In recent years, the term proptech has been a buzzword symbolising the potential for significant innovation within the real estate industry.
Yet when compared with the impact of fintech on the financial services industry, proptech has been unable to match the speed of revolution in real estate, due to a less-than-receptive industry view towards innovation.
Thousands of experts, backed by billions of pounds of investment, are working tirelessly to change the way real estate is traded, used and operated. It would be surprising if this burst of activity does not lead to some significant change. Many firms will fail but there is the potential for some very successful survivors, paving the way for a radical impact on the industry.
My new report, PropTech 3.0: The Future of Real Estate, describes how innovation is opening doors within the industry, enabling three key movements - the development of smart buildings, the shared economy and real estate fintech. All three are already altering the way in which buildings (or, in some cases, entire cities) are operated, inhabited, purchased and owned - and have the potential to change how firms operate not only with consumers, but with each other.
For consumers, how they buy property and the types of building they will inhabit are also up for debate. For example, it isn’t unfeasible that in as little as five years we could be using crypto-currencies such as Bitcoin or Blockchain - or even PropCoin - to buy and sell our houses at the click of a button.
Another likely development comes from the cost effectiveness of vertical living, so we should be prepared to live in apartments in high-rise, multipurpose towers from which we commute to shared working spaces in the same building.
Property assets are too big a portion of wealth to take risks
There will be a greater clustering of urban centres and vertical travel between co-living space, co-working space, gyms, shops, schools and medical facilities.
Yet despite this early progress and exciting potential, many within the industry are unsure what the ultimate result of this evolution will be.
What is clear through my many conversations with real estate professionals, entrepreneurs and capital providers is that while there is a huge appetite for change, doubts remain over delivery.
Strong human and regulatory pushback against the impact of technology within the real estate industry is likely. Investors and customers will be reluctant to trust technology to swap property assets without strong investor protection from professional advisers. Property assets are too big a portion of human wealth to take risks and while it is likely that the process of buying a house will move online, automated Blockchain transactions may never fully capture market confidence.
Funding may also be an issue for smaller proptech enterprises. We may already be past the peak of venture capital excitement, as there are signs that the serious money is increasingly going to the bigger, more established tech companies that have already raised significant sums, reducing opportunities for smaller firms.
There are several good examples of traditional property companies taking the best tech ideas and competing. Yet it is still unlikely that we will soon trade units in commercial real estate assets through an online exchange in sufficient scale to change the fundamental nature of this slow-moving, illiquid, lumpy asset class.
Undoubtedly there is a momentum building behind proptech as a way of injecting some much-needed innovation into a slow-moving market. But we must be realistic. Progress is one thing; making it happen is quite another and there are plenty of issues to overcome before we have a real proptech revolution on our hands.
28 April 2017
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