Originally published July 2022.

It is likely that all readers know that WFH means ‘work from home’, VR is virtual reality and crypto refers to various crypto currencies like bitcoin and ethereum, and BIM is ‘building information modeling’ and ESG is Environmental, Social and Governance, and yet few of these terms existed a dozen years ago. We used to call our buildings ‘smart buildings’ if they had an advanced HVAC system with a few sensors, but today we are well beyond that. Our dialect and lexicons are evolving faster than our recent decisions to seldom wear neck ties or business suits anymore.  

There are many who believe there is room for efficiencies in the way we design, build, buy, lease, manage, value, finance, transact, insure, secure, report and sell real estate resulting in lots of startups.    We also have a bevy of new disclosures and risk metrics to disclose to investors and regulators. Allow me to discern my perceptions on these trends.  

PropTech is a generic term for every technology that is aimed at serving the property market. Like FinTech aimed at the financial services industry and ClimateTech aimed at serving climate change-related business, PropTech is rather broad and includes long-established firms and a bevy of startups.  We can divide PropTech into some general categories, based on the way they process and use information, including those below: 

Metaverse: The term ‘digital twins’ is fairly new and represents the visualisation of a proposed, new, existing or purely digital three-dimensional building. BIM (building information modelling) is based upon a digital twin and BIM software like Revit, Revizto, Procore, Twinmotion and others. It allows users to visualise or simulate the construction process, design elements like lighting or materials, or simulate the user experience with virtual reality walk throughs or tours, that can be used for marketing or conferences. Augmented reality lets us add the digital overlay on existing landscapes and buildings and feel emersed in the actual structure, via computer screens or goggles for more of a 3D feel. Once used mostly in the construction phase of a project, today the emphasis is equally on marketing influenced by a Covid-induced desire to pre-screen space remotely. Applications like PIX (REALNEX-VR) are aimed at serving this market. More recently, digital twin technology is being used to monitor and manage the operations of property, by combining the digital twin with information collection via sensors, cameras and drones. The metaverse can also facilitate conferences with interaction using avatars (typically based on simple images users select), although someday the images will start to take on Spielberg-like quality and realism. In such a VR conference we can choose which break-out to attend or approach other people and strike up conversations. As an attendee in one of these conferences, it is just as challenging to walk up and introduce yourself to someone in VR as it is in real life. None of this tech is that new, but advances in technology and internet speed have made it more practical than ever. At the extreme, ExP.World, an example of a purely digital commercial brokerage world built on a metaverse platform that includes automated language translation allows for international transactions. Yet ExP.World requires no headquarters of real estate in the traditional sense. Ironic that ExP.World requires no space itself, aside from home or remote offices. 

More and more firms in the future will exist only on metaverse platforms and more conferences will be held in this format, allowing us to attend more conferences in the future and likely of shorter duration, from the comfort of our homes or wherever we choose to be. We will also have the chance to buy a piece of a purely digital metaverse space and NFTs (non-fungible tokens) if we wish, but just like there is no limit to the number of crypto currencies that anyone can start, there is no limit to metaverse copycats, so caveat emptor. Decentraland is an example of a firm that provides a platform for digital-only real estate, or unreal estate, if you wish. The value of digital platforms depends on the number and frequency of users. The extreme example of a digital NFT could be the Bored Ape Yacht Club (www.boredapeyach.com), with prices of over $1m to buy your own ape and have access to the digital playground. Just like with crypto, fortune does not always favour the brave, so caveat emptor.

Data: Data is the lifeblood of all PropTech firms and it comes from a variety of sources. Traditionally the real estate industry thrived on and utilised public record data for transaction prices, ownership records, property tax records, physical attributes and the history of all transaction data. Then private association data, like multiple listing services, or Craigslist listings, were added. But for those who think that is all there is, consider that today you can tap into data from cameras, drones, cell phone tracking data and sensors of all sorts (air quality, temperature, gases, vibration, motion) which would have been impossible to integrate a few decades ago, but now with expanded computer and cloud systems, can be stored and analysed. Using such data on prices, rents, tenants, customers, goods in transit and changes in any component of demand and supply in real time, has allowed for hundreds and thousands of new PropTechs to spring up and compete with the established behemoths (CoStar, RCA now MSCI, Corelogic, Black Knight now ICE, JLL, Moody’s [REIS & IPD], Yardi and younger cousins Compstak, Attom Data, RealPage, Reonomy, VTS, CREXI, PlacerAi and others along with all the major brokerage houses like CBRE, CW, DTZ, Colliers, Knight Frank, Marcus and Millichap, Eastdill, Avison Young, Transwestern, etc. Note that the bulk of the current investment within proptech is likely untracked and within these established firms). 

Analytics: Among the thousands of new PropTech startups, many have gained access to some of the data bases above and believe they can use general statistics or ML, machine learning, to better model decision models and provide useful information. Some firms, like Cherre (Cherre.com), exist to help integrate all the disparate sources of data and allow analytics to proceed. In the extreme, firms tout AI, artificial intelligence, and neural network models as the epitome of analytical models. While we can now provide automatic feeds from numerous data sources, as of 2022, it is the opinion of this author that AI is purely a marketing spin on something which is really experimental machine learning. Aside from expert trained categorisation models that can quickly detect the style of roof or quality of a kitchen or number of floors in a building, these models have yet to prove they are any better than experts and automated data feeds, at least in the world of commercial real estate. They can help sort photos and texts into frequency tables and then allow for some useful statistical forecasts and probability analysis, but this all requires expert guidance and we are as far away from useful AI apps as we are from being able to use one drop of blood to diagnose 200 diseases. As investors in Theranos discovered, it is not yet possible.  Still, analytics are improving all the time and we can expect that the best of the PropTechs will be acquired by those larger, more-established behemoths mentioned above, or in a few cases spun out to become public firms in their own right. 

Interactive and Integrated: BIM, Google Shared Team Docs, Zoom, Docusign.com, SalesForce are all examples of shared and interactive data bases and processes. Similar PropTech apps allow us to work on the same building design or send and modify contracts, manage a building operation via a smart phone BMS (Building Management System) or control security responses and access, or WFH (work from home), while working with colleagues, or better utilise workspace by sharing workstations and conference rooms. It is quite amazing that we were satisfied for decades to use less than half our work stations or offices at any point in time.  

When I worked for a major data and analytics firm, my large corner office sat empty at least 70% of the time and no one else dared to use it even though I wouldn’t have minded. Those days are fading, all because of data (sensors, cameras, microphones, analytical software, hard data) and high-speed, low-cost transmission of information flows that allow us to use control systems in real time. Exception reporting filters and predetermined normal condition standards, based on historical data and inputs, are fundamental to such applications. For example, sensors that monitor viruses or toxic gases or temperature are now integrated with HVAC BMS systems that open vents and request filtration changes, or open shades to let light in. Among the best of these applications are those that allow us to provide more rapid responses to clients, tenants, lenders, brokers and those involved in every transaction, speeding up analysis, contracting, due diligence and closings. There are several dozen firms vying for this business. 

Automated reporting:  By filtering data and organising data (even from spreadsheets) into standardised reports, we are able to more quickly, and frequently report to key players and partners. For example, Juniper Square and AppFolio are examples of investor reporting, financial analysis and more. Someday K-1s for tax reporting will be sent out on time. But ESG and energy-related reporting is also a huge beneficiary of automated collection of data and reporting. Firms like RMS, Jupiter Intelligence with location risk data and Measurabl.com with software are providing such services to facilitate the newly required climate risk disclosures.  

Jobs lost and gained: PropTech investors remain euphoric, even as nearly US$200bn goes into new ideas to serve the commercial real estate industry. Most of these will be long gone in five years or less.  Some of the best ideas will be absorbed by the seasoned and established firms, and in some cases the middle managers will find new homes in the larger firms. Within the real estate industry, many jobs are at risk within the decade. We will need fewer facility managers as we automate more building management systems. We may need fewer brokers for smaller standard spaces, as matchmaking and virtual touring applications become more efficient and effective. We will need fewer appraisers as we rely more on automated valuation models. We will have fewer people involved in transaction management, title insurance and lower fees, as blockchain becomes a new way to establish and document ownership interests. But at the same time, we will have more need for professionals that understand data management and process automation and how to evaluate and integrate various systems and applications. We will also need to continue to hire new talent for those who are taking ESG and climate risk seriously or planning new hybrid work strategies. For a while, we will need to run systems in parallel and we may need to add more information for ESG reporting requirements, and this will create new jobs. Among the sectors most at risk and more likely to see revenues decline are residential brokers, residential appraisers and those involved in mortgage underwriting and transaction management. In the long term, greater efficiencies and automation means few people to run the systems.  All of us who continue to hold these jobs will be affected to some extent and will need to add new skills and expertise or else become obsolete. 

Intermediaries and aggregators: There are a number of conduits and intermediaries out there helping us understand and get up to speed on PropTech and the metaverse. Among these is the oldest established forum, www.Realcomm.com, which has been holding conferences to educate the commercial real estate operators about the state of the art for multiple decades. Then we also have CRETech at www.cretech.com, Unissu at www.unissu.com, propmodo at www.propmodo.com and metaprop at www.metaprop.vc or MIPIM and Propel, all of which are providing a forum to exhibit the vast array of PropTech firms, along with some of the established players now entering further into this space, like JLL, Yardi, Moody’s, MSCI, CoStar, CBRE, Cushman and Wakefield, Colliers, RealNex and others.  

Conclusion: Climate-change concerns, ESG-related regulations and various certifications will all force more disclosure and reporting, and this is one sector, among many, facilitated by PropTech applications.  At the same time, the idea of smart buildings that can be designed, constructed, leased, financed, operated and used more efficiently and securely are all beginning to become reality for both real buildings and digital-only platforms (surreal buildings) that exist only in digital form. It is hard to imagine that anyone will pay a lot for a digital avatar to use in digital space, but apparently some people will do exactly that. Crowdfunding and tokenisation, the splitting up of interests into small pieces, co-working and shorter-term rental possibilities for both small and large space users all have their place. Designs will change as we accommodate drone delivery, ecommerce deliveries, food deliveries and autonomous car drop-offs, all oriented towards creating a more time-efficient world. Inefficiencies in how we trade, finance, underwrite, operate and transact within real estate are slowly being dissipated, which should lower costs, increase returns and separate the range of values observed for various levels of truly smart and well-designed or not-so-smart property.

References for readers to consider: Several good publications are available from the University of Oxford and Andrew Baum on PropTech. See also in Linkedin: Jim Young and Realcomm, Matt Ellis and Measurabl, Micheal Beckerman and CRETech, as well as Unissu, REConnect, Metaprop, and FifthWall.