PropTech (Property Technology) is the name given to technological innovations that are developed for and implemented within the property industry.
At the same time, PropTech refers to the industry, or movement, that the innovation comes out of; The PropTech Industry.
In any discussion about PropTech, one must focus on both the outcome, PropTech, and the cause, the Digital Transformation of the built environment. One will not exist without the other.
The PropTech Industry has been driving huge change and deep discussion over the last few years, bringing together an audience of like minded people to better advance the best practices of the property industry.
But PropTech is just one aspect of the Digital Transformation, the global adoption of technology, a force with a far larger agenda than simply property.
The Digital Transformation is affecting every industry on the planet; as such, it affects the vast majority of individuals too. The role that the PropTech community is playing, and must continue to do so, is to represent the property industry’s interests during this period of Digital Transformation
To do so, it must succeed in educating the wider property industry as to the importance of facing their digital future, whilst simultaneously protecting the industry and its customers from any potential harmful disruption coming from the world of tech, only allowing the best and most genuinely helpful innovations to enter the market.
In the context of a fire, PropTech is the accelerant needed to spark the flames, but the Digital Transformation is the embers that keep it burning through the night.
Asked to define PropTech at a recent conference I came up with a small statement which, after much consideration with a fellow panelist Professor Andrew Baum, author of the PropTech 3.0 report, we decided on the following:
“PropTech is one small part of the wider digital transformation of the property industry. It describes a movement driving a mentality change with the real estate industry and its consumers regarding technology-driven innovation in the data assembly, transaction, and design of buildings and cities.” – Baum & Dearsley, 2017.
Because the term ‘PropTech’ is so wide reaching; a movement, a gathering, and a noun, it’s important to analyse this definition closely to offer a truly comprehensive answer to; what is PropTech?
Let me break this definition down into component parts to explain it all further
PropTech is one part of Digital Transformation
PropTech is not the only industry contributing to the digital modernisation of the property industry. Rather, it is just one small part of the Digital Transformation which is literally and simply defined as “the change associated with the application of digital technology”.
As such, if property professionals want to remain knowledgeable about the current and future state of the industry and the innovations that are going to disrupt the traditional way of doing things, they must take in a much broader picture than just PropTech.
Professionals must, for example, be aware of innovation and progress happening in robotics, virtual reality, artificial intelligence, autonomous vehicles, and the Internet of Things (IoT). All of these industries, plus many more, will, without question, have an affect on the property industry.
It is only by understanding both these more futuristic notions of the property market and those, more immediate aspects of technological change; mobile website optimisation and CRM systems being two examples, that you can truly understand Digital Transformation.
The Digital Transformation is a process of change, one which is neither simple nor quick. It’s a process that often occurs over a 5-10 year period and drives change in many core pillars of an organisation’s structure.
The three most common targets for change are mentality, culture, and operating systems. Arguably, it is the mentality of industry professionals that is most in need of immediate disruption; at the same time, it is also the most difficult change to implement.
PropTech is a Mentality Change
Vitally important to understanding what PropTech is, is to see it not only as a technological movement, but as an entire mentality change.
The advancement of the property industry, in this age of the digital revolution, requires not only industry professionals but also the general public to change the way they think about property’s best practices.
Consumers are now used to digitised businesses. On the whole, they are comfortable with online processes and procedures, often shunning traditional, more stunted systems in favour of fluent and efficient technological ones.
As proof of this, one only needs to glance at the world of payment services. The rise of, and acceptance of, chip and pin, and contactless, has been incredibly fast. Consumers want ease and fluidity, but they also want trust. Whilst, for the finance and banking industries, this move must have required a huge mentality change, they did a good job of acting quickly and ensuring that consumer trust for new methods was won quickly and smoothly.
Whilst the act of buying or letting properties is far more complex than, for example, tapping a card to buy coffee, the process of reaching the final act is slow and laborious. The property industry needs to make make the process as seamless and secure as possible. This is what the modern consumer demands.
Property is often considered an industry stuck in time. Best practices have long been the same; why change it now? has often been the attitude. However, not only does this attitude cause problems for new startups in the sector, constantly butting heads with archaic mentalities, but it also results in inefficiencies running throughout the sector.
Another issues that this leaves the property industry with is, how does one attract the best technological talent to a sector that is seen as so old fashioned? Where systems are built on old platforms and Excel spreadsheets still dominate?
PropTech is about Innovation; both Endogenous and Exogenous
As stated by Professor Baum in PropTech 3.0, PropTech is is both endogenous and exogenous.
Endogenous technology is that which comes from within the property industry. For the most part, the technology that we have seen in property so far has been endogenous.
Such technology tends to focus on the streamlining of the property industry’s workflow and best practices. Common examples are property listings (Zoopla, Rightmove), online estate agents (Purplebricks and eMoov), and various software packages that are there to increase efficiencies in already existing processes.
For the next few years, most of property’s innovation will be endogenous. They will be created mainly by property people to help property people.
Exogenous technology is that which comes from outside of, but still takes effect on, the property industry and possibly offers the most risk to the industry.
Examples include Virtual Reality, which will completely change the way that properties are marketed and designed, and Artificial Intelligence, which will disrupt the way we understand and interpret our data and how the built environment works from day to day – which parts of the building are wasting energy, which rooms are going unused, and how best to increase potential returns on investments.
Data is said to be the new oil but if you consider the amount of data coming out of our buildings as the mass of sensors takes over. A system will be required to monitor all data, interpret the results and then instigate necessary changes. AI has the possibility to do all this and will be built be people not necessarily positioned in the property sector but whom will hold tremendous power over the sector
Applications of Exogenous technology are so vast that they warrant an article, or rather articles, of their own.
It is expected that exogenous technology will really start to disrupt the property industry in the longer term, but that won’t make their arrival any less disruptive. In fact, exogenous technology very much sits in the boat of Amara’s law; we overestimate change in the short term but underestimate its impact in the longer term.
PropTech is about buildings and cities
With a combined asset value of $217 trillion the property market and the potential for innovation within it is huge.
It is often considered on a much smaller level i.e. consideration of a single PropTech company impacting a single small aspect of the property process. This is particularly the case on more endogenous technologies.
Looking at a single home or building in isolation is by no means wrong, but the combined impact of all singular assets together is something more exciting; greater than the sum of its parts.
Most of the smaller projects in PropTech are often viewed on a private interest level, singular buildings or developments, for example. But it’s when we move on from thinking about buildings and start thinking about city-wide transformation that things get really interesting. However, the globe is currently battling a huge urbanisation challenge.
The proportion of the global population living in cities as opposed to the countryside exceeded the 50% threshold in 2008 and, by the 2030s, it is estimated five of the World’s eight to nine billion people will live in cities, many of them in slums. This means there is a governmental agenda to deal with PropTech on a city level.
This is important for many reasons, but fundamentally it suggests that funding will be made available and that the attitude of looking at technology as a means to aid city development is going to be pivotal. It is at the top of government agenda and therefore PropTech needs to be taking advantage of that and delivering the innovations that will drive the required change.
In conclusion; PropTech is people
The end goal of PropTech is to best prepare the property industry for the digital future and then maintain its prosperity thereafter.
But, because the property industry is very much a people-first industry, PropTech must do more than simply innovate and disrupt. It must understand its role in the broader picture, it must educate and mediate, it must listen to the needs of professionals and consumers, it must not disrupt for the sake of disruption. It must aid private businesses to run more efficiently, with greater returns, whilst simultaneously working to address and solve current societal issues such as sustainability and affordable housing.
PropTech will, once technology is fully accepted and implemented, become known simply as ‘property’. The two will no longer need different titles because technology will be the norm rather than the new.
To reach that point, and this might be the most important fact of all, PropTech must show to the world that it is not a rival to the property industry, but rather a set of tools designed to help the industry, and those who work within in, perform to the highest possible standard.
PropTech is not the replacement of humans with machines; it is the utilisation of modern technology to enhance the abilities, speed, and efficiency of those who sell, buy, maintain, manage, work within, live within and make their living from property.
And because so much of our world and quality of life revolves around the built environment, PropTech has a responsibility to wield its considerable power thoughtfully and compassionately, for PropTech not only carries the responsibility of strengthening the property industry, but it is also a vital component for making the the world a better, safer, and more prosperous place for all.