech-first real estate managers such as IMMO Capital and Skwire who are leveraging their tech stack to source and manage real estate portfolios for clients. At the same time, as the PropTech industry matures, we will see greater crossovers with FinTech, taking the pain out of the otherwise cumbersome home buying and selling process. One interesting trend worth mentioning is the rise of i-buying, where companies use technology to make immediate home offers. One of the main i-buyers in the US, Opendoor, went public via a SPAC in late 2020 at an enterprise value of $4.8b (current market cap is over $16b).
Augmented and Virtual Reality: Face to face interactions have always been a key part of the real estate business. However, the pandemic has changed this. Virtual reality is increasingly being used to provide customers with virtual tours, allowing prospective tenants and buyers to view properties on the other side of the globe, or even look inside properties that have yet to be built. Matterport, one of the leading providers of virtual tours, has seen significant growth through the pandemic and recently announced plans to go public as it scales its business. Augmented reality, which overlays virtual objects on top of a real-world environment, will also play an important role in enriching in-person property tours.
Evolution of Retail: The shift to omni-channel retail is well underway, and PropTech innovations are expected to play a critical role in helping both retail landlords and retailers moving forward. Given the impact of the crisis, there is a greater urgency for retail occupiers to search for solutions to compete with online retailers while landlords are keen to experiment with more flexible leasing concepts to identify a sustainable rent model that will work in the ‘new normal’ we are entering.
Demand for Flexible Space: Covid-19 has called for a significant rethink of workplaces, lurching the future of work forward. While we hope things return to some semblance of normality, it is quite clear they are unlikely to be the same. One key requirement is flexibility. PropTech companies like Hubble have been at the forefront of this. Positioning themselves as the Airbnb of the commercial world, they offer a curated range of workplaces for employers to rent on short, flexible lease agreements. The changes in the workplace have also opened opportunities for digital transformation in other areas, ranging from employee engagement to organisational agility.