According to Anthony Walker, CEO at mobile report generator GoReport, “construction is the least innovative technology sector. We’re still in the early stages but we’re starting to see a positive direction of travel because of a change in sector mindset.”
Walker participated in a webinar hosted by RICS World Built Environment Forum to discuss ‘Proptech: What’s changed in the past 12 months?’. Joining him were Zak Schwarzman, director of VC firm MetaProp and Ahmed Zghari-Sales, chairman of Construction Blockchain & Smart Contracts Committee.
The hour-long session was directed by John Kraus, director of external affairs at RICS WBEF, who asked broad questions about the past, present, and possible future of proptech.
Who’s driving proptech investment?
“Proptech has grown faster than any other aspect of the tech industry, and this growth has continued to accelerate in the past 12 months. It’s grown from a sector with under $500m worth of investment in 2013, to gaining roughly $10bn in 2018. It’s growing on an ever upward trajectory at the moment.”
“Capital is coming from dedicated VC proptech specific firms, or inhouse corporate ventures like JLL Spark. The generalist venture capital community has become quite aggressive, this includes Softbank, which at $100bn has the largest VC fund in the world. They’re also coming out with a second one, which shows that they’re not shy about putting money into proptech, which accounts for 10 to 15% of its total Vision Fund.” Said Schwarzman.
“Softbank is investing in blockchain, which gained $5bn of investment last year.” Zghari-Sales expanded, then said that “as the property industry grows in popularity there is more investment in technology. Governments are also starting to push technology, and when they say they want to mandate something, it pushes people to invest.”
What tech is being invested in the most? What is the innovation driving investment?
“The real estate industry is so vast, it’s the largest sector in the global economy and has so much innovation debt. There are many different areas in which to still play,” Schwarzman explained. He then needled down on a recent trend.
“Over the last two to three years, full stack startups have really emerged. What that means is something like WeWork or OpenDoor look outside of their immediate intentions, and they’re having a massive impact on proptech. Full stack companies challenge incumbent companies with different tech, and act as a direct challenge to existing hotel operators, stock brokers, etc.”
Walker agreed, but said that in the UK, the market is more geared towards retail and office utilisation.
According to Zghari-Sales, there are two aspects of proptech. “The first are infrastructure projects, which move customers away from software and onto the cloud or their mobile. As the construction industry as a whole is predominantly made up from small scale companies, having a cloud offering has become essential to the business.
“The second is that the Internet is still relatively new but it’s maturing. There has been a recent growth into mobile and 5G is going to change the landscape. AI and sensors are becoming essential in new builds and are helping create a digital twin where cities have their own digital versions of themselves.”
He thinks that security is going to be the next investment. “Security companies are getting into the sector now as they’ve seen the opportunity.”
What’s giving people the edge?
“The backdrop to the construction sector is that the population is growing. Within that global trend you’ll find people moving from rural areas into the city, and this is going to provide logistical challenges. The typical way to gain advantage here is to improve productivity, and construction is the sector with the lowest productivity in the field,” Zghari-Sales explained. He concluded that “the construction industry desperately needs more infrastructure.”
Kraus felt the “construction industry is opaque and we need more transparency.”
Walker noted that in a recent survey “cost was 53% of the issue with adopting proptech for companies. Clarity was also a challenge, but if you show that committing time to technology is worth it, then people are increasingly positive about taking it on board.”
Schwarzman said “these are familiar challenges in the proptech industry. We spend a lot of time with big names across the globe to help them along in their journey.”
He said MetaProp is frequently asked: “What are our priorities going to be, and how do they relate to our corporate priorities? How are we going to fund this? Should we be deploying capital? Should we be building tech we can’t find in the marketplace?”
Schwarzman said that he typically advises companies who want “uncommon proptech access before their competitors” that they need to be seen as “investing in proptech.”
Walker said that “in a recent survey with surveyors, 38% said they have a digital strategy in place, while 17% are still working on it, and the rest had nothing.”
How do I choose the right proptech?
“It’s okay to make mistakes and try things out,” according to Zghari-Sales. “A lot of times when you choose technology, it’s not until you start to deploy or change your processes you know whether it’s going to work out or not.”
How will proptech impact on real estate professionals?
Walker said that “proptech will have a massively positive impact on businesses and individuals. As with all tech throughout history, jobs will change but new jobs will present themselves. It’s not about making surveyors into coders, but just having people aware of the technology will help the company.
“Proptech provides a massive opportunity that people should take and run with. Recruiting new members into the profession can only be a good thing.
Schwarzman concluded by saying “I’m an optimist generally” and that he typically hires “disruptors”.
“If you look at companies in the world of surveying for example, they are using tools to ease their workflows with better data access and a better user experience, which helps firms operate more profitably and at a greater scale.”