50 years ago, everyone thought it was crazy to use software to manage property accounting. But now CRE professionals probably can't imagine their lives without it. How long until everyone is using software to manage Commercial Real Estate debt?
Every year there are more and more PropTech companies tackling different issues CRE professionals face. From property management software to portfolio management software, there's a plethora of options available. Here's a glimpse at some of the capabilities of different PropTech companies and a general idea of the amount of companies within each category.
PropTech popularity, as an industry, has soared within recent years due to its ever-expanding capabilities/advancements and shift in market demand to focus on the consumer/tenant and data. From buying, to selling, and managing properties, there are several software options to help. The commercial real estate space is continuously evolving and as its needs change, more and more (tech) solutions appear.
"Companies can significantly increase tenant engagement by optimizing real-time updates about facilities and developing a sense of community using mobile apps... Cloud technology could be the backbone for many new capabilities as it offers scalability, data storage, and ubiquitous access." - Deloitte's 2021 commercial real estate outlook
The Three Waves of PropTech Popularity
- PropTech 1.0 - The first wave of PropTech popularity came in the 1980s as the usage of computers (both personally and professionally) rose. This wave started in the 70s with the birth and rise of accounting software but didn't become an integral part of the workforce until 1985; millions of offices around the world became reliant on accounting software for their bookkeeping. This wave also saw the creation of Microsoft Office in 1990, and we all know Excel is still widely used in the CRE world.
- PropTech 2.0 - PropTech's second wave of popularity came in the early 2000s/late 1990s with the dot-com bubble. As the internet's popularity boomed, so did PropTech; the digitization of information and information sharing options made everything easier for CRE professionals — online leasing, portals, and payment options via the world wide web became the norm. Within this wave, the PropTech industry skyrocketed.
- PropTech 3.0 - The third wave is the current wave. It started as a continuation of the second wave in the 2010s but quickly accelerated in 2020 when the COVID-19 pandemic pushed everything online. Since everyone moved to be remote, technology was more important than ever. The COVID pandemic also presented challenges that highlighted concerns revolving around health/safety and ESG initiatives. This wave shifted the PropTech industry to focus on smart buildings, blockchain security, and augmented/virtual reality.
Although the overall popularity of PropTech dramatically increased with each of these waves, the industry as a whole was relatively slower to pick up (compared to other Fintech types) due to underinvestment and skepticism. It wasn't until recently, with the current wave, that PropTech truly started making a difference.
Don't be the laggard when it comes to adopting tech solutions. Like any investment, it pays to start early; it's harder to catch up to competitors that are using tech.
Here and Now
In a post-pandemic world, the ability to easily shift to an online world is more important than ever; from esigning to virtual tours, the PropTech trend not only continues but is expanding.
In 2021, PropTech set a new record in venture capital with private investments hitting over $32 billion! This is a 28% growth from the previous year!
"Following a year of uncertainty, the venture capital and real estate tech entrepreneur market is back in a meaningful way. The continued growth of the sector has seen new investors across multiple stages enter the market, including private equity groups and institutional organizations." - Ashkán Zandieh, Chairman of the Center for Real Estate Technology and Innovation.
As the industry continues to mature, 2022 is expected to be another record-breaker with unanimous optimism from the Center for Real Estate Technology and Innovation.
The pandemic highlighted a desire for more transparency and resiliency, whether that is regarding health/safety conscious features for tenants and/or ESG focused initiatives, data is the backbone holding the third wave afloat. This current wave of PropTech popularity focuses a lot on smart buildings and the capabilities/potential technology can have to increase data analysis and disclosure.
These are 10 trends expected to lead the way this year:
- Rent/Home Price Estimation
- Online Tenant Screening
- Virtual and Augmented Reality
- Data Analytics
- AI Neighborhood Analysis
- IoT Compatible Smart Buildings
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