PropTech has reached critical mass, according to new report
Data usability challenges continue to hinder productivity
Kimberly Greene
Mortgage Broker News
PropTech adoption has hit a critical mass threshold, according to the 2020 Altus Group CRE Innovation Report. For the first time in the five years since Altus Group began conducting this annual research, a majority of commercial real estate (CRE) leaders fully recognize the disruptive impact of PropTech, acknowledging that many advanced technologies can potentially solve their current challenges.
PropTech has been called the digitalisation of real estate, and can be used to describe companies, an enhanced consumer experience, and technology for everything from software to manufacturing. The report finds that online marketplace platforms in particular are gaining significant traction, with 61% of CRE leaders saying they will have a major disruptive impact on the industry. Recent years have seen new platform-based marketplaces connecting a broad network of market participants (such as buyers and sellers, tenants and landlords, lenders and borrowers, and investors and fund managers), and delivering transactional efficiencies as well as the collection and aggregation of data for the benefit of users. Lending platforms have experienced the largest level of adoption to date, with 63% of CRE firms having used an online lending marketplace for a recent transaction and 79% planning to increase use in the future.
As PropTech is here to stay, companies have successfully transitioned the structure of their organization to accommodate growing amounts of data and determining how to use that data effectively.
“CRE continues to rapidly accelerate its digital transformation and despite the growing complexity stemming from the proliferation of data, the industry is clearly shifting from a stage of ‘trial and testing’ to one of practical innovation to solve their current challenges today,” said Altus Group CEO Bob Courteau.
The challenges that CRE executives face today surrounding data are different from five years ago, and they report that the areas that they’re more concerned with now than they were in 2015 include: issues around the regulatory requirements of collection and management of data; lack of internal expertise/capability; lack of normalized data formats; and the lack of company desire to invest in technology.
To help deal with these challenges, eight out of 10 CRE firms now have a chief data officer or equivalent senior executive who oversees their organization’s data strategy and data governance, compared to only 44% four years ago.
PropTech has been disrupting the residential housing landscape for almost a decade, and Michael Cook, SVP of product marketing for Altus Group, says that the CRE space has actually been ahead of the residential space when it comes to investment in technology. The focus for investors and operators, however, has been different.
“In the residential space, the focus has typically been on the marketing process, end-user convenience, efficiency, and speed of transactions, while many of the CRE PropTech solutions are focused on functional applications, data management, and insights leading to increased performance from their assets, both financially and physically,” Cook said. “Because CRE has been mostly limited to institutional investors and trades much less frequently, the space has remained driven by a gobal network of experienced relationships across the industry. Many of the incumbent technology vendors were founded in the 1980s and early 1990s, before the arrival of the internet.”
Cook said that the recent boom in PropTech investment has been driven in part by the traditional tech ecosystem of VCs and founders discovering the CRE insutry and building startups geared specifically to accommodate the nuances of CRE.
Even as CRE executives have moved to accommodate changes that PropTech has required, views are still mixed about the impacts and opportunities that new technology affords.Three-quarters of CRE leaders said automation will eliminate jobs, but almost as many said that it will introduce new types of jobs within the industry and 67% said that positions will shift toward higher value-add tasks. While CRE leaders recognize both the impact on jobs and the short-term productivity benefits that automation can deliver, a major challenge is to anticipate how it shapes the future of the CRE workforce.
Eighty-nine percent of CRE executives said that significant consolidation is needed for PropTech to more effectively deliver on the needs of the CRE industry. Almost half (43%) indicate the push is already underway or will occur within a year. The areas that CRE execs feel are most likely for consolidation include property management, property transactions and listing services, and financing and lending firms.
The annual Altus Group CRE Innovation Report provides an outlook on technology trends and highlights the current digital transformation impacting the global CRE industry. It is based on a global quantitative survey of 400 CRE C-level and senior executives in both front and back office positions at owner operator and investor firms in North America, Europe, Asia-Pacific and Latin America. Altus Group Limited is a leading provider of software, data solutions and independent advisory services to the global CRE industry.
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