PropTech - Transforming Real Estate

PropTech - Transforming Real Estate

Real estate is one of the most exciting places to examine the tech revolution at work. Long seen because the Cinderella asset class due to its relative illiquidity, opacity and asymmetries of information, the very characteristics that made real estate difficult to navigate also are making it the proper proving ground for technologies that break down info barriers and eliminate friction.

We’re seeing PropTech have an impact at each step of the life cycle of a building, from development to operation to eventual change of use. for example, in the office sector, our sister development firm Trammell Crow Company is making buildings with larger ride-sharing opportunities and drop-off areas. This will increase capacity by repurposing garages that are presently needed for future office space because the proportion of individuals commuting by car falls. increasingly, these office buildings are marketed to tenants using virtual reality(VR) tours of space that's still being built, with visualizations of how space is used most efficiently. both investors and managers of the office are ready to use PropTech to see 3-D stacking plans of the tenants with all their relevant info per floor. 

Once that office is occupied, PropTech and smart controls can help eliminate wasted space and latency in usage, reducing energy prices and helping to create micro-climates per user to increase well-being of the people who work in the building. Customers will be ready to book meeting space, register guests or even access concierge services through a specially designed app. Finally, anonymizing and collating this property use information across all the offices of a selected owner, tenant or property manager, can create enormous opportunities for the analysis of building usage and better specify space for tenants. a good example of this is often within the retail sector, where info about typical “cross-shop” patterns in shopping centers can help landlords create tenant mixes and co-locations that better appeal to shoppers and maximize turnover for retail tenants.

While all these opportunities for larger efficiency and transparency are positive, they also create challenges. A landlord is no longer the seller of a commodity – an empty floorplate let out on a long lease – but is usually the supplier of an amenitised service in a smart building where the tenant is potentially way less secure. the requirement to have buildings that meet these new specifications has challenged conventional underwriting assumptions around capex, depreciation rates and void periods. Moreover, the investment and energy required to bring IT systems up-to-date, so that huge data sets are clean, well-organized and compatible with one another, is sizeable.

Increasingly, these office buildings are marketed to tenants using virtual reality tours of space that is still being built, with visualizations of how space can be used most efficiently.

The PropTech opportunity is thus a transformational one for real estate investment managers, because it challenges the very nature of how we price and operate real estate, but also how we look at what we can offer and the kind of talent set we need to invest in to deliver our clients’ performance targets. 5 years ago, how many of us employed data scientists? how massive were our IT budgets? What are those stats today and what will they be in 5 years, 10 or 15 years’ time? The managers who will survive and thrive are those that embrace the disruptions that PropTech brings and invests to exploit the larger efficiencies that they promise. In other words, the best deals we do this year shouldn’t simply be the assets we buy, however the tech firms we invest in.

Weekly Brief

Read Also

PropTech: The New Disruptor

PropTech: The New Disruptor

Edel Christie, UK Managing Director - Buildings, Arcadis
PropTech Brings Traditional Real Estate into the Digital Age

PropTech Brings Traditional Real Estate into the Digital Age

Aftab Taylor, Chief Information Officer, EMEA, JLL
Proptech Primer: Trends In Real Estate Technology

Proptech Primer: Trends In Real Estate Technology

Stephen Skinner, CIO, First Team Real Estate
The Intoxication of PropTech: Boom, Bust, and Survival

The Intoxication of PropTech: Boom, Bust, and Survival

Sandy Jacolow, CIO, Meridian Capital Group