How Will Proptech Advance In Sales, Transaction, Asset Management? (Magazine)
Proptech funding reached a new peak of US$8.86 billion in 2019. Post pandemic will see more sophisticated tools as competition intensifies and funding increases.
By Patrick Ma, Director of Listed Securities and Research, Admiral Investment Limited
November 10, 2020 – Proptech started after the 2000s, following the dawn of the Internet era, as customers went online to search for real estate information and became more adapted to online transactions.
As the demand for digital news and real estate e-commerce started to rise, the early-stage portals were similar to online activities and transactions in other areas of e-commerce. And so, it was of no surprise that the mainstay proptech businesses that emerged at the time were online portals and aggregators for real estate markets, such as Zillow and Trulia in the US and Propertyguru.com and Lianjia.com in Asia.
From mid-2010 onwards, the emergence of high technology, such as big data, artificial intelligence, and cloud computing started another wave of developments. These technologies have propelled proptech from the “low hanging fruit” of aggregators/marketplaces with a consumer focus to more sophisticated applications that focus on the demand of not only consumers but also businesses. One example is the adoption of virtual reality (VR) and augmented reality (AR) in real estate marketing, which allowed marketers to bring the “experience” of a real estate product to prospective customers without being limited by distance.
As the potential of proptech application expands, investments in proptech have risen in tandem. According to CB Insights, proptech funding reached a new peak of US$8.86 billion in 2019. For the first eight months of 2020, amid the coronavirus pandemic, new funding for proptech was at US$5.22 billion.
The on-going coronavirus pandemic has accelerated the development and application of proptech. While social distancing may affect onsite sales, further deployment of VR/AR showrooms and increased application of big data and artificial intelligence into marketing and sales processes have helped real estate marketers to continue sales operations. Preventive health measures against the pandemic have further encouraged smart applications at the workplace and home. We believe proptech applications will be broadened and embedded in real estate industry practice in a post-pandemic world.
Currently, the development of proptech has been focusing on the following areas:
- Marketing and sales – For real estate marketing, we have already seen the impact of the advances in VR/AR on promoting real estate sales. With progress in big data, cloud computing and artificial intelligence, the real estate industry has further adopted more robust customer relationship management (CRM) applications in marketing and sales operations. The adoption of more powerful CRM applications allows for better identification of sales opportunities, customer acquisition and expectation management, as well as project management.
- Property transactions – Property transaction has always been a complex process due to information asymmetry and the involvement of multiple parties with diverse interests. While the first generation of proptech has gained ground in aggregation, marketplace and direct-listings, further development in the area of property transactions has so far been limited. With the development of blockchain technology, the use of blockchain to build an open system for property transaction ledgers and exchanges of property assets will likely become more prevalent. However, the challenge in utilising blockchain for property exchanges has always been regulatory, especially in the area of bridging the technological advances with oversight from authorities.
- Property management/asset management – One area of proptech application that has gained traction within the real estate market is asset management, which includes lease management, tenant management, smart home and smart workspace, digitalisation of property management, and asset maintenance and enhancement. From the perspective of landlords, these asset management tasks are tedious and costly in terms of money spent, as well as the time and efforts involved. However, they are necessary to support the value of an asset. Thus, the development of proptech has given the landlords an opportunity to deploy more efficient property management solutions. The advances in cloud computing and Internet of Things (IoT) technologies have allowed increased digitalisation and automation in lease management, space utilisation management, day-to-day operations and maintenance, which do not only accelerate the development of platform sharing operations (e.g. co-working space and co-living space) but also help investors/landlords with multiple assets to gain economies of scale in property management. Another proptech application in property management is the use of solar energy systems: starting as a cost-saving tool, they have become a new source of revenue.
Nextgen tech to drive asset management
In a post-coronavirus pandemic world, we believe proptech to be further entrenched in the different segments of the real estate industry, as the pandemic also pushes real estate industry players to improve cost efficiency and to deploy technology to satisfy customer needs. Notably, we believe asset or property management will become the area that drives the next generation of proptech development and investment, as the advances of big data, IoT and artificial intelligence support further proptech development. Asset management/property management has so far been less penetrated by technology, which means the potential for cost-savings and efficiency gains by deploying proptech is substantial.
About the Author:
Patrick Ma, CFA, has served as Admiral’s Research Director since 2016 and subsequently Admiral’s Director, Listed Products and Research. Patrick is responsible for the investment research that backs all of Admiral’s investment advice and management activities. He is also responsible for Admiral’s products in the listed space. Patrick has over 20 years of experience in the securities markets.