If you’re in the real estate industry, understanding Proptech is a priority for finding success in the coming years. If you are unfamiliar with the term or fail to see its importance, the time has come to discover what it is and how it is the future of real estate. In this comprehensive article, we will go over exactly what Proptech is, how is useful, and what you might expect to see in the years ahead.
So, what is Proptech? The most simple way to describe Proptech is to consider it as modern technology for real estate, or Property Technology. To expand on that, Proptech is a vague term that characterizes technology startup companies that provide services for real estate. Think Zillow or Airbnb – these are some widely known Proptech companies. This sector of real estate is a multi-billion dollar industry alone.
Grasping the idea of Proptech begins with its reach and why it is an important concept. It then expands into specific startups and what they’re doing. Additionally, knowing what you might expect from Proptech can help you get a leg up in real estate. Lastly, discovering the opportunities you might see from Proptech in the coming years. Learning and mastering the concept of Proptech is vital to anyone in the real estate industry.
The Importance of Proptech
It seems to be widely understood that technology is the future. This is true in all industries, real estate included. It is also understood that anyone not adapting to or utilizing technology is a quick way to fall behind. In order to remain relevant, using Proptech is highly recommended.
Proptech includes so many aspects of real estate that ignoring it or trying to be involved with the industry without the use of it will likely leave you in the dark. Since the concept expands into every sector of real estate, from finance to new construction, and office space to rental properties, Proptech reaches them all on a worldwide basis.
Some might even question where Proptech ends. With such variety in the startups – even Alexa and Google Home are Proptech tools – it is widespread and open to so much possibility. As technology and ideas continue to expand, as will Proptech. Currently, startups provide products that assist on both sides of the sale. It does bring up the apprehension that jobs might be eliminated due to the ease at which Proptech makes purchasing or selling a property.
A concern for real estate professionals worldwide is the fear that Proptech might fully replace them. Since this is almost entirely possible, the fear is legitimate. This is one of the top reasons that those in the industry should utilize Proptech and discover ways to be involved in it. Doing so can help realtors to remain current and needed.
How might realtors or other real estate professionals be replaced with technology? Take a look at all the ways in which Proptech can make life easier. With technology, a company can monitor a person’s self-guided tour of a home from afar, cutting out the middle man – a realtor. The financial aspect of real estate, such as getting a mortgage, can be removed from the big banks by companies like Rocket Mortgage or Lenda. These financial startups provide mortgages much faster than traditional banks.
Think of hugely successful companies that didn’t want to change their ways and utilize technology as it advanced over time. Kodak is the first that comes to mind. With the failure to change comes the failure of a company’s success. This is true for businesses and individuals. Being open to change and learning the newest technologies helps those in the industry to stay relevant.
If Proptech is indeed a threat to real estate professionals, what can be done to stay employed in the industry? A realtor that keeps up with the times is a realtor that will continue to find success. While many people might prefer to deal with apps or other technology to sell or purchase their homes, there are just as many people looking for a human presence during the stressful process. By hiring a realtor or other professional that can utilize technology to make the whole process easier, a home buyer or seller will feel more comfortable.
Banks that are willing to join the Proptech craze by developing a faster mortgage process and easy to use apps are more likely to survive the technology era. Keeping up with Proptech is important when it comes to moving forward. This is a recurring theme to remaining competitive.
One Proptech application that can enhance a real estate professional’s presentation is AR, or augmented reality. This technology allows a client to view a new build as a complete, 3d virtual model. It takes a standard, flat blueprint and transforms it into something a person might see themselves living or working in. While it might be possible for a client to experience a virtual version of their potential home without the help of a real estate agent, agents that are moving forward with technology can use it to better the sales process.
The importance of Proptech mostly lies in accepting change. While change is inevitable, it is important for those in the industry to stay up to date on those changes. Being left behind is something that has happened to many companies unwilling to accept and adjust to the changes. If real estate professionals want to continue in the industry, it is imperative that they learn to advance with technology. It is the future of real estate – and the future of the world.
Successful Proptech Startups
Proptech is a fairly new concept, but there are hundreds of startups in the category. In fact, some companies have found success worldwide. There are numerous Proptech startups that are known as unicorns, or startups worth more than $1 billion. Many lower valued startups in the Proptech sector are rapidly expanding. Examples of successful startups in Proptech include Opendoor, Compass, and Airbnb. Bowery and HqO are other companies that are also finding success.
Opendoor is a home buying tech startup that aims to make the process much more simple. Rather than dealing with the stressful process of listing your home, having a realtor show it, and then waiting to see if there are any offers, Opendoor uses technology and a team of people to determine what they would offer for your home. If you accept the offer, it’s done! You get the money, Opendoor gets a home to improve and resell.
While Opendoor currently only operates in 19 cities, the company is rapidly expanding. It is estimated that Opendoor will spend upwards of $2.5 billion on the purchase of homes in 2019. With numbers like these, it begs the question: how much is the company worth? As of June of 2018, Opendoor’s value was placed at just over $2 billion. Since then, the company has nearly doubled its reach, expanding from just 10 cities to the current 19. They plan to be in 50 cities by 2020. The vision and current growth at Opendoor speak volumes for the future.
With the rapid growth and increasing value, Opendoor is considered to be one of the most successful startups in the Proptech sector. Despite the $1.5 billion the company has in debt, there seems to be no concern for the future of Opendoor. It appears that the business model this Proptech startup has mastered is a popular route for sellers wanting to sell fast.
Compass is another hugely successful Proptech startup. It is considered a modern real estate company that employees real estate professionals and provides them with the tools to sell luxury properties. The company, which was valued at nearly $4.5 billion this past fall, listens to the needs and suggestions of its realtors and develops technology to meet those needs.
For their near 8,000 employees, Compass technology helps to improve efficiency and productivity. Compass is a Proptech company that continues to make realtors useful and proves their worth with the help of technology. While up until recently the company was in cities all over the United States, 2019 will be the year for them to grow internationally.
Airbnb is a widely known startup that you might not have known is considered Proptech. In fact, not only is Airbnb a Proptech company but as of late 2017, it was also the second most valuable startup in the United States at $31 billion. In November of 2018, Airbnb was valued at $38 billion.
Recently, Airbnb has taken a leap into a whole new aspect of real estate: the design, construction, and selling of homes. This project, known as Backyard, plans to have prototype homes available for sale this year. The homes are slated to be more efficient and environmentally friendly, even the construction leaving less of a carbon footprint. Although the inner workings of Backyard have been kept fairly secret, a project like this from Airbnb is expected to be exciting and new age.
Bowery is a Proptech startup that works on a different side of real estate: the commercial side. Office space is a large chunk of real estate. This company is one that determines the value of commercial spaces in a more consistent manner. Bowery is expected to have a huge impact on real estate appraisals, as the average age of appraisers is nearing retirement. The company has raised nearly $19 million since 2015 and continues to grow.
An additional Proptech startup that deals with the corporate side of real estate is WeWork, which as of January of this year is becoming The We Company. This startup raised a whopping $500 million in a single month last year and is estimated to be worth $47 billion. The company is one that creates shared office spaces in both physical and virtual locations. With the rebranding and unique business model, The We Company should be one to watch this year and next. The success discovered in WeWork is expected to improve with the rebranding that recently occurred.
HqO is another Proptech startup that is up and coming and quickly gaining success. This company is all about real estate from a rental perspective. The focus with HqO is the tenant experience, also known as TeX. The technology creates a smart building that can update tenants on traffic or public transportation, allows for easier payments, and even makes communication between landlord and tenant much more simple.
While the numbers for HqO’s valuation have not been reported as of yet, the company did receive funding in the amount of $6.5 million this past September. 2019 will be a big year for the growing company and definitely one to watch in the months ahead, as they are expected to do big things.
While these few companies are just a small number in the widespread startups in Proptech, they give an idea of the different types of technology companies exist in real estate. With advances in technology and the discovery of different needs and wants, Proptech is sure to have a long, successful future all around the globe.
What’s Coming in Proptech
Looking ahead to the future is just a glimpse of the possibilities in Proptech. There are various technologies that have yet to be developed or even dreamed of. However, the trends to watch for this year might give us some ideas.
Technology on the construction side of real estate is going to be a trending startup this year. With the development of BuildSupply, a tool for construction optimization in the work, billing, and even the purchase and use of materials, other similar companies will follow suit. Given that BuildSupply acquired $3.5 million in December as funding, it is likely that similar software companies will put their own spin on the concept.
Another expected trend for Proptech in 2019 is the implementation of several technologies developed the year prior. 2018 was huge for Proptech; there was the creation of numerous ideas, strategies, and products that have yet to be utilized much or at all. The Proptech niche will most definitely explode into something much larger this year. It will prove to have some human positions removed and others added, depending on the technology. It will be interesting to see how the real estate industry changes throughout the year.
Positions that might be added to the real estate industry due to Proptech might include those that deal with the technology end of things more so than the people. For example, with Proptech making waves, it is likely that an established IT department or person will be necessary where they might not have been before. They may also require positions for the more open lines of communication between tenants and landlord, especially if the number of tenants is great. This expected trend suggests that employment levels in the industry will be on the rise, despite some Proptech startups requiring less human interaction.
In the past, the real estate industry has utilized numerous software programs and apps designed to help with valuing a property, finding specific data, accounting, property management, and more. This year, it is expected that Proptech will develop one system with all of the real estate industry’s needs. Rather than multiple systems that need managing and the
how-to that goes along with it, there will be a single interface that combines the quality programs into one system. While this will be an ever-changing product, it is expected that 2019 is the start to this concept.
From 2015 to 2017 investments in Proptech, known as real estate technology early on, went from $1.8 billion to $12.6 billion. It is expected that this number will continue to grow, especially since the early numbers from 2018 showed promise. Despite the growth in numbers, sources believe that the risk in investing in Proptech will hit a high, meaning there will be fewer investors. However, the investors that choose to do so will be risk takers that provide more money, as they can expect a higher reward if things go well. This will account for the growth expected in 2019.
Growth is also expected in certain United States cities when it comes to Proptech. However, there is one US city that is expected to explode in growth in 2019. That city is New York. NYC is the birthplace of numerous Proptech startups and will continue to be a hub this year. Not only is New York the hub for the United States, but it is also the leader in Proptech hubs worldwide.
NYC also has continuing education on Proptech at Columbia University. It is clear that further understanding of Proptech is known to be an important aspect of working in the real estate industry. With numerous New York based Proptech companies being worth more than $1 billion, the city is expected to grow exponentially this year.
Another change to be expected in 2019 is the mindset around Proptech. While utilizing technology might have been optional in previous years, attempting to advance in real estate without the use of Proptech will be near impossible. The mindset had changed and will continue to do so – Proptech is a necessity for real estate today.
With 2019 seeing advances and new technologies in the Proptech world, the trends discussed herein not only hoped for, but likely. It seems that change is becoming welcome when it comes to technology in all industries. Real estate is now one that in joining the rest of the world.
The opportunities to get involved with Proptech are many. From investing and developing the tech to using apps and implementation, real estate moguls or even the average Joe can get in on the growth of Proptech. If an opportunity is what you’re looking for, it’s there.
Investing in Proptech in 2019 will be a high risk, high reward situation. In 2018, multiple months saw investments for $600 million or more in Proptech. Even the biggest of startups continue to gather funding for their next idea or next city. It seems clear that Proptech is going nowhere but up. However, finding the startup that will perform above others might be the challenge.
There are a handful of qualifications that must be evaluated when thinking about investing, and those qualifications get a bit more specific when it comes to Proptech startups. Firstly, apply logic to the startup’s mission. Are they looking to offer a successful solution to a problem experienced often in real estate? Is there a similar startup already in play? The answers to these questions might help to determine the next questions.
You then might ask if the similar startup is doing well or if it might be too difficult to differentiate between the two. Really evaluate the product and think about the potential is has to succeed or fail. Be honest with your assessments – it is your money at stake.
The next step to consider when thinking of investing in a Proptech startup is to learn everything you can about the people behind it. Experience, education, personal qualities, and skills as a team are all aspects that should be considered prior to investing. It’s also incredibly important to verify that the members of the team are all on the same page regarding their product and business as a whole. While differing ideas can be good for brainstorming, too much difference can be a cause of contention. Having a defined plan that everyone shares helps to keep things on track.
This leads us to the third part to be considered: vision. Investing in a startup that has no vision is a recipe for disaster. Most companies don’t exist their very first idea to be their only idea. Where do they go when the first idea hits a point where it can’t expand anymore? A successful startup will have another idea on standby and another one behind that. These ideas are probably years from seeing fruition, but to ensure the future of the company, they must have the vision to see where it might take them.
Be realistic. This is always recommended when investing in any startup. Despite the graphs and figures that show immense growth and return on investment (ROI) in the first year or two, most understand that it is quite possibly inflated to best case scenario in order to encourage investment. If the numbers seem too good to be true, they probably are.
If these aspects have been thoroughly thought over and you still wish to invest, the Proptech startup might be a great opportunity for you. Investing can be a big success for the investors and helps the startup to grow. This leads to other opportunities as well.
Real estate owners are now looking to Proptech to solve problems they experience regularly. From the improvement of productivity to knowing how the market is performing, technology’s capabilities are endless. Some owners are looking for technology that makes collaborating across the industry easier. Improved communication between the construction phase to the realtor and the financial institution can only make the sales process easier. By listening to the needs of real.estate professionals, startups might find opportunities that weren’t there before.
All individuals involved in real estate have a huge opportunity to use Proptech in a way never done before – using technology from start to finish to find a place, see or show the entire home or apartment virtually, communicate with someone on the opposite side of the transaction, and even handle payment. There are even Proptech startups that take care of the moving in or out process. Proptech also exists in the everyday life of homeowners or renters in the form of AIs and smart homes. With the numerous opportunities available, the need for startups seems massive.
It seems obvious that Proptech will be around for years to come. The relevancy of technology does not seem to be diminishing any time soon. The technology era will continue to form advanced solutions in areas of real estate such as construction, marketing, sales, and even rentals. Realtors and other real estate professionals will continue to learn and adapt to change in order to stay relevant.
Proptech is the future. The numerous startups that have already found success are just a hint of what’s to come. 2019 will bring forth existing and new companies that will bring together all aspects of real estate. The technology on the construction side will dip into the real estate sector, just as the financial aspect will do the same. This will make for a more fluid real estate industry, as channels of communication will be more open.
With the implementation of Proptech, it is likely that the real estate market will see some improvement in the coming years. Although this is pure speculation, the excitement of new technology and apps might inspire more movement in the real estate industry. While the changes seen in the market might be small or nearly insignificant, the slightest bump might inspire greater sales and returns the following year.
2019 will also bring about more expectations for Proptech and more people and companies willing to utilize it. The change in workforce needs might prove to be a necessary part of 2019, but those that stay current on events and technology should keep up with the change. Those that see Proptech as an opportunity are most likely looking at a bright future. Just as with any industry in 2019, technology is necessary to advance and create success in coming years. Proptech is a requirement for the future of real estate.
Does every industry have a newfound reliance on technology? You would be hard-pressed to find an industry that is technology free. However, Proptech just started gaining traction in 2018. Other industries have required technology startups long before Proptech came about.
What other industries have a sector designated for technology, much like Proptech? There are numerous industries with an emphasis on their technology sectors. These include Fintech, Edtech, Wealthtech, Insurtech, and more.