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Palmer Capital
PropTech Evolve and Mature Significantly
Real Estate has long proven itself to be an impenetrable fortress. If the latest FuturePropTech, CogX and RealComm events are anything to go by, the queue of technology companies poised to breach is steadily increasing. Just outside the walls, tech giants are skillfully removing the hinges from the door. Don’t believe me? Take a look at:
• Google’s recent $13bn investment in data centers and offices across the US and the recent $1bn to build 20,000 Bay Area homes
• Sidewalk Labs’ new smart city dream in Toronto
• Amazon's HQ2, Alexa Smart Homes division and it’s ever increasing 288m sqft of offices, warehouses, retail stores and data centers
• Microsoft's numerous IoT products, Azure Digital Twin service, $500m pledge to fight housing affordability
• IBM’s Facilities Management products and IoT services
• Airbnb’s move into construction with Samara
• WeWork’s ‘Powered by We’ philosophy and its impending billion dollar IPO (Successful infiltrator who has been working on the locks from the inside)
Despite the buzz of high-profile activity, there is still a pervasive wariness and distrust about the use of additional technology. Some of the larger players are embracing it in theory, but their hands are tied in accessing the full value of such technologies until their own internal culture has been digitally transformed. It is a massive undertaking.
Amongst the SME organisations, of which there are thousands, it is fair to say the needle hasn't moved far. Where PropTech solutions are being used, they are usually implemented to solve an isolated problem. The short and long-term benefits don’t come to fruition because there isn’t a holistic approach being taken to digital transformation. For many years, “technology” has been a computer, MS Office, a phone and an underwriting tool (if you were really lucky). The connecting data tissue and business IP has largely existed within the memory of employees and an array of fragmented spreadsheets. Within the property industry, R&D spend vs revenue is ~0.08percent and within construction, it is ~1percent. Even if these numbers were out by 50percent, these figures on R&D in real estate are shocking in comparison to other industry norms.Commercial real-estate’s relationship with technology, though historically rocky, does not have to forego its happy ending. Want to fuel the romance? For traditional real estate companies to stay relevant and be able to leverage all that technology has to offer, there are 4 things to understand.
1. The last best experience that anyone has anywhere, becomes the minimum expectation for the experience they want everywhere.
This is a quote from Bridget van Kralingen (Senior VP at IBM) in 2014. Once you truly understand this statement, this should be your catalyst for change and the north star for your business.
2. The gold rush for talent is on!
All industries are fighting for similar resources that are skilled in enabling cultural and technological transformation. All property companies within the industry know they have to change...at some point. Irrespective of the company size, someone with the right skills is required to be focussed on business change and make sense of solutions on the market. Transformation officers, analysts, data [anything] and engineers are in hot demand. The seasoned talent will be looking for an alignment of vision and a seat at the table. If this cannot be delivered, you will struggle to attract and retain.
3. It takes money to make money.
Do you want to see your business digitally transformed? Do you want to differentiate by providing a seamless experience for your employees and customers? Do you want to work faster, cheaper and smarter? Of course you do! [and yes, please read those questions using your best X-factor voiceover impression] For this to happen, you will need to assign and protect the budget for the next few years. You need a clear runway for success. Today, most PropTech solutions are great at solving specific problems, (however theoretical), but investment will be required to bring it all together. Most of the PropTech companies have made it very easy to integrate. To make it all work will require a vision, time and commitment to manage these implementations and embed new ways of working.
4. PropTech is not just a prop.
The slow uptake of PropTech is due to technology not being seen as a business enabler or differentiator. To some, PropTech is a checkbox exercise. Sign up to one or two of the new products and you’re tech-enabled. Little effort, minimal pain and no change. Consumer, customer, investor and employee expectations are evolving. No company can make, deliver or market their products or services efficiently without technology. No company can change, measure and manage their operations effectively without the use of technology.
In October 2018, Susan Freeman (Partner at Mishcon de Reya) interviewed Brendan Wallace (Co-Founder and MD at FifthWall) on the impact of technology within Property. He said, “Real-estate is an industry that sat on the side-lines for 2 decades worth of innovation. They more or less missed the entire internet and all of mobile."
Real estate has been clinging to the past with a vice-like grip. PropTech has been a lone soldier, leading the charge for change. I’m not worried about property missing out on the next technological wave because PropTech is not alone anymore. With increased collaboration and partnerships, Real-estate is an industry that cannot sit on the side-lines for the next 2 decades because others will make the choice for them.
