PropTech: the Future of Real Estate
By Aidan Coleman, CIO & CTO, Charter Hall
Real estate is not known as an industry which readily embraces change. The nature of the asset class, which comprises large heterogeneous assets traded in a largely private market, is perhaps a good reason for this. It may also be the case that various stakeholders that dominate the investment and property management ecosystem clearly have had an interest in protecting their income sources, so might all be expected to resist tech-driven innovations designed to ‘disrupt’ their business models.
Nevertheless, in current times we are witnessing a battle for market share between traditional players and a discernible second wave of technology-based innovation. The real estate sector is now awash with disruptive technologies significantly changing the consumer experience. Recent property focused startups, including Purple Bricks, Airbnb and WeWork, have revolutionized the way agents, investors, lenders, property owners, and managers engage with their customers to deliver an enhanced experience to the consumer. According to CBInsights, US$2.6 billion was raised by Property Tech startups in 2016, a 40 percent increase on the previous year in what is one of the fastest growing startup sectors.
Property tech (or “PropTech”) is one of the fastest growing startup sectors which is hardly surprising as property and our relationship with an experience of it, whether that as buyers, renters, investors or agents, transcends every aspect of our lives - from where we work to where we eat, play, shop and live.
Exponentially growing technologies such as the internet of things, big data, machine learning and lower technological barriers to entry for startups are converging. The result is that the oft-referred to as archaic real estate industry is on the cusp of significant change.
The FinTech industry – in particular, online payment systems, crowd funding equity and debt platforms and online exchanges – provided the foundation for a large part of the PropTech revolution. The development of intelligent control engineering is another plank. Much relevant work has already been done in other places and real estate can, as usual, be a late entry to the party, using the lessons learned from what works and what does not in the wider world of banking and engineering.
There are three PropTech sub-sectors namely, a) Real Estate FinTech b) the Sharing Economy and c) Smart Real Estate
Exponentially Growing Technologies Such as The Internet of Things, Big Data, Machine Learning and Lower Technological Barriers to Entry For Startups are Converging
SMART PROPERTY describes technology-based platforms which facilitate the operation and management of real estate assets. The assets can be single property units or entire cities. The platforms may simply provide information about building or urban centre performance, or they may directly facilitate or control building services.
SHARING ECONOMY describes technology-based platforms which facilitate the use of real estate assets. The assets can be land or buildings, including offices, shops, storage, housing and other property types.
The platforms may simply provide information for prospective users and sellers of space, or they may more directly facilitate or effect rent- or fee-based transactions.
REAL ESTATE FINTECH describes technology-based platforms which facilitate the trading of real estate asset ownership. The assets can be buildings, shares or funds, debt or equity; ownership can be freehold or leasehold. The platforms may simply provide information for prospective buyers and sellers, or they may more directly facilitate or effect transactions of asset ownership or leases with a (negative or positive) capital value. This category includes investment and fund management platforms.
So how are we at Charter Hall seeking to exploit PropTech?
With a AU$20+ billion national property portfolio across office, industrial and logistics and retail property sectors, we recognize the need to build our understanding around technology disruption, to understand how relevant it is to our business and how we can position ourselves to take full advantage of future disruption to deliver better experiences for our investors, tenants, our people and the communities we operate in.
With that in mind, we are moving with some urgency on our innovation agenda. Recently, Charter Hall was a finalist at the US based Realcomm "Digie" Awards (short for Commercial Real Estate Digital Innovation Awards). The main purpose of this award is to recognize real estate companies, real estate projects, technologies and people that have gone above and beyond to positively impact the industry through the use of technology, automation and innovation.
As the next stage we are now aiming to introduce more technology innovation across our portfolio as part of our efforts to offer an integral suite of services that will assist the Group to provide a new level of customer experience. We’ve initiated partnership with corporate accelerator group Collective Campus that will enhance our understanding of how technology will shape the real estate sector.
The PropTech accelerator program will consist of a 13-week incubation period at Collective Campus, where a network of educators and mentors from both the corporate and startup sectors will work with the selected startups to help them find product-market fit and gain traction, culminating in a demo day in front of investors, media and partners. Charter Hall will be hands on offering industry-specific expertise and leveraging its smarts and key relationships to help startups accelerate.
This process is very exciting as it will allow us to collaborate and diversify our thinking of innovation to be more responsive to challenges impacting our core sectors and how we offer solutions to our customers in the future.