Proptech and agents: rise of the machines

Tushar Agarwal is on a mission to revolutionise the property market.

“Our ambition is to be the Savills of the future,” he says bullishly about Hubble, the online letting platform he co-founded in 2013.

Hubble is part of a wave of new ‘proptech’ companies using technology to enhance and, in some cases, replace traditional agency services.

Last year, proptech entrepreneur Rohan Silva predicted that in 2017, for the first time ever, the most intelligent agent in London will be a machine, not a human. Which begs the question - what role are agents likely to play in the property industry of the future? And should agencies view the proptech revolution as a threat or as an opportunity to enhance their own services?

The idea for Hubble, which allows businesses to find and compare office space online and matches occupiers with landlords - crucially, cutting out the middle man - came to Agarwal around 2013 when he was advising FTSE 250 companies on strategic decisions while working in the banking sector.

“A lot of large companies were tied into long-term leases, which they needed at that time to do business, but as technology evolved it disrupted their business models and they started needing less and less of that space and needed it to be more dynamic and practical,” he explains.

Virtual marketplace

In response, Hubble has created what is, in essence, a virtual marketplace that helps SMEs rent office space, whether that’s excess space in other businesses’ workspaces, co-working space or even space in previously disused buildings.

Having started off catering to tech start-ups, in recent years Agarwal says Hubble has begun to receive interest from larger, traditional businesses such as Jaguar Land Rover, a trend that has made Hubble reassess the scale of its ambitions.

“The plan for us is, yes, to take on the traditional agency model because we feel it just doesn’t work for the way the world of work is evolving,” he says.

Some established agencies view the likes of Hubble and other proptech start-ups as a threat to their tried-and-tested business models.

“Many property agents believe the technology locusts have descended upon their industry” - Joe Cohen, Property.Works

“My experience is that many property agents believe the technology locusts have descended upon their industry,” says Joe Cohen, founder and chief executive of online marketplace Property.Works.

“There is nervousness about it. Some put their heads in the sand; some dig their heels in; some are trying to figure it out.”

The more progressive agencies are looking to stay on the front foot. Knight Frank has formed an innovation committee, which is closely looking at and monitoring the technologies that it believes will affect the business in the future.

“There is no doubt that technology is going to change the way that we operate and is already [having] an effect on the way we interact with our customers,” says William Beardmore-Gray, head of consultancy and occupiers at Knight Frank.

“Some of that will be negative from an income point of view, but the majority of it will be positive so long as we interact properly and adopt a very open-minded approach about what we’re prepared to take forward, because ultimately what I don’t see being replaced is the 10, 20, 30 years’ experience that the best operators have.”

Occupiers and landlords are also still feeling their way through the proptech landscape.

“Some clients are much more advanced in understanding the opportunities that technology can bring and there are certain friction points that they would like to remove,” says Toby Ogden, international partner at Cushman & Wakefield, who leads a team assessing strategic opportunities in the proptech space.

“Other clients are very comfortable with the existing way of operating because it delivers exactly what they need.”

‘Unparalleled service’

Ogden’s brief in his new role is to identify strategic opportunities for Cushman & Wakefield within the proptech space that can help make its advisers as efficient as possible and bring added value and insight to its products and services.

“We want to understand where there are new entrants to our market that are going to disrupt us, but also how we can work with them, partner with them and bring the value that we have gained from 100-plus years of real estate advice and match it with the best technology platforms out there to arrive at a service that will be unparalleled,” he says.

Ogden’s optimism may well be justified because for every marketplace disrupter such as Hubble, there is a tech start-up whose aim is to complement and improve the traditional agency model.

“You can divide [proptech] into two spaces at the moment,” says James Nicholson, Knight Frank partner and leader of its tech and creative team in London.

“There’s the technology that is driving efficiency in the current service provider role and then there are the more disruptive technologies that may well change the way that things are done altogether.”

We are not in the business of stripping clients away from agents - Joe Cohen, Property.Works

Cohen would place his Property.Works business in the former camp. Although not dissimilar in concept to Hubble, Property.Works helps businesses find office, retail or industrial space and connects them with the agent rather than cutting out the middle man entirely.

“We are not in the business of stripping clients away from agents,” says Cohen, a seasoned tech entrepreneur who founded the business in 2015. “We think that agents bring a lot of expertise to this activity because it’s not an easy or standard thing to do.”

Property.Works’ stock varies from industrial properties with Knight Frank in the West Country and Wales to the West End and City stock of Cushman & Wakefield and BNP Paribas.

Cohen says his platform brings agents incremental business because the majority of its clients are not represented by the big agents. It also vets every potential occupier in order to reduce the lead cycle.

‘Huge opportunity’

The real value, however, is to be found in the data that the new breed of proptech companies can generate, which helps bring clarity to a market where information has historically been fragmented and hard to qualify.

VTS is a case in point. The company was founded with the intention of transforming the way in which information in the property industry is managed.

“If you’re an agent, you’re reporting through Excel to multiple different owners,” says Ryan Masiello, VTS co-founder and chief revenue officer.

“If you’re on 20 different schemes that could be 20 different reports, you’re basically collecting the same 20 pieces of information in 20 different formats.

“We saw a huge opportunity to start to solve this fundamental problem around reporting and workflow.”

VTS equips agents with real-time information on the market, enabling them to position their properties to cater to demand based on real - rather than anecdotal - information and thus make better business decisions.

It is this ability to understand demand in the market that excites Cohen most about the potential of the Property.Works platform. He uses the example of lease lengths to demonstrate how big data can make agents more responsive to client requirements.

“It’s very clear in this market that businesses have demonstrated they are willing to pay a premium for flexibility in lease terms,” he says. “They’re doing that because landlords have forever made a choice to say: ‘I am going to prioritise security of my rent covenant against maximising price.’

“If I can demonstrate to the landlord that they can get a 30% premium on their rent by doing two-year leases and I can show you a demand pipeline that will make you feel confident you will never have an empty unit - how does that make you feel differently about your business?”

‘Big data’ revolution

Naturally, there are contrasting views on what the ‘big data’ revolution means for the future role of agents. Agarwal, perhaps unsurprisingly, is not particularly optimistic about their prospects.

“Technology can automate the majority of the agent’s work that is not real knowledge work, that doesn’t rely on what humans do best - which is negotiate, build relationships and build trust,” he argues. “And what you then start to do is separate the wheat from the chaff because there is this Darwinian process the market goes through where only the best negotiators and agents have a job and the rest don’t because they’ve been replaced by technology.”

However, he accepts that there are aspects of the agent’s job that Hubble cannot currently replicate. Others agree that there is no immediate prospect of technology reaching a point where it renders human capital obsolete.

“My view is that one won’t replace the other,” says Ogden.

“You may have elements of the process that can be done better and quicker and big data will provide certain insights faster, but the thing about property is it’s non-homogeneous - every property is different - so as a consequence you still need to have a certain amount of interpretation and translation of whatever it may be that the occupier needs.”

Ogden stresses the agent’s role is not based simply on knowing how much space the occupier needs and how much they can spend. “You also need to understand what the business driver is for that real estate, what kind of people they need to have, what the building needs to say about its brand and how it delivers to their overall agenda,” he says.

Knight Frank’s Beardmore-Gray notes that the last part of an agent’s job - actually finding the space - also requires knowledge that cannot yet be replicated by technology.

Beyond the database

“When you get to that point, you need the very best local knowledge on the ground,” he says. “You can press a button and out of a database you will get a list of buildings, but you can guarantee that if there are 10 buildings on that list, there will be another 10 buildings that are not on the list that a good agent will actually know about. You cannot find that type of information in a database.”

Indeed, for all their potential to transform the property sector, as things stand companies such as Hubble play a niche role in the market.

As Agarwal himself attests: “We’re geared towards workspace and office space at the moment. We don’t do any retail; we don’t do any industrial. It’s all geared towards office and work.”

This is what a property agency will look like in five to 10 years’ time and those old models will be disrupted - Tushar Agarwal, Hubble

That may change in time, but most experts agree that we are a long way from Amazon leasing a 1m sq ft distribution centre through an online marketplace. Yet there is enough evidence to suggest that agencies view the proptech sector as transformative for the industry.

Just last month, Savills announced the launch of Workthere, a new brokerage service and website listing platform that aims to help growing businesses find flexible, co-working and serviced office space across Europe, America and Asia. It is a clear example of ‘if you can’t beat ‘em, join ‘em’.

Should Agarwal’s bullish predictions prove prescient, Savills is playing a smart hand since it is the traditional agency services it provides that Hubble believes it can ultimately supersede.

“We’re taking on the Savillses of this world because their clients are coming to us,” says Agarwal. “This is what a property agency will look like in five to 10 years’ time and those old models will be disrupted.”

Ironically, some of it by the very firms that have been disrupted themselves.