Seventy years ago, the Westinghouse Electric Corporation released a short film titled Total Electric Home.
In the film, the classic 1950s family shows off their house full of futuristic conveniences. They have a centralized temperature control panel, whole-house surround-sound speakers, and even a front-porch-mounted TV camera to view visitors as they approach. It was truly the home of the future.
What Westinghouse did was predict a sliver of an enormous movement toward tech-enabled real estate now known as property technology or “PropTech.” And it’s disrupting nearly every aspect of commercial real estate.
In order to keep up with the evolving expectations of clients, brokers should know how technology is applied to the challenges of CRE. They need to learn where to adapt their own businesses so they can remain competitive in a swiftly changing environment.
Short for property technology, the word PropTech is used in two ways. It refers to the technology itself and to the companies that create and sell the technology.
PropTech first caught on in residential real estate with listing websites like Zillow, which provide homebuyers with instant access to information on thousands of potential properties.
Then, products like Ring (video-enabled home security), Alexa (voice-activated virtual assistant), and SmartThings (centralized smart home control hub) delivered homeowners the house of the future.
Now, residential real estate agents can entice buyers online with 3D home tours and drone footage. Mortgage tech classifies technologies used to smooth out the home loan process. And insurtech applications help insurance agents and providers build better pricing models and create highly customized policy mixes for their clients.
The PropTech industry is solving problems for those in commercial real estate, too.
Some residential PropTech solutions have migrated into the commercial real estate world. Virtual tours are often used to help sell office buildings, for example. But other types of technology are built specifically for CRE pros and investors only.
End-to-end solutions like biproxi equip CRE buyers, sellers, and brokers with a single cloud-based platform that powers the entire transaction from listing to close.
An ideal end-to-end CRE PropTech platform includes three types of tools:
CRE data flows smoothly among listings, marketing, and transactions.
CRE marketplaces are commercial real estate listing websites similar to Zillow. LoopNet is one of the oldest platforms in this space and has the largest repository of inventory. They provide a centralized location for listings by pulling listing data from across multiple listings sites. Biproxi offers a different type of marketplace, where listings are curated by accuracy, recency and quality.
Imagine using a touchless entryway that scans your face, sets the perfect temperature in your office, and tells the coffee machine to prepare your favorite beverage. That’s building management PropTech.
Companies like Enertiv leverage the internet of things (IoT)—a network of sensors and other hardware connected virtually—to help building managers reduce power consumption. With the right sensors in place, these technologies monitor everything from people flow to ambient temperatures. They then use that data to optimize the operation of HVAC systems, boilers, and other utility-hungry systems.
Building management PropTech is also used to improve the tenant experience. That can mean everything from touchless building access controls to a platform that streamlines lease agreements and payments, like ManageCasa.
ConTech is a sub-category of PropTech that includes technology used to streamline planning, designing, and building real estate.
One of the most widely known applications in ConTech is 3D printing. A 3D printer can create a perfectly scaled model of a new construction project in a matter of hours. But that’s just the tip of the ConTech iceberg. Below the surface, builders use construction productivity software like PlanGrid to run the entire building process.
PropTech solutions like these continue to change how CRE is done. Brokers that keep up with the evolution will be in a position to profit from them.
Commercial real estate has already been disrupted by technology. That genie isn’t going back in the bottle. If you’re willing to go where PropTech is headed, you’ll find a whole new generation of leads and a toolbox of solutions to modern real estate challenges.
Millennials now outnumber boomers (and have always outnumbered Gen X). They’ll be the next group to turn their investment dollars to commercial real estate. As the first truly digitally native generation, millennials will expect a tech-forward approach to CRE investing.
In general, millennials are heavily invested in tech solutions to everyday challenges. That priority continues in matters of money. Most millennials (73%, according to a study by Bank of America) would be more excited about a new financial product from a tech firm than one offered by a national bank.
When working with a millennial investor, you’re more likely to score points with a self-service website than a solid handshake. A Pew survey found that only 19% of millennials trust other people compared to 31% of Gen X and 40% of boomers. And Business Insider noted that only 24% of millennial investors worked with a certified financial planner. That strongly suggests that this new CRE investor will prefer tech solutions they can use independently. Provide them, and you’ll get their business.
Hackers have increased people’s concerns about internet safety, while COVID has increased concerns about personal safety. PropTech addresses both.
In some ways, new technology creates its own problems. High-profile data breaches show how vulnerable our information is online. They don’t go unnoticed. Pew found that 47% of U.S. internet users are more concerned about online privacy than they were a few years ago.
We’re unlikely to return to a paper-only transaction process. You’ll need the right technology to ensure your client’s data is safe. Secure electronic signature solutions and encrypted document vaults are a couple of ways to accomplish that.
Over in the real world, a pandemic accelerated the use case for virtual property visits in CRE. People were already comfortable going online to find everything from houses to spouses. With in-person visits suddenly impossible, commercial real estate property assessment is going digital as well.
Virtual walkthroughs, 3D virtual tours, drone footage, and better photography are the answer. Since the social effects of COVID are likely to linger for a while, a broker that embraces these technologies will be better suited to serve their clients.
PropTech momentum in CRE is clearly building, both on the supply and demand sides of the market.
Venture capital has been pouring into real estate-focused startups. Investment in PropTech companies reached $13 billion in 2019. That’s up from just over $1 billion in 2012. Since CRE is behind the tech curve in many ways, there’s still plenty of upside for even more growth in this sector.
Even with some hesitation by brokers to fully adopt technology (43% of tech providers say that user reluctance to use new tools is hindering widespread adoption), there is still momentum on the demand side of PropTech. Some 58% of real estate companies said they had a digital strategy in 2019 compared to 52% in 2018. And roughly 78% of brokers said an online listing service, like Loopnet or Reonomy, was their best source of property data in 2020.
CRE is behind the curve in digital transformation. For example,78% of brokers still manage their back-office process manually. Nearly half of brokers who keep a private database manage it on Outlook or on spreadsheets. And while email marketing is the most popular method to share listings, CRE marketers mostly use disconnected platforms, like Mailchimp and Constant Contact, to manage it.
The solution is to use a single platform that integrates customer management and marketing automation with all the other functions of CRE. Otherwise, your listing data, contact information, and transaction reports will remain in silos, turning your office of the future dream into a nightmare of time-consuming manual tasks and missed opportunities.