It’s a common theme in most predictions for the real estate investment industry in 2019: the rapid growth in property technology, or ‚proptech‘.
Essentially, the term covers the way that technology is enabling the property sector. But we wanted to find out how it is transforming commercial real estate investment in particular.
Here’s my take on why proptech is such a big deal.
Proptech is here to stay
We’re now beginning to see a genuine growth in this area. Reports suggest that venture capitalists recently invested a remarkable $12 billion in proptech start-ups around the world in a single year.
Why? Because real estate is a hugely competitive market. They know that ‚proptech‘ can give businesses and investors the edge over the competition.“
Nery tells us that many investors have seen how proptech is already transforming the residential real estate sector. And they’re now sure that the commercial sector will follow suit.
A start up like Opendoor has streamlined buying and selling in the residential sector. Basically, proptech systems allow the company buy a home directly from a homeowner without any intermediary. They then invest in improvements and sell it on as quickly as they can.
“This kind of investment is driven by a more streamlined, tech-enabled purchasing process. And it’s now transforming the commercial sector as well.”
A smarter transactional system
Smart contracts are one way this is happening on the commercial side of real estate.
Buying commercial real estate can be lengthy and complex process. We see contracts and legal agreements going back and forth over a long period. Ultimately, it’s only the brokers and legal teams who benefit from the added costs.
Smart contracts are based on secure blockchain technology. They are a piece of software that automatically implements the terms of an agreement between different parties.
They’re completely safe and secure and create a permanent record of any transaction.
According to the experts at Deloitte: “Blockchain technology can potentially transform core commercial real estate operations such as property transactions like purchase, sale, financing, leasing, and management transactions.“
How proptech is helping investors and landlords
Proptech is also having an impact in terms of applications that help investors to monitor and manage the performance of their property portfolio.
Proptech systems are able to collect, manage and analyse huge amounts of data. Commercial real estate investors are now using that data to their advantage.
Nery explains that investors are now able to use the data to model occupancy rates, get help setting rents or predict footfall.
More directly, proptech now helps commercial real estate investors to directly monitor and manage their buildings.
Proptech software combined with the right hardware allows a landlord to manage everything in a building. That could be anything from water usage to office temperatures.
New investment models
Thanks to proptech, commercial real estate investors are also finding new ways to run their portfolio of properties more profitably.
Proptech software allows them to analyse huge amounts of data on customer and tenant behaviour. And this has led to innovative business models like that run by the co-working firm Industrious.
We’re seeing businesses using data-driven insights from proptech applications to help them create different business models.
For example, they’re able to be more flexible and dynamic in the way they charge rents to the people using the space. And even the design of the physical space itself can be optimised based on customer behaviour data.
Proptech innovation ultimately means that commercial investors are able to be more savvy about how they manage their real estate portfolio to fit with customer behaviour.
Proptech has proven its worth in the residential sector. It’s now making an impact on the commercial real estate side too.
My advice to investors? Leverage these innovations to your advantage as soon as you can.