Unclear financial returns hinder tech adoption
Nearly half of real estate companies that have adopted three or more proptech tools are hesitant to invest further in the sector due to a lack of return on investment.
Some 45% of these companies identified “no clear return on investment” as a barrier to further implementation, while 41% said they have “low technological maturity”.
Among companies that have adopted just one or two proptech tools, those numbers were lower, at 37% and 29% respectively.
The numbers come from a survey of European real estate companies by Yardi and the European Real Estate Association (EPRA). Respondents comprised investors across a full range of commercial property assets, with half having a market cap of at least €1bn.
1. Having an in-house strategy is vital
Nearly two-thirds of companies with an internal digital strategy said they had experienced a “strong impact on company performance” in the last five years. This compared to half of those that outsourced their strategy. Almost a quarter (23%) of companies that outsource their plans rated the impact of tech five out of 10 or worse.
2. Organisations lack a ‘power user’
More than a third (35.3%) of companies either outsource their digital strategy or are still planning it. Quoting Bastian Zarske Bueno, head of group corporate ventures and innovation at Swiss Prime Site, the report said: “Many organisations still lack a power user for technology. In other words, someone who can take control… and get the best use out of systems.” Without someone like this, companies risk coming across technical barriers and data misuse.
The biggest companies are best prepared, with 91% of those with a market cap of €5bn or more using an internal team to manage their strategy.
3. Most want proptech – but sparingly
While the vast majority (90.6%) of companies use at least one tech tool in their portfolio, two-fifths have stuck to three or fewer. About a quarter have used more, while another quarter have opted for in-house solutions to the issues they face.
4. Proptech tools are still limited in their function…
One of the biggest obstacles to adopting new tools is the “limited functional scope of proptech solutions”. Companies, conscious of meeting ROI expectations and preferring to opt for fewer tech tools, are more likely to favour platforms that meet multiple needs.
Meanwhile, a one-in-five companies are unlikely to consider proptech because they prefer working with established players in the market.
5. … but the real hurdle is competing priorities
“The main obstacle is that 45.9% of businesses are not considering tech adoption as an overarching priority compared to other business initiatives,” the report said. Just 2.4% of respondents expect to spend 7% or more of their company’s annual budget on proptech. The majority are either unsure (37.6%) or will spend between 0-3% (40%).
Richard Gerritsen, senior director at Yardi, said: “Organisations are succumbing to the idea that they are not ready to get themselves through the other side of technological innovation. This is an underlying issue that we need to change. More European real estate organisations need to be asking: ‘What is my cost if I don’t invest?’”