2021 began with continued pressures and challenges from the global COVID-19 pandemic. Since the pandemic began, all business sectors, including the real estate industry, have had to find innovative ways to operate in the face of lockdowns and other restrictions across the globe. The need to adopt new technology became a matter of urgency for those using outdated systems.
This increased need for virtual systems has fuelled interest in PropTech. PropTech is not a new concept, but the global response to COVID-19 has accelerated its growth and adoption rate throughout the real estate industry. For many businesses this may have been a daunting process at first, but exceptional growth payoffs and new revenue streams have made it worthwhile.
PropTech startups entering the real estate market at this time need to understand current trends and the impact of COVID-19 on real estate business.
- What is Proptech?
- The Three Waves of Proptech
- The PropTech Industry Today
- The Benefits of PropTech in Overcoming Real Estate Challenges
- Types of Real Estate Software You Need to Know to Succeed
- Four Main Types of Real Estate Software
- Real Estate Technology Trends in 2021
This article will give you answers to all of these questions.
What is PropTech?
PropTech, or Property Technology, refers to real estate startups that use new technologies and innovations to streamline the traditional processes of the industry. PropTech uses technology to enhance every aspect of real estate.
There are several distinct areas under the PropTech umbrella. For example, ‘ConTech’ relates to the use of new technologies to improve construction processes. Real estate startups building new, ‘smart’ buildings and cities are referred to as ‘Smart Real Estate’, and ‘Real Estate FinTech’ describes financial technology startups that provide innovative solutions for streamlining the financial processes of real estate.
The Three Waves of PropTech
PropTech has developed in three waves over the years.
The first wave began in the 1980s when computers first came into commercial use, allowing businesses to collect customer data. Software packages and programs were released that catered to the needs of various business models, real estate included.
At the beginning of this period, Microsoft Excel was the program of choice. Agencies were able to collect, store, and analyse customer and property data using Excel, but a market quickly developed for products that were specific to real estate. The focus at this time was on providing systems to help agents perform analytics and underwriting better, and the emergence of new products in this area opened the door to a new real estate business format.
The second wave, which made an appearance in the early 2000s, skyrocketed the use of PropTech as the use of the internet to search for anything and everything became the norm. Technology companies with a specific focus on real estate began to emerge, including for example Redfin and Trulia. Suddenly real estate tech (or PropTech) was an entire niche of its own.
The property market is now entering a third wave of PropTech, undoubtedly sped up by the challenges to the industry that COVID-19 presents. In this third wave, we see innovative digital systems and applications that enable investors and agents to conclude deals without meeting in person. Third wave PropTech goes beyond online services to also include VR, AR, drones, and the IoT, for example.
The PropTech Industry Today
The PropTech industry has come a long way since its first wave. Today, funding for PropTech is at an all-time high according to CB Insights, and the real estate tech sector gains more traction each year. In 2019, funding for PropTech rose 65% from $5.4 billion to $8.9 billion. Statistics show that deal sizes have also increased in 2019, from $10.9 million in 2018 to $17.4 million.
There has never been a better time for real estate businesses to invest in PropTech. The real estate market recently reached its highest ever level since 2006, and according to CNBC, real estate sales saw a 22% increase in 2020 compared to 2019.
To take maximum advantage of this trend, startups must know how to capitalise on PropTech and understand how emerging technologies can overcome the challenges of the property industry.
This brings us to our next section.
The Benefits of PropTech in Overcoming Real Estate Challenges
PropTech offers real estate startups many benefits and can easily overcome traditional areas of challenge, as detailed in the table below:
|Area||Challenge||How PropTech Can Help|
|Investing||Investing in commercial property for profit is becoming increasingly popular, but it can be time consuming to investigate and shortlist property options.||Commercial property comparison online saves both time and money by enabling investors to thoroughly investigate property options before creating a shortlist. Some examples of this are 42Floors, CIMLS, and LoopNet.|
|Construction||Risks and losses caused by failures in planning, forecasting, and estimating costs.|
The need for manual or in-person meetings to provide updates can slow the project down.
|Collaborators can use PropTech to communicate and share information on a single easy-to-use platform, from initial conceptualizers to the final builders. The need for in-person meetings is eliminated, and efficient team-wide collaboration ensures that construction projects are completed to specification in less time.|
|Purchasing and Renting||The property-hunting process can be arduous and traditional search engines turn up many unsuitable results.||PropTech apps and programs allow agents and investors to set customised parameters such as location, property features and price tag to filter out unsuitable results and only present options most likely to meet the investor’s needs. A prime example of PropTech used in this way is Airbnb.|
|Coworking||Use of coworking spaces is becoming increasingly popular.||Owners, agents, and managers of coworking spaces significantly benefit from using PropTech. It can keep track of memberships and payments, integrate marketing systems, and track customers.|
|Data Management||Gathering, storing and interpreting data requires significant resources and can easily result in inaccuracies.||PropTech helps with gathering and interpreting data accurately. PropTech makes it easier to keep track of investor interest and simplifies the management of rental and sale properties.|
In all of these areas, PropTech reduces overheads and allows agencies to cut back on spending. Customers receive digital/virtual services, and agents can work on the go. As a result, productivity and profits increase.
Types of Real Estate Software You Need to Know to Succeed
Each real estate niche has specific software requirements. It is important to consider your property niche when looking into real estate software solutions.
Nevertheless, PropTech startups benefit from an awareness of the wider real estate industry.
Types of real estate business exist within several sectors of the industry. Each sector has its own role and uses PropTech in different ways.
Developers buy land for rezoning and construction. On completion of the project, the property is sold or leased. Startups in development earn profits by increasing the land value and then selling it for a profit.
Developers use PropTech to keep track of construction. It helps collaborators to work, share, and update the project in real-time without any need for face-to-face meetings.
A real estate brokerage is a firm that hires estate agents to work under their company name. Agents facilitate the sale, purchase, rental, and management of the property.
Brokerages use PropTech software for real estate professionals to communicate with agents digitally and for property presentations. PropTech also helps to keep track of properties and existing/potential clients by collecting and managing data.
Sales and Marketing
Sales and marketing firms and agents work with developers to handle the sale of newly-developed properties. Their services include marketing, advertising, and facilitating the final deal. This simplifies the process for developers.
Real estate sales and marketing professionals use real estate business software to stay on top of development progress. It is also ideal for presenting properties to potential clients, marketing properties, and analyzing market data.
Lending companies such as banks, credit unions and government institutions make up a large part of the real estate market. This is because most individuals and businesses finance the purchase of their properties.
Lenders can use specialised online real estate software that uses machine learning technology and algorithms to determine property investors’ creditworthiness.
Property managers help owners manage the rental of their units. They use real estate agent management software to keep control over tenant issues. The software also helps to manage repairs, rent collection, advertising, and property presentations.
Without professional services, the real estate industry would come to a grinding halt. Lawyers, accountants, property stagers, interior designers, contractors, and construction workers all use PropTech to simplify and enhance their role in the real estate industry. For instance, a property stager can use VR to help clients envision their lives in a new property.
Now that we have taken note of the main areas of real estate business, what types of real estate software are commonly available?
Four Main Types of Real Estate Software
There are four main types of real estate success software products on the market. These are Real Estate Agent Management Software, Customer Relational Management Software, AV/VR Real Estate Software, and Enterprise Resource Planning Software.
Real Estate Agent Management Software
Real Estate Agent Management Software streamlines the daily tasks essential to property management. These tasks include accounting, rent payment tracking, tenant correspondence, and maintaining tenant legal compliance records.
Customer Relational Management Software
Customer Relational Management Software (CRM) facilitates relationships between agents and clients. It allows for concise data management and lead nurturing, and can be used to alert potential customers of offers, deals and property sales. It’s also ideal for efficient contract management.
AV/VR Real Estate Software
AV/VR Real Estate Software uses Augmented Reality (AR) and Virtual Reality (VR) to visualise property without the need to be there in person. AR superimposes objects onto actual surroundings, whereas VR is about immersing oneself in a virtual world. Both types of software are essential to agents and brokers, especially since in-person meetings have been restricted in many jurisdictions because of the COVID-19 pandemic.
There are other uses too. VR software helps investors to envision what an as-yet undeveloped property will look like after construction. AR can allow potential buyers to virtually arrange their furniture in a home to check the fit and imagine living there.
Enterprise Resource Planning Software
Enterprise Resource Planning Software is ideal for managing the daily activities of a real estate business, such as accounting tasks, project tracking, and risk management. Brokerages also use this software to visualise their business’s overall performance and gain insights that keep them on top of their game.
Real Estate Technology Trends in 2021
Several real estate technology trends have emerged in recent years and these commercial real estate technology trends are driving PropTech growth. The nine main drivers for PropTech growth seen this year are:
- Artificial Intelligence and Machine Learning
- Virtual Reality
- Internet of Things
- Big Data and Digitalization
- Sustainability Technology
- CRM Software or Custom CRM Development
- Cloud Computing
We will consider each of these main drivers/trends in more detail below.
Artificial Intelligence and Machine Learning
Artificial Intelligence (AI) is the intelligence portrayed by machines. Machine learning is a subset of AI that involves providing machines with data, which helps the machine ‘learn’ to respond in a particular way. AI is popular because it automates otherwise time-consuming and repetitive tasks.
Using AI and machine learning for real estate purposes gives many benefits. Some of the biggest benefits include:
- AI simplifies large property management tasks and streamlines data management.
- AI can recognise customer preferences and make suggestions.
- Advertising campaigns can be fine-tuned with input from artificial intelligence real estate products.
- Machine learning real estate software generates actionable insights by identifying patterns.
- Chatbots can provide 24/7 customer service availability.
Virtual Reality in Real Estate
Virtual Reality (VR) is the use of technology to immerse oneself in a simulated environment. In most instances, headsets are used. VR provides prospective buyers, renters, and investors with a virtual property tour with no need to visit the actual property. EYESPY360 and iStaging are PropTech VR programs trending in the real estate industry.
The main benefits of VR in the real estate industry are:
- Virtual reality real estate software instantly presents customers with appealing properties.
- VR saves real estate agents and customers time and money as neither one has to visit the property.
- VR real estate software opens up the market to more buyers. People overseas or out of town can view properties and process a sale without ever meeting the agent.
Internet of Things
Internet of Things (IoT) refers to a network of devices and objects in everyday life that are embedded with sensors and connect to the internet to share data and communicate. For example, with devices connected in this way, a person can switch on their television or kettle using their smartphone.
Some benefits of IoT in the real estate industry:
- IoT exposes properties to more potential buyers. Beacons (sensors) installed in properties can send out alerts to passers by, which inform them of the property’s availability and main features.
- IoT real estate products allow predictive maintenance. Property managers can use IoT to keep on top of repairs and maintenance schedules. If a roof will need a maintenance checkup in three months, for example, IoT devices can ensure all parties are well informed.
- Drones are another fine example of internet of things real estate use, which are also a trend in their own right.
Drones in Real Estate
Drones real estate software can record tours of properties from the exterior. These are made available to interested clients, saving time and money for both the agency and the client. According to Dart Drones, several companies already use drones for real estate. These include RE/MAX, Century21, Keller Williams, Coldwell Banker, Avanti Properties Group, and Goodman Real Estate.
Drones benefit the real estate industry in many ways:
- Drones provide high-resolution aerial images of property without having to pay for an expensive aerial photography shoot.
- Drones provide a better view of larger homes and properties.
- Drones present large vacant land better than driving or going for a walk.
- Drones can also be used to show prospective tenants/buyers more of the surrounding area.
Real estate businesses are inundated every day with large amounts of data from many sources. This data can provide helpful insight into customer needs, but businesses need a way to handle the data effectively. The term ‘Big Data’ describes technology that automatically organises and interprets large amounts of data. Big data real estate software helps agents to strategize effectively and make better business decisions.
Zillow Rental Manager is one example of ‘Big Data’ software that is trending in the real estate industry.
The benefits of big data and digitization in the real estate industry are many:
- Big Data real estate software can drive social media campaigns to get maximum benefit from them. It uses data to ensure advertising is well-timed and reaches the right audience.
- Agents can present customers with the properties most likely to interest them, eliminating the hit-and-miss approach.
- Utilizing Big Data in commercial real estate reduces financial risks. It analyses all known data about a property and its past owners to determine the property’s value and make recommendations on the next steps and requirements.
Sustainable technology is the combination of digital technology and sustainability. Property Forum statistics state that real estate consumes around 40% of the world’s energy. With green business models on the rise, more agents are looking into advocating for greener properties and systems to manage them.
Most startup real estate businesses and their customers want to meet current needs. This must be done without taking advantage of depleting natural resources. Sustainable technology allows startups to achieve both of these desires and also aims to avoid compromising future developments.
Benefits of sustainable technology in the real estate industry:
- Use of sustainable construction technologies (an integral part of PropTech) benefits the construction process.
- Proptech can help to achieve sustainability measures during the development phase of projects.
- Use of sustainable technology allows real estate agencies to meet and even exceed their social and environmental responsibilities.
CRM (Customer Relationship Management) software maintains data from tenants, customers, agents and businesses, and helps to facilitate good relationships between all parties.
CRM software is trending in the real estate industry because it is effective in customer (and employee) retention.
Benefits of CRM software in the real estate industry:
- Data can be imported and accurately interpreted.
- CRM automates sales campaigns based on reliable data.
- CRM software ensures efficient management is possible at all stages of the transaction.
- It provides an easy-to-use dashboard that simplifies customer relationship processes.
Cloud computing is the process of accessing data and running business operations online, rather than storing data offline and meeting in person. It makes data and information easy to access from any location. Agents can be far more productive having everything they need at the touch of a button.
Ease of access makes this a current trend in the real estate industry. According to Rapid Scale, as many as 80% of the top performers in real estate use cloud computing. It’s ideal for sales, advertising, and customer relationship building. It also helps with property management, data collection, and storage.
Benefits of cloud computing in the real estate industry:
- Remote access to files and data improves agent performance and productivity.
- Improved customer relationships are possible as easier access to information leads to quicker responses.
- Cloud computing reduces IT maintenance costs.
- Work can continue as usual even if significant external events mean staff are unable to get to work.
Blockchain in Real Estate
Blockchain technology stores data and acts as a reliable digital registry for recording contracts and transactions. Blockchain simplifies processes by removing the need for several third parties.
The use of blockchain in the real estate industry is trending because it increases transparency, minimises paperwork, and simplifies transactions. One of the trending blockchain apps at the moment is Ubiquity.
Some benefits of blockchain real estate software include:
- Blockchain enhances the efficiency of transactions.
- It keeps data transparency as a top priority during the property purchase process. Documents are trackable and readable. Once a new block of data has been added to the registry, it cannot be changed.
- Use of Blockchain ensures due diligence before the sale of a property goes through.
- It speeds up transactions of ownership so customers don’t need to wait.
The Lasting Impact of COVID-19 on PropTech
COVID-19 has had a massive impact on business processes worldwide, not least in the real estate industry. Innovation in business is a must in order to remain competitive in this new environment. Real estate startups can benefit from PropTech in many ways, especially during these uncertain times.
On a global scale, many people are still working from home. With effective use of PropTech this is a non-issue for real estate agencies, as PropTech handles all real estate processes without the need to step outside of the office.
Below are just a few ways in which PropTech is helping the real estate industry during the COVID-19 pandemic.
Smart Space Management
Social distancing has become somewhat of a buzzword nowadays. With COVID-19, companies must pay attention to efficient space management within a building. PropTech can help with ensuring safe distancing in commercial spaces.
Machine learning algorithms and sensors help set up areas with people-density in mind. PropTech also generates reports and forecasts about possible distancing risks in the workspace.
Access Control Systems
This is another way in which PropTech can help real estate owners to meet social distancing requirements and reduce in-person interactions. Property owners must be aware of and able to control who is accessing their premises, and using PropTech access control systems can reduce the numbers of security staff needed.
Remote Building Management
It is risky for property managers to visit properties during the pandemic, but essential building management and tenant management tasks must still be carried out. With PropTech, property managers can remotely track tenant payments and maintenance requirements. This minimises the risk of COVID-19 exposure while allowing property managers to stay on top of maintenance.
As explained previously, cloud computing allows real estate business employees to access information and run business operations from any location. This possibility became even more important during COVID-19 lockdowns in many countries last year, and continues to be helpful for reducing in-person interactions.
It is now clear that understanding and effectively utilising PropTech solutions will be key to running real estate businesses effectively post COVID-19. With this overview of current trends in PropTech, startups can make better decisions about their focus, identify their chosen niche, and adopt the best solutions to fulfill their goals.
PropTech has made it possible for real estate businesses to thrive during the COVID-19 pandemic, and agents and investors are likely to maintain their interest in new technologies long after the need for social distancing and masks has lessened. PropTech will undoubtedly continue to play a large role going forward. The question is, in which area will your startup make the biggest contribution?