Property Technology (PropTech): FinTech's Next Frontier

What is property technology (PropTech) and why is it important?

The makings of PropTech began in the mid-1980s, marked by the founding of companies that provided software for the commercial real estate industry. Autodesk and NCREIF in 1982, Yardi in 1984, and CoStar in 1987. However, PropTech didn’t really spring to life in a big way until the mid-2000s, when cloud computing, broadband connectivity, and mobile devices enabled residential PropTech giants RightMove, Trulia & Zillow to launch and show investors the value of disrupting real estate through technology. Since the mid-2000s, more and more PropTech startups have been bringing new technologies to market that address a wide variety of inefficiencies, scoring more attention and capital from technology VCs and growth funds, which legitimizes the real estate technology movement, explained Nathan Dever, the Founder of Ten-X, a real estate platform that allows buyers, sellers, and real estate professionals to search, list and transact properties completely online, summing up the making of property technology(PropTech).

PropTech encompasses a variety of areas, including property management using digital dashboards, research & analytics, listing services/tech-enabled brokerages, mobile applications, residential & commercial lending, 3D-modeling for online portals, and many more. German PropTech Initiative adds to the applications crowdfunding real estate projects, shared spaces management, as well as organizing, analyzing, and extracting key data from lengthy rental documents.

One of the areas that have been affected the most by data-focused platforms is the search and discovery of properties. Results of a study by HSBC called Beyond the Bricks found that over four in five (86%) of recent homeowners looked for available properties online and a similar proportion (85%) searched online for house prices. Some 82% went online to help research where they would like to live. Online marketplaces for real estate are the most common representatives of the PropTech business, which will soon have two important implications: first, the organic expectation of the modern consumer to be able to find relevant real-time listings online in a friendly interface, and second, the necessity for businesses to go an extra mile – integrate predictive analytics for estate pricing, life-like 3D models for virtual tours, incorporation of financial instruments like insurance, payments management, and a lot more.

At the moment, however, the industry is still in the early stages of filling out the value chain of the real estate business – the services are yet to see consolidation into mega-platforms. It is apparent, however, that the opportunities are vast with advancements in machine learning, IoT, sensory technology, and a pivot towards smart nations, smart cities and smart buildings by the most advanced authorities. More importantly, PropTech feeds on the increased mobility of a modern global citizen – the technology sector is bound to address accelerating changes in the way individuals and businesses discover, buy/sell, and manage property.

Commercial Real Estate Outlook 2018 by Deloitte reports that globally, the number of real estate tech startups rose from 176 in 2008 to 1,274 by 2017. In the same period, cumulative investments in these startups soared from $2.4 billion to $33.7 billion.

While venture capital remains the dominant funding source, there is substantial capital flow from non-VC investors as well, including REITs (real estate ITs), established real estate services companies and investors, private equity firms, and high-net-worth individuals. D ...

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