Enabling Technologies

Property Technology (PropTech) – FinTech's Next Frontier

MEDICIGlobal Head of Content

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. Deloitte predicts that in the five-year period between 2011 and 2016, funding from non-VC sources for real estate tech startups increased at a CAGR of 65.7% to $2.3 billion in 2016. As of September 2017, funding hit an all-time-high record of $5.8 billion YTD.

How technology changes the real estate business

PropTech is expected to reshape and redefine the real estate industry, from how we buy, sell or rent properties to how we manage them, be they shopping malls, hospitals, wellness facilities or golf courses, professionals suggest. Advances in technology are breaking the traditional process of companies and individuals making real estate-related decisions – how to discover, review, buy, sell, lease estate. The process has always been controlled and defined by the industry; more particularly, by the largest real estate conglomerates – think Keller Williams Realty, Weichert, Century21, RE/MAX, Coldwell Banker, Sotheby’s International Realty, The Keyes Company, and others. We can probably add Zillow (Trulia belongs to Zillow Group Brands) to the list of the largest players, although it does represent a new generation of tech-focused real estate businesses.

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Data source: How technology will redefine real estate, and why companies need to prepare now, CBRE, 2017

Digital technologies are reshaping the way individuals and businesses are fulfilling their RE needs. One of the most important catalysts of change is the smartphone, CBRE, one of the largest commercial real estate services and investment firm in the world, suggests. With penetration of nearly 60% in Asia-Pacific, for example, mobile phones are the primary means by which many people collect information, approach customers, and dispatch services.

In its 2017 report called How Technology Will Redefine Real Estate, CBRE emphasizes that technology is already enabling individual mobility when it comes to the physical place of work, all while fostering a more creative and sharing culture within companies, business units, and individual teams. This is supporting the use of third-party spaces such as co-working centers and serviced offices – a relatively young, but massive industry, which is the most receptive to PropTech innovations.

Some technologies will have a stronger transformative impact on the development of PropTech than others. Forty/8, a specialist property company, sees the benefit of using VR to help potential buyers visualize finished apartments at a development in Manchester, the Telegraph reports.

“On traditional opening weekends, we expect to sell about 7pc of apartments on show, but using the VR headsets has seen sales increase to 15pc,” says Richard Forman, Head of Sales. “VR headsets enable viewers to step inside the apartment and sense how it will look and feel. It gives them a better understanding of what’s on offer.”

Examples of PropTech startups redefining the real estate business

Appear Here is a global marketplace for the short-term retail space. It connects brands, retailers, designers, and entrepreneurs with available space seamlessly online. Since its launch in February 2013, over 4,000 exclusive spaces have been listed on Appear Here in the UK and France, and as of April 2017, Appear Here has added New York’s top neighborhoods like Nolita, Soho, West Village, Chelsea, and Williamsburg to its global network of spaces. The company also works with leading retailers like TOPSHOP to list space in their flagship stores.

clixifix is a web-based defect and repair resolution platform. clixifix enables the whole team to collaborate on snagging, reported defects, customer queries, and aftercare conversations.

Habito is a digital mortgage broker service based in London. In September 2017, the company raised £18.5 million in Series B funding.

Houzen offers a way for landlords to connect to expert local agents. Landlords can use the platform to deal online with independent agents that are constantly assessed to deliver high-quality performance.

Explaining the goal her business, Angelica Krystle Donati, Co-founder at Houzen, said, “It’s to shift from simple tech-efficient operations to tech-heavy. We think that for what we do for the residential space, the real value-add will be machine learning driven by big data and by what we like to call intelligence augmentation. It’s basically AI but the other way around, so rather than replacing humans enhancing what a human can do through tech.”

“We’re also very interested in natural language processing, which is something we’ve started looking at already. Part of the funds we’re raising are earmarked for research into these new technologies.”

Humberts is a self-service platform that allows landlords to take full control of letting their property (for non-British readers, letting property is the act of allowing your house or land to be lived in or used by someone else in exchange for a regular payment).

Invicara is a cloud platform for managing building information. The company’s vision is a smarter industry that uses richer, more accurate information to drive efficiency for the entire ecosystem of the built environment. The company’s first product is BIM Assure, a cloud solution that helps the entire project team collaborate to improve data quality in BIM models. The company received an investment of $10 million in January 2018 from Kingspan, a global company providing high-performance insulation and building envelopes.

LeadPro is a flagship product of Property Technology (founded in March 2016), LeadPro is a tool for estate and letting agents that identifies vendor, landlord, and mortgage leads from email data. LeadPro also profiles and prioritizes consumer inquiries, ensuring the high performance of letting agents.

LeasePilot is a document automation platform specifically designed to streamline retail, office, and industrial leasing.

Matterport is an all-in-one reality capture system that gives users a realistic, interactive 3D and VR experiences that feel as real as being at the spot. Part of the Seeable suit.

Move represents a group of platforms and provides real estate information, tools, and professional expertise across a family of websites and mobile experiences for consumers and real estate professionals through all stages of the home journey. The Move network includes realtor.com as well as Doorsteps, Moving.com, and SeniorHousingNet.

Move also offers a complete solution of software products and services to help real estate professionals serve their clients and grow their business in a digital world, including ListHub, a listings syndicator and centralized intelligence platform for the real estate industry; Top Producer Systems; FiveStreetSM, and Reesio as well as many free services. It has a perpetual license to operate realtor.com from the National Association of Realtors.

Movebubble enables renters to search properties that are updated in real time. Its algorithm also learns about users’ preferences as it goes, providing more tailored results each time they search. Renters can book viewings and make offers through the platform; Rushby estimates they save renters an average of 20 hours of research. Despite only covering London, the app has 10,000 users per month.

Nested, launched in January 2017, is an estate agent that provides home sellers with up to 97% of their property’s value when they need it, and the rest when it sells. The home seller can thus use the funds advanced by Nested to buy their next home before selling their old one. In October 2017, the company raised £36 million in its latest funding round led by Global Founders Capital.

No Agent offers an intelligent property management services to landlords. It offers landlords a simpler, flexible and low-fee way to manage everything from start to finish. Landlords can find tenants, perform credit checks, manage repairs & inspections, collect rent, and a lot more. In November 2017, the company raised £840,000 to scale its renting service as a platform for landlords.

Ohmyhome is mobile application that connects HDB (Housing and Development Board) buyers to sellers and landlords to tenants directly for free. Ohmyhome also provides a range of flat-fee services, performed by qualified CEA licensed agents to cater to sellers, buyers, landlords, and tenants. Ohmyhome only allows direct sellers or landlords to list their flat and each unit number can only be listed once.

Panoleh is a platform, which allows users to create their own virtual tours easily. Specially tailored for real estate consultants, self-produced virtual tours benefit them by increasing their productivity and quality of their leads.

Pegaxis is a property management platform seeking to transform the procurement and management of property management-related services. The company’s tools provide property managers and property owners with a framework to help keep track of projects – lending efficiency, accountability, and transparency to the exchange of information that translates into significant time and cost savings. By centralizing the procurement workflow on Pegaxis, the process of obtaining quotations for the various property management services required by the property is claimed to be more organized and traceable. Property management companies can now procure the best service providers for their condominiums and commercial properties and better manage multiple ongoing projects. Condominium management councils can also track the whole procurement process and take control of the condominium’s expenditure.

PlotBox is an unusual case. PlotBox brings technology to the death industry, offering a fully integrated cemetery software and digital mapping.

Properr develops integrated technology solutions for the property industry. Its flagship product, Track My Move, was launched in 2016. Track My Move is a cloud-based sales progression software. The company offers one simple application that streamlines, informs, and allows everyone to track and efficiently progress the sale of a property.

PropertyGuru is an Asian online property company. Headquartered in Singapore, PropertyGuru.com.sg was launched in 2007 by two entrepreneurs who had the vision to simplify the property search process and help renters, buyers, sellers, and investors make confident property decisions faster. Since then, it has grown from being a media company to a high-growth technology company, operating a suite of property portals mobile apps across Singapore, Malaysia, Thailand, Indonesia, and Vietnam. PropertyGuru also operates a project marketing technology platform, ePropertyTrack, and a host of industry-leading property offerings such as publications, events and awards across multiple countries in Asia.

Propoly is a rental platform that has been created to help landlords and tenants directly engage through an interactively designed system that allows property owners to put their property on Zoopla and PrimeLocation without the need for a third party.

Redfin is in line with Zillow and other large-and-established tech RE companies. Redfin represents the next-generation real estate brokerage, combining its own full-service agents with modern technology to redefine real estate in the consumer’s favor. The platform offers a host of online tools to consumers, including the Redfin Estimate, the automated home-value estimate with the industry’s lowest published error rate for listed homes. Homebuyers and sellers enjoy a full-service, technology-powered experience from Redfin real estate agents while saving thousands in commissions. Redfin serves more than 80 major metro areas across the US. The company has closed more than $50 billion in home sales.

Rentify is a software platform for landlords, helping them to market, manage, and make money from their properties.

Reposit is a web app which provides an affordable alternative to the tenancy rental deposit. It helps agents rent properties faster, reduces landlord void periods and saves tenants money.

Roofstock is an online real estate marketplace. The site features single-family home rental properties for sale that already have tenants in them. The company raised $35 million in October 2017 from a pack of investors including Canvas Ventures, Lightspeed Venture Partners, Bain Capital Ventures, Khosla Ventures, and others. Roofstock is reported to have surpassed more than $1 billion in property transactions on its platform since its inception in early 2016.

Settled connects buyers and sellers, opening a channel of communication which makes for a more transparent, refreshing way of doing things. Instead of waiting for a middleman, buyers and sellers can have open conversations about the property and their preferences. Founded in 2015 by former Google staffer Gemma Young, Settled claims to save customers an average of £5,000 per sale by abolishing fees and enabling peer-to-peer negotiations, *Wired *reports.

StreetEasy is New York City’s local real estate marketplace on mobile and the web, providing comprehensive for-sale and for-rent listings from hundreds of real estate brokerages throughout New York City and the major NYC metropolitan area. StreetEasy adds layers of proprietary data and useful search tools to help home shoppers and real estate professionals navigate the complex real estate markets within the five boroughs of New York City, as well as Northern New Jersey and the Hamptons. Launched in 2006, StreetEasy is based in the Flatiron neighborhood of Manhattan. StreetEasy is owned and operated by Zillow Group (which also owns Trulia).

Ten-X, the parent company of Ten-X Commercial, Auction.com, and Ten-X Homes, is an online real estate transaction marketplace. As of December 2017, the company has sold 323,000+ residential and commercial properties totaling over $53 billion. Leveraging desktop and mobile technology, Ten-X allows people to safely and easily complete real estate transactions online. Ten-X is headquartered in Irvine and Silicon Valley, Calif., and has offices in key markets nationwide. Investors in the company include Thomas H. Lee Partners, L.P., CapitalG (formerly Google Capital), and Stone Point Capital.

TheGuarantors offers a rental lease guarantee service that provides the same security as a lease prepayment for landlords at no additional cost. Its Lease Guarantee Bond is backed by Hanover Insurance Group, an A-rated insurance company with over $13 billion in total assets.

Trussle is a free online mortgage broker. The company helps first-time buyers and existing homeowners save time and money securing a mortgage online. It then continues to monitor mortgages and helps users switch to a better deal later on. Trussle is connected to markets of 90 lenders and thousands of products to find the right mortgage to suit one’s circumstances. Users can track each stage of their application at any time from personal Trussle Timeline, and can quickly speak to the company’s team around the clock using the website’s live-chat tool. Trussle also gives existing homeowners the power to take control of their mortgage. Its free mortgage monitoring service keeps track of current mortgage, notifying users when it’s time to switch to a more suitable deal.

Virtual Commercial is a commercial property disposal platform that allows landlords and business owners to take full control of the letting or sales process without the need for a traditional commercial agent. The company provides all the tools, guides and templates to allow its clients to market the property, manage their viewings, negotiate and compare offers, draft professional Heads of Terms, and take professional tenant and purchaser references.

There are many more interesting examples, including Acasa, Compass, Exporo, Foyr (Foyr has been integrated with JLL’s tools across various APAC markets since 2016, and has been used in fitting out more than two million square feet of commercial space for the brokerage’s clients in the region), GeoSLAM, Goodlord, etc. In the short term, we will see a deep diversification of the areas addressed by technology startups, which, in the long term will come to consolidate into the next-gen platforms encompassing a full suite of services required for end-to-end property management for individuals and businesses alike.

“The taxonomy of real estate technology is still maturing. In recent years, it appears the rapid rise of smart real estate technologies, such as IoT (networked sensors, devices), is shifting the association of PropTech to property management technologies, while real estate information technologies and transaction technologies go without their own defining cliché buzzwords,” shares Nathan Dever, the Founder of Ten-X.

The markets of opportunities

“The market of potential customers for applications and services serving the real estate market is global, with half the world’s top 12 largest commercial real estate markets outside the US. London, Tokyo, and Paris are among the top six. Toronto, a city that doesn’t appear on most global rankings based on transaction volume, has more industrial cranes installed right now than anywhere else in North America.

“India and China have been among the most active markets outside the US for real estate technology investment. International startups like Housing.com, PropTiger, Fangdd, Anjuke, CommonFloor, and HouseTrip have all raised substantial sums of capital already,” says Josh Guttman, Partner at Softbank Capital.

“With the largest commercial real estate market in the world, New York is currently the worldwide prop-tech hub. But in Europe, the UK is leading the way, although [all] eyes are looking beyond these areas for the future of PropTech,” adds Paul Armstrong, Founder of HERE/FORTH.

For those passionate about PropTech, there are dedicated events to consider following – Future: Property Tech, Propteq Europe 2018, MIPIM PropTech Europe, PropTech Innovation Award by German Tech Entrepreneurship Center, and New York City Real Estate Tech Week 2018. Over time, we will see an increasing number of dedicated funds (like Fifth Wall Ventures), and even innovation labs (like Property Innovation Labs (Pi Labs)), which will play a curative and accelerative role to the industry with yet to be measured outstanding potential around the world.

“The way we consume real estate and PropTech will be affected by three main factors: changing consumer behavior; generational shifts, which will intensify the growth of urban centers while creating hyperlocal micro-communities; and technological shifts that will bring niche technologies into mainstream society. PropTech has already hit the investment mainstream. This year might be the year in which everyday user adoption starts becoming mainstream,” notes Angelica Krystle Donati, Co-founder at Houzen.

Elena Mesropyan

MEDICIGlobal Head of Content

Global Head of Content, MEDICI

Elena is a research professional with a background in social sciences and extensive experience in consumer behavior studies and marketing analytics. She is passionate about technologies enabling financial inclusion for underprivileged and vulnerable groups of the population around the world.