Why is everyone talking about PropTech?
The simple answer to this is because PropTech is changing the guidelines of ‘best practice’ in almost every fragment of the industry. What started off as an experiment, just a handful of people asking ‘what if?’, has become an internationally recognised transformation, proven by the fact that the University of Oxford have a just released their first academic report into the PropTech industry, curated by Professor Andrew Baum.
First things first, let’s nail down what PropTech actually is. We’ve been working for a long time without a solid definition but, finally, Professor Baum and I put our heads together to develop one that can standardise stakeholders’ understanding of the industry:
“PropTech is one small part of the wider digital transformation of the property industry. It describes a movement driving a mentality change within the real estate industry and its consumers regarding technology driven innovation in the data assembly, transacting, and design of buildings and cities” (suggested by Baum & Dearsley, 2017).
On a practical level, PropTech is the arm of property which essentially deals in the development of tools and solutions to streamline, enhance or make accessible the process of buying, letting and managing property.
Property is not the first industry to undergo this digital transformation, and in fact, the truth is it’s pretty far behind. One only has to look at music and film to see what the results of this transformation can be; the ups and the downs, the winners and the losers – Spotify vs. HMV, Netflix vs. DVD distributors. So, as property moves forward, what role is PropTech going to play? How does the industry best harness the power that it is being provided? How does it deal with the potential pitfalls? And is it, in any way, a threat to the average property professional?
Slow to adopt, cautious to advance.
It’s not an understatement to assert that PropTech is the most significant thing to happen to the property industry is the past 20 or 30 years. I say this confidently because of one key quality that it, as an industry, possesses. Most innovations, advancements or changes in the property industry only target audiences on one side of the deal; either the professionals or the consumers. PropTech, however, targets both.
Now, although this is a key reason for its success and growth, it is also what makes the relationship between tradition and technology so complicated. The residential market was the first to react, just ahead of the dot.com boom when we saw the rapid ascent of online portals such as Zoopla.
In those early days, these customer facing PropTech companies were widely reported, both wrongly and rightly, to be disrupting and potentially sidelining the property professional. As a result, the industry grew wary of PropTech; this feeling of mistrust remains to this day.
This distrust is entirely understandable, but it has stood in the way of the industry being educated on what it is PropTech can do. Because these early developments were so dominant, so soon, they effectively threatened the sector’s professionals, and closed the door to the very people developing superb tech solely to help property professionals work faster and close more deals.
This cautious approach has slowly been opening up, but as PropTech advances, we are fast approaching a tipping point. One could argue that all of modern civilisation is undergoing this digital revolution; if property professionals don’t embrace at least some aspects of PropTech, they are very quickly going to fall behind. Consumers are demanding a better, more personalised service which is on-demand and instant; just as they do their music, their TV consumption and their communications.
If the industry as a whole fails to adapt its mentality and start looking forward, the opportunities will start slipping away. PropTech companies, just like all companies, need active customers in order to succeed. A lot of the most exciting tech is coming out of small, startup companies who don’t have the luxury of time; they literally can’t afford to wait for industry to catch on and so they fold.
If anyone out there sees this as a good thing, I would remind them that we operate in an industry that is consumer driven, more and more so every day. If traditional property firms don’t offer what they want, they know they can find it elsewhere – probably online.
This leads me to a really important point. There is a common misconception that PropTech is an all or nothing thing, but it simply isn’t true. Traditional firms don’t have to let PropTech take over every aspect of their business. Rather, it offers property professionals an incredible array of tools and solutions to pick and choose from, so they use whatever they believe will help them be the best they can be. Not everything is for everyone, but it’s vital to be aware of what’s on offer. I think communicating this message is something that the PropTech industry can improve on.
Finally, I want to finish on something that I find myself preaching about every week: the digital transformation of the built environment.
PropTech is not the end of the story. The property industry is made up of a huge amount of smaller industries. PropTech is only one of these. But it doesn’t stop there: the digital transformation of the built environment is not only down to PropTech, because PropTech is just one small facet.
I am a firm believer that the time is already here to stop paying all of our attention to PropTech, and instead start talking about the Digital Transformation. That way, a more holistic view of property is possible.
To gain this holistic knowledge of the industry and where it’s going, professionals need to be looking beyond PropTech. The property industry is only the most valuable asset class in the world because of countless side industries thriving. Construction, finance, transport, connectivity, virtual reality, robotics. They all play a part in the future of property and a working knowledge of all of them will be a priceless asset to any property professional. Otherwise, not only might they miss out on opportunities, they might be left behind altogether.
To highlight this, I’ll steal a quote from Bill Gates:
‘We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.’
On top of that, let’s add Andrew Baum’s quote from his recent PropTech 3.0 report*: “…we should also differentiate between endogenous or internal PropTech…and the broader impact of exogenous technology…autonomous vehicles and artificial intelligence on buildings, cities and the entire built environment…”
These two quotes work hand in hand to perfectly illustrate why being aware of so many industries is so vital. Over the next two years we are going to see a continuation of process improvement across all property sectors – nothing too disruptive – much of which will be delivered by the PropTech industry. But the 10 year scope sees completely unrelated companies and industries making an impact. Autonomous vehicles, artificial intelligence and blockchain are just three examples.
Without an open and optimistic mentality towards technology’s role in property, we are, on so many levels, risking our own success as well as that of the entire market.
*For more information on James and Andrew’s report highlights, the report’s launch event overview offers a snapshot.
Read more about PropTech & Innovation in our Insight Report here, A Brave New World? Innovating Real Estate