Whilst we are adapting to the dramatic disruption in the financial services sector driven by the innovative application of new technologies (FinTech), are we ready for the revolution that is now firmly taking hold in the property sector?
Real estate and property technologies (RealTech/PropTech) are changing the way we design, build, manage, invest in, and buy and sell property. Consider Propy.com, based in Silicon Valley, which provides a platform for buying and selling real estate online, secured through blockchain.
Facilitated by this technology, a real estate property settlement occurred in October 2018 between a Spanish seller and French buyer, both using cryptocurrency. This has now opened the door for foreign investors to buy property in the European Union online!
And in Australia, Property Exchange Australia Limited (PEXA), Australia’s online property exchange network now accounts for more than half of all property settlements nationwide and has a market value of $1.6 billion. Within two years of launching in Australia, WeWork now leases 35,000 square metres of commercial office space in Melbourne alone, and over the same short time period Purplebricks has sold more than 3,600 homes.
For existing professional services firms and businesses in the property sector, there are two fundamental challenges that must be faced to ensure they remain relevant:
- how to innovate through the application of new technologies to enhance customer service, experience and engagement, and more effectively address pain-points, and
- reduce the cost of doing business through automation, speed, development of end-to-end processes and scaling.
The traditional business models employed across the property sector are being threatened. In their book, “The Future of the Professions”, Richard and Daniel Susskind present a compelling picture of how technology will transform the work of human experts. Are the recent moves by JLL (JLL Spark Global Venture Fund plans to invest $100 million in PropTech) and Colliers (Colliers PropTech Accelerator powered by Techstars) examples of an offensive, or, a defensive strategy?
The disruptors include wonderful Australian start-ups such as Jake Dimarco’s Spare Workspace, the “Airbnb for Meeting Rooms & Desk Space,” where businesses can share or book on-demand meeting rooms and desk space by the hour or day (covered in more detail by Cole Wilkinson here).
But it is not just about the start-ups. Australia’s property market is mature, sophisticated and has embedded in it, a practical knowledge, know-how and expertise that is ripe to be leveraged and exploited through PropTech innovation.
Lorenz Grollo’s third generation property DNA provided the foundation for Equiem, a platform that creates communities within commercial office buildings throughout Australia and has now successfully entered New York and London. A great example of Australian PropTech taking on the world.
The Australian property industry’s intellectual property provides a clear commercial advantage and the opportunity is present to innovate through technology, to not only improve effectiveness and competitiveness, but to commercialise and monetise this IP in its own right. There will be global application and we must consider our strategic competitive advantage with the ASEAN neighbours. For these existing property businesses alliancing and collaboration with the technology innovators will be crucial.
The growth in PropTech investment is staggering, with predictions that by 2020 global investment in PropTech will increase to $20 billion.
Australia, with our world leading expertise and entrepreneurial flair, is now attracting a flow of capital and funding for PropTech innovation. But we are behind the rest of the world and we need to catch up quickly.
Pleasingly, we are seeing examples such as Charter Hall’s PropTech accelerator program, serial entrepreneurs such as Evan Thornley and LongView (“I’m an accidental real estate agent”) entering the market, as well as heightened activity by venture capitalists and private equity.
These are indeed exciting times for the property sector. For property market participants, it is a time to take stock and to, amongst other things:
- rigorously review existing business models (consider Westfield and its OneMarket spinoff!)
- develop an innovation strategy
- consider key IP that may be leveraged (globally) through PropTech
- keep informed and engage in the PropTech community and networks
- build alliances and collaborate with technology innovators