While PropTech 1.0 was mostly comprised of established companies going online, the second wave, like in many other sectors, is disrupting through the mechanisms and economics of startup creation. Both VC backed unicorns and bootstrapping underdogs are trying to win over parts of the huge real estate market. A growing amount of investments can be seen moving into the more than 2000 Startup strong market.
Read about the first PropTech wave here.
These startups all operated roughly in the commercial, residential or mortgage sectors. Because the global residential market is around six times the size of the commercial one, investments are mostly going to the former.
The second PropTech wave is driven by startups backed by VCs that innovate property and portfolio management, home services (i.e gig economy), rent and sales search, insurance, agent tools, mapping, IoT and office spaces (i.e co-working).
Most of the 2000+ startups can be divided equally between the 3 verticals. These are the Smart Real Estate, Real Estate FinTech, and the Sharing Economy.
Let us take a closer look at these verticals, what they stand for, who are the biggest players and how an organization can align itself to make use of the value potential of each.
Smart Real Estate
Smart Real Estate vertical stands on the premise of the following expectations. Both users and investors expect that buildings will operate cost-efficiently and are highly functional at the same time. If operational costs are lower, then occupants will experience more competitive fees that result in better returns to investors.
It would be the perfect problem to solve for IoT if it wouldn’t be for the inherent flaws of the latter.
The sharing economy in Real Estate is galvanized by the slow merger of the second and third space. People don’t work in the office that much anymore. Sharing Economy, of course, is not only affecting the Real Estate but also the transportation and labor markets.
The low ownership rate this economic model is generating will benefit many operating in the rental market space.
Real Estate Fintech
The third vertical of PropTech is Real Estate Fintech. Startups in this vertical enable faster and more convenient trading of real estate assets helping to lower the illiquidity of the notoriously solid asset class.
The global real estate market makes up more than half the value of all mainstream assets in the world
The expectations towards the second wave are to mitigate the limitations of the Real Estate asset class like depreciation, lease contracts, supply-side regulations, smoothing and so forth. Time will tell if it succeeds or will the third wave with its AI be needed to break through.