The Future of Real Estate: What is PropTech?
What is PropTech?
Property Technology, as its term implies, is the application of technology in the wide spectrum of the concept of property. PropTech is just one out of the thousand branches initiated by the ever-evolving and transforming applied science which is called technology. In the present times, everyone is keeping up with the latest technological trends to make daily life easier, just like teachers and professors use digital slide presentations for their teaching, stores using a point of sale (PoS) automated system to keep track of their earnings efficiently, even you, who constantly uses an Internet search engine to know and research various things with ease, and the list goes on and on endlessly. These examples are just the tip of an iceberg to really understand the nature of technology. Given that, the concept of PropTech in its introduction in the digital world is vague and indistinct compared to what it is in the present.
In the present, PropTech’s definition is concise and straightforward in which we can now distinguish its importance in the development of various industries through technology across the globe. PropTech is defined as “a collective term used to define startups offering technologically innovative products or new business models for the real estate markets.” Since technology is finding new ways for innovation, PropTech became integral to the commerce industry and then trajected its purpose into many promising fields such as the real estate market. Before we hop on the wide train of information under the PropTech’s hold on the real estate market now, we must first understand how it became to what it is now starting from its roots and then to its buds of today.
The invention of personal computers (PCs) was the birth of many technological phenomena such as our PropTech. Personal computers were not the sole devices able to contribute but also the utilization of mainframe computers – computers that are responsible for processes such as analyzing, arranging, and managing large amounts of data that cannot be done by smaller computers. These two types of computers enabled an intensive process that connected millions of people through network platforms and vastly accumulated bulks of data provided by the users. And because of these data gathering and connections, property market companies that have data analytical powers were established. Their fast analytics became an efficient tool in recording properties and property ownerships, values of assets, transaction records, and many more processes involved. Since the real estate industry is not just about the transactions and negotiations of parties involved, but also the construction planning and management, the PropTech wave greatly endorsed the use of technology for the latter concern, computer-based applications that reduce the workload in construction project designs and planning started surfacing. Eventually, existing real estate companies adapted the use of these automated database systems and building applications resulting in a better approach in their business-related decisions. This first wave of PropTech was called PropTech 1.0 and it lasted for twenty years, starting from the 1980s and finding its end in the early 2000.
PropTech 2.0 started right after the boom of easier Internet access in 2000. The creation of the World Wide Web allowed more people to be online because of web browsers such as the Internet Explorer, Google Chrome, Firefox, etc. Because of the introduction of possibilities in the first wave of PropTech, the electric commerce advanced thoroughly and paved the way for FinTech (Financial Technology). FinTech, just like PropTech, became one of the biggest technological phenomena because of its distinct value for the online commercial markets and online banking. Company owners grabbed the opportunity to launch their products online to be able to reach more consumers and big estate agencies also started to venture their businesses digitally. Continuing the second wave through the next few years of the new century was even more feasible because of the help of globally competitive and popular web browsers, the evolution of FinTech, cheap and versatile devices like mobile phones and laptops, and new generation of startup companies. Newer and more efficient PropTech solutions were offered by these startup technology companies. They were able to accommodate consumers and help them choose the best products and at the same time, captivated big-time investors that are also product innovators to try and set forth in using PropTech solutions. These factors really pushed through and conquered the business ventures of estate agencies, market companies, and many kinds of businesses in the past decades.
As technology evolves exponentially and develops rapidly, the second wave of PropTech will soon be engulfed by its third wave, PropTech 3.0. This third wave crashed in the year of 2008. Why 2008? Most of the startup companies that offered PropTech solutions and are still offering it now launched worldwide starting from the said year and then in the next years, their numbers grew and took investments from the ultra-wide arrays of markets. As these PropTech companies started to multiply, their use of technology in the real estate became more substantial and effective, giving them high credibility and then getting the investments they deserve. The year 2008 also gave existence to the widespread and admired system of blockchain. Blockchain is a very intriguing system and at the same time intricate to explain because it holds too many concepts in it. This system was first applied in a cryptocurrency called Bitcoin and seeing the system’s complex but powerful design, real estate stakeholders wondered if they could apply this kind of system in transactional management. PropTech 3.0 also includes the use of machine learning and artificial intelligence (AI). The utilization of these solutions definitely skyrocketed the performance of real estate agencies that have PropTech on their side. The existing technology nowadays is exceptionally different from what PropTech 2.0 offered for the real-estate market and other shared industry or economy compared to the third wave of PropTech. But the global situation suddenly erupted because of the global pandemic caused by COVID-19. Still, PropTech is out there facilitating consumers and estate agencies, using the best and appropriate solutions while also ensuring the safety of each and every one that is trusting these vital processes.
The history of PropTech consisted of decades that were slow-paced but soon after, consecutive years of abrupt growth, with not just consistency on hand, but also obvious progress. Notice that the PropTech 1.0 took 20 years before transitioning to the second phase. The reason is that traditional real estate professionals barricaded it making it unsteady at first. Eventually, as the nature of technology continues, PropTech became an inevitable surge of limitless possibilities. And because of this with the openness of everyone regarding innovation, the length of transitioning of PropTech 2.0 to its third phase accelerated even more.
PropTech in Real Estate
As PropTech emerged and drove technological transformations towards many sectors that govern the life of humankind, the sole field that managed to leverage out of it was the real estate industry. Therefore, the term PropTech adopted other names like ReTech (Real Estate Technology) and CRETech (Commercial Real Estate Technology). These newer terms are continually used in the USA, while PropTech is still the most used term globally.
In the research paper published in the Said Business School of the University of Oxford, Professor Andrew Baum, a real estate property research chairman, defined PropTech as “a series of verticals that facilitate information, transactions/marketplace, or management/control, offered through the industry horizontals of Real Estate FinTech, Shared Economy, and Smart Real Estate.” Understanding these verticals and horizontals can be visualized by using a table created also by the Oxford Professor Andrew Baum.
By considering the horizontals incorporated by the sector of real estate, the verticals that are subsectors of PropTech can be categorized to what their scope in the wide industry. The three drivers of real estate – information, transactions/marketplace, and management/control – are the integrals of the sector. Real estate information holds the data gathered that is processed and analyzed for business accommodations. Examples are property history and demographics, as well as smallest details and specific attributes of a property such as land area and boundary, previous issues, etc. The information gathering is really extensive because of the wide range of data that can also differ depending on the type of real estate that is described. Transactions and marketplaces in real estate govern the negotiations between a seller and a buyer, involvement of realtors, the market trends and techniques, etc. The third driver, management and or control of real estate directly defines the property management including the property designs and models, maintenance, administration and many processes that controls a property.
Classifying the horizontals of the real estate sector is not that complex because in every industry, they are also considered vital. On the other hand, the real estate verticals constitute of dynamic matters and these sub-sectors are the area of subsequent developments and exist as technology-based platforms. As stated on the table above, these PropTech sub-sectors are the following: Real Estate FinTech, Shared Economy, and Smart Real Estate.
Financial Technology platforms address the trading of properties. In the case of Real Estate FinTech, these properties are real estate assets which can be buildings or infrastructures, investment shares or funds, and any valuables incorporated in finance. Examples of real estate FinTech enterprises in the international market are Zillow, Fiserv, SS&C Technologies, and etc. The simplest activities provided by these real estate FinTech specialists consist of building web or mobile applications that can easily buy or sell an estate property, helping a prospective buyer to decide which estate to consider depending on his/her needs through an online platform, and even online booking and payment of hotel reservations.
The next sub-sector of Shared Economy deals with the use of property and the sense of these enterprises is the sharing of spaces. The simplest example provided by this business model are taxis and car rentals. In the industry of real estate, it is commonly found in residential estates, retail spaces, workspaces, where the most basic is the renting of homes, specifically apartments and condominiums.
While the first two sub-sectors are responsible for the trading and use, the last one which is the Smart Real Estate holds the operation and management of real estate assets. Their enterprise platforms consist of acquiring data and then structuring it as information and can also be the direct supervision of building the property, which can be classified as Smart Buildings. Technology-based platforms that provide “smart” services like these rely heavily on pure information to provide the most advanced and efficient way in conducting their work. A primary example of their work that can be obvious to us is the application of IoT (Internet of Things) on residential buildings. Remote access of appliances in homes using a mobile phone, automatic glass doors with sensors, and also sustainable supply of water and electricity are examples of Smart Real Estate of Smart Building provided technologies.
PropTech in the Philippines
The Philippines ranked 34th out of 50 among the countries in Southeast Asia according to the Speedtest Global Index commenced in October of 2020. This implies that the country’s internet condition is a lot more inferior compared to leading countries in terms of their technology adoption. Relative to this information, PropTech in the Philippines is completely far behind than the others. However, it is not impossible for the country to overcome this major problem and achieve better than what it currently has. Even with this barricade, the Philippines still maintain a small percentage of being nearly efficient through the use of technology across different industries, making it invalid to say that the country has completely no efforts to uphold higher technology standards. Through the emergence of startup companies in the Philippines like Flyspaces (2015), Hoppler (2004), Venuespring (2021) and other real estate agencies like BedandGo Inc., the potential of PropTech is starting to gain more momentum and is seeking for higher places in the estate market.
PropTech Benefits and Relevance
PropTech in the real estate industry is very dominant. Finding its benefits is really undemanding since these benefits are the foundation of why Property Technology is being pursued in the first place. Sustainable energy consumption in houses, reliable automations, tedious workload reductions, and even the timely necessity of being able to connect without direct physical contact, are just sprinkling advantages of PropTech in our daily lives. As everyone continues living their lives, everyone tends to think of ways that promote further simplicity and ease and this quality is what also makes humans what they are themselves. By observing the global state of pandemic in the last years and reflecting what effects it brings, PropTech is sure to be absolutely relevant and still important as it is one of the exceptionally adapting ways of mankind to its environment.