How Proptech 3.0 Will Revolutionize the Real Estate Industry

Today the real estate market is changing dramatically by various technological trends which result in the rise of PropTech. These changes occur due to the development of technologies where the focus finally and irrevocably shifts from the manufacturer to the consumer.

It seems obvious that this will not affect developers, because they control production and, therefore, cannot become victims of disintermediation. This confidence is reflected in the fact that less than a third of real estate organizations claim to have an enterprise-wide digital strategy. Indeed, it is difficult to imagine how you can find house-building plots by means of big data, use blockchain to optimize the purchase process, print 3D models of houses and buildings, and conduct virtual house tours online using VR. However, in several years, this will become a reality. Companies that don’t keep up with technology will become dinosaurs on the verge of extinction: in the future, they will lose the cut-throat competition and stay in the past or adapt to the digital age.

PropTech encompasses information provision, transactions, management and relates to all types of real estate including residential, commercial, hotel, logistics and land. Grand View Research predicts that the global real estate market is expected to generate a revenue of $4,263.7 billion by 2025. Construction output globally is expected to rise by $6.3 trillion to $15 trillion by 2025. In order to automate business, the real estate industry takes the best from information technologies and goes through several stages of blending with IT.

PropTech 1.0

Despite computing was invented in the 1930s and 1940s, the wave of PropTech 1.0 raised only in the mid-1980s with PCs. The industry used computer-aided design tools, such as Autodesk or CAD, and Excel for data organization and analysis. The dotcom boom in the 1990s transformed print to web to sell real estate as well as goods. We saw the growth of online listing sites for residential property lead by estate agencies. This model generates revenue from listing fees predominantly on the pre-sales front as lead generators for developers and estate agents, but most post-lead real estate transactions were still manual.

PropTech 2.0

PropTech 2.0 continued the evolution of PropTech 1.0 and was released by e-commerce, social networking, open-source software, and the multi-platform world. According to the classification of the World Economic Forum, PropTech 2.0 is focused on the use of data analytics and virtual reality.

Nowadays, data-driven analytics accelerates business efficiency. Realizing this, Omega-R company developed a PropTech analytical platform that evaluates the most rational use of the office property regardless of whether it is owned or rented. The program combines graphs, big-data, trends, analytics and other parameters sorted by territory and other filters.

PropTech 2.0, provided by advancements in data processing and storage, led to a breakthrough in cloud computing, leaner coding, mobile devices, sensors, making the industry fully digitized. Broader internet and smartphone penetration enabled greater information sourcing and transfer, empowered market behavior research, communication in terms of business and resulted in home-sharing and co-working. Actual conversions were encouraged by blending FinTech and PropTech concerning electronic payments, mortgages, and property-related insurance.

Future of PropTech

2019 was definitely the year of the real estate tech industry. As CRETech 2020 Emerging Trends Report shows that a total of 39 deals over a $100 million took place in 2019. That is a noticeable increase from the 23 mega deals of 2018. In 2019, the largest deal belonged to WeWork, with SoftBank’s $6 billion investment in the We Company. In 2018 it was Anida, a real estate platform operator from Spain that closed a $5.82 billion investment in October. In 2019, North America’s dominance in PropTech has begun to be challenged by the Asia market in terms of total dollar volume and median funding amount.

KPMG Global PropTech Survey 2019 foresees that 95% of real estate companies have someone responsible for leading digital transformation and innovation. The main reasons for embracing digital strategy are reducing costs, improving efficiencies and enhancing decision-making. Nevertheless, advisors and brokers succeed in digital transformation more than owners and developers. The last ones show low engagement and collaboration, obviously, because the prevailing number of people managing digitization has mainly finance, construction, real estate, and some other background than IT.

Unlike consumer-focused PropTech 1.0 and PropTech 2.0, which is oriented on small businesses, PropTech 3.0 will step into an enterprise and carry high technical challenges.

Blockchain

Blockchain is probably one of the most popular buzzwords in recent years. In short, this new technology can be described as peer-to-peer sharing of data. In real estate, the adoption of blockchain would rewrite the industry in four ways: disintermediation, prevention of fraud, a novel currency concept Money 2.0, and smart contracts. However, beyond Bitcoin payments and remittance, blockchain remains primarily experimental.

What is the value proposition of blockchain technology? Deloitte assumes that blockchain is going to improve the property search process due to the control and standardization of data. It speeds up due to diligence and financial evaluation and excludes time-consuming, paper-driven and predominantly offline steps. Smart contracts can automate subsequent property and cash flow management. Blockchain makes property title management transparent and reduces corruption. CB Insights concludes that this old industry may be one of the first to jump into a decentralized digital world. Increasingly complex enterprise needs to pave the way for this disruptive technology.

Blockchain IoT

Fortune Business Insights predicts that the global IoT market is estimated to reach $1,102.6 billion by 2026 exhibiting a Compounded Annual Growth Rate of 24.7%.

The convergence of blockchain and the Internet of Things (IoT) is probably one of the most impressive technological trends in recent years. BIoT would certainly unleash a whole new range of services and businesses, among which smart homes and smart buildings would certainly be part of those that benefit the most from the combination of such technologies. Aftrex Market Research forecasts that BIoT market is estimated to reach $254.31 billion by 2026.

BIoT would allow entities to access real-time data from sensors, and the data would be fully protected thanks to blockchain. BIoT will be boosted by 6G wireless connection technology, which is anticipated to be launched until 2030.

Smart Cities

Smart city initiatives are being implemented all over the world. MarketsandMarkets study shows that the global smart cities market size will grow to $717.2 billion by 2023. The evolution of smart cities will prompt the need for smart property development and management, giving a boost to PropTech. For example, smart cities are highly data-driven, as extensive data collection and analysis are necessary to fully realize the benefits of smart cities.

This would create opportunities for commercial real estate players to act on data they possess to make more informed decisions regarding which locations to invest in, what the appropriate tenant mix would be, or how to improve valuation methodologies. These questions could be answered effectively with the support of PropTech startups that are specialized in predictive analytics.

Artificial Intelligence

Inkwood Research anticipates that the global Artificial Intelligence market will capture $94.01 billion by 2027, growing at a CAGR of 40.39%. Artificial Intelligence (AI) is too promising to be missed in the real estate industry. AI solutions could help agents to make data-based decisions. In several years, there will be invented algorithms that detect and manage emotions. This empowers AI to make phone calls and enables AI to take critical decisions. As for now, AI provides real estate companies with accurate automated valuation models for estimating prices. It is also proficient in conducting smart property analysis for calculating annual sunlight amount, parking space availability, sound disturbance, time of best light during the day, etc.

AI can analyze city zoning, trends in the industry and future local infrastructure to suggest plots or building sites for developers. As for communication with customers, AI can explore customer preferences and digital traces, propose solutions and assist clients during every step of the purchase journey. AI chatbots are able to collect leads and answer technical questions. AI can automate manual tasks by reviewing documents and generating new ones. Thus, the future opportunities of real estate powered by AI are vast, and it will digitize the entire real estate purchase experience.

Significant breakthrough is on the horizon – the way we live, sleep, work, move, create, connect and learn is being changed by disruptive technologies. The digitization of life reached the real estate market, which makes most traditional real estate organizations consider PropTech as an opportunity. It seems that the rise of all these trends is just the initial step to the next level of real estate industry evolution.