What is PropTech? – Digitization of the real estate industry
Understanding digitization in the real estate industry and what PropTech is all about.
Digitalization has arrived in the conservative real estate industry and is being driven primarily by so-called PropTech companies. But what is behind the buzzword PropTech? What business models and trends exist in the field and what significance do they have for the real estate industry?
Combining the terms property and technology, PropTech encompasses, in simple terms, all technological developments in the real estate industry. These include the introduction or optimization of workflows, processes or entire business models with the help of the latest software and hardware solutions. Traditional business processes are shifted to the digital world and new business models are developed primarily from the customer’s perspective. PropTech companies bring together the offline and online markets and, in addition to pure cost savings, use digital technologies above all to improve the quality, flexibility and transparency of their customers’ service offerings. In this way, they also contribute to the long-term success of established real estate companies.
Who benefits from PropTech?
Digitization is transforming all industries and offers great opportunities, especially for early adopters. The target group of PropTechs includes both companies and private individuals. Specifically, this includes owners, buyers, sellers, tenants, landlords, capital investors, brokers and companies. A major advantage of the new technologies is that they make the handling of common business processes much faster and more targeted. This not only increases efficiency, but also leads to cost savings.
In general, PropTech solutions are creating an increasingly transparent real estate market and can be used in almost all areas of the industry. While smart-home apps ensure more energy-efficient design and use of real estate, special real estate crowdfunding platforms also enable small investors to invest in lucrative real estate projects. In real estate brokerage, portfolio and lead management softwares facilitate the work of agents. In addition, there are PropTechs that take over the valuation and exposé creation for private sellers and companies, or assist in finding a suitable real estate agent who will sell the property at the best price. Whether digital facility management or an app for property security – digital products and services will increasingly provide more convenience, security, speed and cost savings in the coming years.
What areas does PropTech cover?
PropTechs can now be found in all areas of the real estate industry – from construction and maintenance, investments, insurance and sales, to management and supply (e.g. gas and electricity). Various digital solutions are being integrated at various points to ultimately make the day-to-day work of real estate experts and customers easier. Whether it is the creation of 3D floor plans, tenant matching, the sale of condominiums or real estate investments via online platforms – for business and private customers, the use of modern tools means one thing above all: simplification and time savings. Various technologies such as APIs, chatbots, machine learning processes, cryptocurrencies, but also blockchain technology, drones, virtual reality/augmented reality applications, robotics and 3D printing processes come into question for this.
What does the future hold for PropTechs?
Given the diversity of possible fields of application, the industry in Germany is still relatively far at the beginning of what is possible in an international country comparison. However, technological advances in Deep Learning, AI and Big Data are driving significant innovation across all areas of the real estate sector.
The fact that the time is ripe for fundamental changes in the local real estate industry as well is proven above all by the growing number of corresponding company startups. The German Startups Association has identified 58 companies that are revolutionizing and digitizing the real estate market. According to an Ernst & Young study, 33 million euros in venture capital were already invested in PropTechs in Germany at that time in 2017. A manageable level of investment compared to €332 million invested in FinTechs. However, the further the digitization of the industry progresses, the more the interest of financiers grows and the invested capital increases. Brokers as well as entrepreneurs otherwise established in the real estate industry should follow current developments closely and seize the opportunity to optimize already existing business processes as well as develop new products.
After the industry has long gone unnoticed by technology companies, PropTech is opening up new opportunities for innovative companies and new benefits for users.
What PropTech trends can be expected?
- Transparency – Intelligent, digital networking makes it easier and, above all, faster to identify and communicate rental prices, fluctuation rates or vacant properties. This makes for a more transparent real estate market.
- Sustainability and environmental protection – Smart home apps ensure more energy-efficient design and use of real estate, thus laying the foundation for the major social issues – sustainability and environmental protection.
- Real estate and housing brokerage without brokers – digital real estate brokerage makes it easier for both buyers and tenants to find the right property. As a result, the role of the traditional real estate agent is changing significantly.
- Blockchain and cryptocurrency – In the real estate industry, for example, the use of blockchain can eliminate middlemen such as notaries. Moreover, by handling payment processes via cryptocurrencies, the speed of real estate purchases can be increased, while at the same time reducing the fees required for them.
- Crowdinvesting – Real estate crowdinvesting enables investments in lucrative real estate projects. And it does so for everyone.