Role of Proptech in the Commercial Real Estate Market (CRE)
Despite all the grim news about the housing market crisis, Commercial Real Estate (CRE) continues to thrive in the US. Experts project that the US CRE market will reach a value of US$24.67tn in 2023. With an annual growth rate (CAGR 2023-2028) of 2.70% the market volume will hit US$28.18 tn by 2028.
The enduring success story behind this growth in the CRE space is that of increased technology adoption. The advent of various proptech innovations has ushered in an age of disruptive digital transformation. Technology is having an impact on every aspect of the real estate market. From how we measure tenant satisfaction, to how we analyze market data and even the way we build and operate buildings.
From an investor perspective, proptech is emerging to be a very profitable sector. If we disregard the disruption during the pandemic, proptech companies worldwide have consistently attracted a steady stream of growing investments.
The proptech disruption and innovations have impacted all segments of the CRE market. PropTech innovations are impacting landlords, tenants, brokers, developers, and investors. Some examples of the kind of solutions we are seeing range from automation leasing to remote facility management.
The adoption of proptech is enabling the collection of data on a large scale, along with the ability to monitor, evaluate, and conduct in-depth analysis. This, in turn, is driving the recognition within the industry of the significant advantages offered by data-driven decision-making.
Towards a shared understanding of proptech
The invention of proptech, also called retech (real estate tech), dates back to as early as the 1980s. The boom of personal computing was shaking up industries, and the CRE market was also keen to harness these innovations.
Since then, proptech has evolved greatly. The use of technology is enhancing buying, selling, leasing, and researching real estate. The real estate industry has been using technology for various operations for many years now. However, proptech has become a buzzword with the advent of AI, Big Data, blockchain, cloud computing, and the Internet of Things.
How is proptech adding value to various market segments in CRE?
Enhancing Real Estate Transactions
One of the most useful impacts of Proptech has been on real estate transactions. The buying and selling of real estate has traditionally had various pain points. Credit assessment of the buyer, ID verification, virtual house tours and so much more are now within the realm of possibilities.
With the use of blockchain technology in CRE, known for its security and transparency, you can secure real estate transactions further. Smart contracts on blockchain enable trustless, automated transactions, reducing the need for middlemen and minimizing the risk of fraud.
Property Management and Smart Homes
Proptech has had a profoundly positive impact on property management. The Internet of Things (IoT) alongside other innovations helps property managers optimize their operations, saving valuable time, effort, and resources.
Smart home technologies provide property owners with real-time insights into their properties and allow tenants more visibility. You can now calculate energy and water consumption accurately and self-regulate your consumption levels. This is creating several positive externalities, especially in the realm of environmental sustainability.
Property owners are using smart thermostats, security systems, and energy management tools to optimize their investments. These technologies are playing a major role in ensuring the comfort and safety of tenants. This level of remote oversight and management capabilities was unthinkable even a decade ago. However, these have now become standard features of property management.
Supercharging data-driven decision-making and minimizing risk
Some things in life would be easier if the guessing element was taken out of it. Nothing better than making a decision with the certainty that it is backed by hard facts. The integration of proptech has made it simple to collect and analyze data at scale, in real time.
Be it using software to analyze the financials for your CRE portfolio YoY, or monitoring the value of your assets across time, proptech has really changed the game for the CRE industry. Take the example of Cadence OneFive°, a startup on a mission to decarbonize our buildings. Their planning platform is equipping people with the data and capacity to make data-driven decisions about retrofits quicker.
Advanced software solutions are enabling investors and property owners to make data-driven decisions quickly and accurately. This level of agility in today's hyper-competitive market can give firms a major competitive advantage.
How is proptech affecting the real estate investor market?
Proptech has emerged as a major sector that is attracting increased investments globally. Discussions on managing our built environment better, now center on smart cities and decarbonization. Proptech is a big piece of that puzzle, leading the way toward a more sustainable future for us all.
According to experts, global investments in proptech are on the rise again. There was a a major drop in 2020 owing to the pandemic but the trends are back up again. It's a testament to the appetite of investors, who recognize the potential of proptech as a lucrative industry. Besides the financial aspect, proptech is also front and center on many impact investors' agendas, owing to its utility in tackling major social challenges. There are several climate-tech startups coming up that are tackling important sustainability challenges by innovating on the go.
Upcoming trends in the proptech space
The global proptech market is expected to grow from $18.2 billion in 2022 to $86.5 billion by 2032. One of the strongest trends in the space is the growing popularity of fintech products. They are supplementing a lot of the traditional proptech products and adding another layer of utility.
The global fintech market is currently experiencing a growth rate of 13.9% CAGR. Similarly, the ConTech market is attracting major venture capital investments and is set to expand rapidly in the coming years. Essentially, we are witnessing a trend of fintech and contech becoming increasingly intertwined with the larger proptech space. This has already led to the emergence of all-in-one platforms. End users are ditching fragmented systems in favor of end-to-end software solutions.
Builders Patch is one of those solutions that was developed with this classic problem in mind. The problem of the fragmented software solution approach that dominated the CRE industry. In our experience, end-to-end solutions save precious time and effort for users. It allows them to seamlessly manage, store and oversee their projects without any drop-offs between multiple systems. Therefore, we expect to see this trend grow and the proptech space to keep booming in the upcoming years.
Image credits: Yuliya Pauliukevich via Vecteezy.com