At the end of 2017, the RICS published an Insights Paper, co-authored by Saurabh Saxena and me, on the future of residential property in light of technological innovation in the space.
As we kick off 2018, it seems fitting to use the findings from that paper and attempt to divine what the new year has in store for proptech.
Proptech is a much-hyped term these days. Although still dwarfed by older cousin fintech, proptech has seen steady investment growth – according to Forbes and CB Insights, venture capital investment was set to top $3bn globally in 2017, reflecting a 36% year-on-year growth since 2016.
WeWork raised a monster $4.4bn round from SoftBank in August, which continued to show its appetite for the space by also investing $550m in Compass. With several unicorns, and a few industry M&A deals, proptech can no longer be seen as a nascent space – even in the UK, which is slightly behind the US and Asia.
In slightly unorthodox fashion, I will start from the end of the paper. In the conclusion, we recommended that those seeking to participate in residential technologies “be sensible, not sexy”.
We, among others, identified the proptech industry as being in the early stages of a “Gartner hype cycle”. With investment piling into the industry, early-stage investors will pump heavy capital commitments into a large number of start-ups, expecting most to fail. When this inevitably happens, credibility for the entire space plummets.
We have seen this in the digital brokerage sphere, with the plethora of ‘idea clone’ online agents that have appeared and disappeared over the past two years, and predict that in 2018 and beyond this will happen again with start-ups dabbling in deep tech.
Regardless of the specific technology that is ultimately chosen, investors (and users) should seek to bet on well-devised, well-managed and practicable solutions to real problems – a simple principle that is often forgotten during an investment hype.
But what will shape the future of proptech? The key lies with data. Data, especially in the residential lettings space, is extremely fragmented and often privately held. Most ‘deep’ technologies require copious amounts of data to analyse before they can produce meaningful outputs. I would expect more data-share projects such as Project Dingo, launched in September for commercial real estate, to be piloted in 2018 and beyond.
If these take root, then IA (intelligence augmentation) will be the tech to watch. While the ‘goal’ of AI is ultimately to replace humans for certain tasks, IA uses machine-learning capabilities to give humans tools to eliminate mundane tasks, amplifying user productivity by freeing up our time for core activities. This is most relevant to real estate because it is, and will remain for the foreseeable future, a very people-centric activity.
Intelligence augmentation uses machine-learning capabilities to give humans tools to eliminate mundane tasks
How might tech and the built environment grow together? The way we consume real estate and proptech will be affected by three main factors: changing consumer behaviour; generational shifts, which will intensify the growth of urban centres while creating hyperlocal micro-communities; and technological shifts that will bring niche technologies into mainstream society.
Proptech has already hit the investment mainstream. This year might be the year in which everyday user adoption starts becoming mainstream. Stay tuned for an exciting year ahead.