Real Estate is the largest asset class and one of the last to adopt technological change. Despite its limits, the size and lack of adoption to tech present a great opportunity for entrepreneurs.
The potential of tech in the Real Estate market started to realize first in the 1980s with the invent of the Personal Computer. That was the start of the first PropTech wave. Today we are experiencing the second wave and the third can be seen just behind the corner.
Let us examine how these waves are defined, what can we learn from them and what they can tell us about the future of PropTech.
What is PropTech
PropTech as an all-encompassing term used to define a specific sector can lead to misunderstandings. It embodies in itself FinTech (which is just another umbrella term), lending, payments, wealth management, money transactions, crowdfunding, property, and ConTech (construction engineering & management), and so forth. To have a ubiquitous language throughout this blog, we follow the classification done by Oxford in a recent study on PropTech.
This article borrows heavily from the study and can be considered a summary while attempting to add takeaways for the reader.
As defined in the Study, PropTech can be divided into three verticals and horizontals where each organization operates somewhere in and between these cells.
Each vertical describes technology-based platforms which facilitate certain operations with a specific product or service. Smart Real Estate facilitates the operation and management of real estate asset. The Shared Economy facilitate the use of real estate assets while the Real Estate FinTech describes technology-based platforms which facilitate the trading of real estate asset ownership.
Many in the PropTech sector, are operating either in all of the verticals at the same time or have strong touchpoints across.
As can be seen, FinTech consolidates many of the PropTech verticals. This is also why the financial technology industry with its online payments, crowdfunding, equity, debt and exchange platforms provided the foundation for the PropTech 2.0 revolution. Before dissecting the second wave, lets first see where it all started.
The First Wave — invent of PCs
PropTech 1.0 lasted for 20 years. Like many other technological revolutions, it started with the invent of Personal Computers in the ’80s. When PCs and mainframes made computing power more available, different property market analytics companies were established. More data was produced than ever before and the growing volume of internet traffic throughout the 90s only fed the analytics capabilities. These innovations mostly profited existing Real Estate companies who managed to improve their economics through better decision making.
These twenty years also saw the launch of Autodesk in 1982 which today, plays a key role in the ConTech sector. Developments in e-Commerce gave way to FinTech that later started the second wave and email was mainstreamed for the mass data facilitation online.
PropTech 1.0 ended with the dot-com burst in 2000. At the same time, big estate agencies moved their residential markets online as we saw the launch of multiple Internet property portals throughout the decade from 2000 to 2010. Examples are Rightmove in UK and Zillow in the US.
Recent advances in information technology have made the development of complex transactional environments faster and more accessible. The mass distribution of mobile internet and cheap smartphones has put a potential management dashboard into the hands of almost every person in the world.
The advances in computing, FinTech revolution, and the startup economy, in general, have all contributed to the second wave of PropTech.
In the second part, we will understand how the three verticals of PropTech play into the current wave and how Your organization can align itself to make the most out the ongoing transition to PropTech 3.0.