PropTech is a composite of the words property and technology and is described as follows: PropTech refers to technological applications that optimise or innovate the design, construction, use, valuation, renting and leasing, buying and selling and management of buildings.
Immowi is also considered a proptech company. We developed algorithms and use AI and big data in order to break down the wall between real estate marketing and sales and to deliver high quality leads for real estate professionals.
PropTech makes the real estate market more transparent. For example, thanks to big data the value of properties can be determined more accurately and the risk for investors decreases. Sensors ensure more optimal use of properties and better energy performance. This is expected to increase the value.
The question is whether we can create affordable houses and healthy work environments with new technology and also contribute to climate objectives.
Rigid real estate market
Up to now, the real estate sector has not been known for being innovative. This is clear from the fact that while a buyer or tenant often looks online for a new home, the rest of the transaction takes place offline. Only 2% of consumers signed their purchase or rental contract digitally.
PropTech is currently in the spotlight because it combines social innovations, technical, product innovations and new business models to solve societal issues related to living, working and life.
Innovative barriers in real estate
The growth of labour productivity in the sector has been stagnant for a long time. Compared to other sectors, hardly any investments are made in research and development. Important explanations for this are:
-Long life of real estate: new technologies therefore only slowly replace the old ones.
-Capital-intensive: This makes it difficult for starting entrepreneurs with a good idea to enter the market.
-Not a transparent market: Every property is different and there is relatively little public information available. As a result, there is less direct competition in the real estate market, which reduces the urgency to innovate.
New technologies drive innovation
Thanks to new technologies (such as sensors, big data and data analytics), the real estate sector can now innovate more easily. Under the name of PropTech, new technological applications are possible. Investments in PropTech companies have increased tenfold this decade and are expected to increase further in the coming years.
More transparency, better occupancy and additional services
PropTech makes real estate more transparent. Further development of digital market platforms for real estate will make it easier for market parties to find each other. As a result, transaction costs are falling and the value of properties is becoming easier to determine through data analytics. The occupancy of office buildings, for example, is improving as a result of better insight into their use through sensors. Free workplaces are easier to find by means of an app. Finally, there are benefits to be gained from digitising the administrative process.
Increased value through PropTech
PropTech can ultimately increase the value of real estate by:
-Higher rental income because the tenant is willing to pay a higher price per m2 thanks to the higher quality of the property, opportunities for more efficient occupancy and lower energy costs.
-Lower risk for real estate investors. Big data improves the valuation of real estate. Moreover, the liquidity of real estate is increasing due to the further development of platforms. Finally, Smart Buildings reduce the risk of vacancy because these buildings are more attractive to tenants.
If we list all the new PropTech applications, it turns out that users are the ones who benefit most. A Smart Building better meets their needs and allows them to better control occupancy. Letting platforms enable shorter rental periods and lower transaction costs. The traditional role of the estate agent is therefore under pressure. Platforms can further digitise and take over this role.
From bricks to business
In order to meet the changing demand and the opportunities offered by PropTech, real estate investors will increasingly become like entrepreneurs. They will look beyond the value of the property, the duration of the lease and the creditworthiness of the tenant. A real estate entrepreneur has a business model with which he creates added value and ensures a lasting demand for his “Space as a Service”.