Proptech Primer: Trends In Real Estate Technology

Proptech Primer: Trends In Real Estate Technology

In recent years, PropTech has emerged as a dynamic new force within the real estate Technology space. usually speaking, PropTech is a collective term for global digital transformation occurring within the real Estate industry. PropTech seeks to bring new workflows to bear across this broad sector. This trend has dramatically accelerated in recent years, fueled by an explosion of venture funding and a steady infusion of startups that have risen to the challenge of transforming yet another ‘traditional’ industry. There are a significant number of VC funds, hedge funds, and incubators focused on PropTech, funding, and powering the present startup wave.

Broadly speaking, there are many trends at play in the PropTech sector. For this discussion, i will focus on the real Estate industry, specifically although this broad sector additionally includes Construction, Building Management, and other related fields.

The market trends in PropTech can be roughly sorted into 2 categories:

1) Innovators who wish to disrupt and fundamentally change the method that residential and commercial real estate is bought and sold by eliminating brokers and realtors. this is the ‘consumer-centric’ model.

2) Innovators who wish to bring new technologies to enhance and transform the traditional business of real estate. this is the ‘broker-centric’ model

In the consumer-centric model, PropTech innovators are seeking to replace (or eliminate) traditional real estate brokers and Realtors with a lean and efficient transaction process geared directly towards consumers. Naturally, this is a huge threat to the conventional real estate business model.

The broker-centric innovation models seek to transform and enhance the real estate transaction model through innovation wherever the real estate broker or agent remains at the center of the transaction. the traditional brokerage community has embraced this second trend.

It is value noting that over ⅔ of the funding and development within the PropTech space falls into the consumer-centric category due in part to the broader market share and opportunity size.

For the consumer-centric startup, there are significant challenges posed to any disruptor of an outsized and well-established trade section that's threatened by technological change.

For the consumer-centric startup, there are significant challenges posed to any disruptor of a large and well established industry section that is threatened by technological change 

Both Zillow and Redfin fall into the consumer-centric category as they still disrupt the traditional brokerage model. Zillow introduced the automated Valuation Model (Zestimate) to enable consumers to know the potential value of a property without consulting a realtor. Zillow began as a property search portal and is steadily transforming into an online brokerage. Redfin is a brokerage that leverages technology to offer better customer experience and lower fees. together both Zillow and Redfin have captured a majority of online real estate traffic due in part to their success at understanding the importance of consumer user experience (UI/UX).

The iBuyer trend, where a home merchant can receive an instant all-cash offer online, has been embraced by both firms and is presently being tested in many regional markets. to understand the scale of this single opportunity, Zillow estimates that their iBuyer program might generate up to $20B annually within a couple of years.

For the consumer-centric startup, there are significant challenges posed to any disruptor of a large and well-established industry section that is threatened by technological change. this can be particularly true in the united states, where the National Association of Realtors has a poor track record of responding to structural changes within the industry. That said, some of the most innovative developments in PropTech continue to come from the consumer-centric group, who are free to think outside the traditional trade boundaries. For the broker-centric innovators, a major challenge is how to partner with trade leaders (brokers) to develop a solution that meets the everyday desires of a broad group of customers.

Make no mistake about it: this is a time of fundamental change throughout the entire real estate industry, fueled by rapid innovation and growth in the PropTech space. many of these innovators are seeking nothing less than the elimination of brokers and realtors on a large scale. several PropTech startups are better funded than the brokers they seek to replace and are free to innovate outside of real estate industry constraints and regulations. For a CIO, this represents a challenging opportunity.

Agile brokers will partner with like-minded startups that seek to enhance instead of replace their workflows. With proper execution, this partnership can significantly improve an organization’s capabilities as it relates to new technology development. complex workflows that utilize AI, Machine Learning, and natural language processing are beyond the scope of most brokers not operating in partnership with an outside technology team.

A PropTech CIO must develop a broad understanding of the landscape and help to formulate digital strategies which will keep the organization ahead of this breaking wave of innovation. this requires industry research as well as evangelism within one’s organization. Forming an organizational partnership with your CMO and digital marketing teams is also crucial, as this group is usually an early adopter of latest technologies.

The PropTech sector is driving a wave of rapid change across the real estate industry and the real estate technology space. Consolidation is occurring and affects technology startups and brokers alike. big brokers are rebranding themselves as technology firms whereas technology startups are fundamentally changing the way that we buy and sell housing. It’s an exciting time in this sector, and i encourage my colleagues here to get in the game.

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