PropTech

Regardless of the technology, the objective is to enable integration, automation and data flow seamlessly across different applications for better business intelligence and an intense focus on stakeholders and net promoters. An example of this would be a mobile banking app customizable to a customer that combines all the user’s accounts (e.g., checking, savings, credit cards, mortgage, bill payment, transfers, etc.).

The foundation and approach to technology are similar if not the same across many technology categories. For example, blockchain, artificial intelligence (AI), data analytics, business intelligence (BI), application programming interface (API) integrations, machine learning, robotic process automation (RPA) and the Internet of Things (IoT) provide a foundation for advancements.

Evolution of PropTech

Some sources suggest that PropTech emerged just after the dotcom era. Since then, significant growth and increased demand and investment in commercial PropTech solutions have occurred. However, over the last five to seven years, there has been a proliferation. As of April 2021, approximately 2,171 PropTech companies have collectively raised more than US$51.6 billion, according to Crunchbase. While both the number of startups and investments have grown exponentially over the past few years, they comparatively remain in the shadow of FinTech.

PropTech is still in its early stages

While the number of investors and investment levels changes significantly across industry sectors, some of the variances can be explained given that a few firms categorize PropTech as a subsection of FinTech (e.g., KPMG), as commercial real estate is considered part of the financial sector, providing financial services to commercial and retail customers. The significant growth of PropTech has remained consistent over the past few years. The report cited that in 2019, 2,693 FinTech and 105 PropTech companies had received funding compared to CBInsights reporting just in the first quarter of 2021 there were 1,735 venture capital (VC) deals in total.

According to Freshcode, “FinTech is mostly an alternative to several offline solutions, for example, banking systems and being provided for end-users, whereas PropTech is transforming the whole real estate business ecosystem and creating a lot of new solutions for intermediate users.” This information only provides a sliver of the volume in PropTech.

For example, there are internet directories that list thousands of PropTech startups. Many of these might be self-funded or funded by individual investors. There are also industry combinations like LegalTech and PropTech for lease and contract management. PropTech is a broad category with subcategories such as ConTech (construction), smart real estate, sustainability, real estate FinTech (buy, sell, lease), etc.

There are many dynamics behind real estate and facilities that make it somewhat unique as one of the lagging industries to embrace what technology has to offer. Some dynamics are systemic and stem from dated infrastructure, the tremendous fragmentation from the degree of third-party managers and their proprietary technology solutions and investments, the local nature of the location of real estate, lack of transparency, and occupiers versus owner level of demand and/or control over PropTech implementation decisions.

There are also many owners and occupiers of real estate that can slow the acceleration of technology implementation. The ability to scale tends to reside on engaging the larger owners or occupiers, which may or may not be incentivized to improve transparency, efficiencies or cost structure. For example, increased transparency in real estate data supporting transactions could impact the need for brokers or implementing smart building technology that reduces on-site resources could reduce a service provider’s scope or fees.

Prompto cites two ways to adapt a large, traditional, slow-moving institution to an agile and fast-paced world — in-house solutions or cooperating with startups. What remains unclear is the funding from larger service providers or owners in some of the VC funds compared to the level of implementation of the same technologies across their service delivery or client portfolios. How many are implementing the technology that is self-funded or individually funded or have the infrastructure to evaluate the volume of these opportunities?

Based on 2019 studies highlighted by Freshcode, more than 80 percent of CRE investors expected PropTech to have an impact on the industry, but only 58 percent of real estate companies had a digital strategy in place and 25 percent had well-established data strategies to capture the right datasets. Freshcode also noted a 2020 study in which 54 percent of PropTech startup CEOs responded they were targeting office real estate and 31 percent were targeting hospitality real estate.

Changes accelerating impacts to facility & property management

Change has often accelerated due to disruption caused by others entering an industry. For example, Amazon’s impact on retail, Uber’s on ridesharing and Airbnb’s on hospitality. It is unclear which company will win trying to automate the transaction process of the buying and selling of real estate. FM is more fragmented than one end-to-end business process given the multiple different services and providers.  While PropTech solutions can bring new ways of doing things, disruptions bring a new way of doing business. 

Clayton M. Christensen defined “disruptive innovation” as innovation that creates a new market and value network and eventually disrupts an existing market and value network, displacing established market-leading firms, products and alliances. PropTech is set to impact FM’s future, but a disruptive model for FM may be an all-in-one management system that integrates various solutions into one platform. This integration may include both technologies to enhance the occupant experience as well as technologies to drive operational excellence to provide a healthy and safe environment, e.g., indoor air quality, circadian and other lighting solutions. 

2021 & beyond

While the hybrid office model is still playing out, there are trends that are expected to continue to evolve in PropTech for the second half of 2021 (post-pandemic) and the future: 

• Covid impact and lessons learned for the future

• Influences of other technologies (e.g., Digital Twins, Blockchain, Big Data, AR/AI, Drones)

• Open system protocols like BACnet allowing communication between building automation and control systems for HVAC, lighting control, access control, fire protection and their associated equipment

• Renewable energy, energy management and conservation solutions

• Predictive maintenance and all-in-one building management solutions

• Bluetooth mesh, power over ethernet (PoE), and other cost-effective smart building solutions

• Integration with other industries (i.e., FinTech)

• Real-time occupancy management and space management planning

• Occupier apps to improve the customer experience (e.g., concierge services, issuing services and work order requests, accessing indoor air quality readings for room occupants, space access, building security touchless access, room and personal workspace lighting controls, etc.)

• Circadian and UV lighting, acoustics solutions for sound creation or canceling, smart window shades/blinds, and other building health and wellness solutions

• Smart buildings, Smart portfolios, monitoring/IoT, cybersecurity for building systems and remote access

What 2021 will potentially bring for these areas, according to Nex Cubed

• FinTech: Personal banking solutions continue to reach a wider audience than traditionally reached.

• EdTech: A combination of in-person and online learning will allow students to conduct their curriculum at their own pace.

• PropTech: Aligning to future trends and societal changes and center on identifying customer preferences as people will be hesitant to gather considering the pandemic.

• Digital Health: Telemedicine continued development and ways to increase access to personal healthcare resources.

PropTech can provide point solutions that are designed to tackle a single, specific problem that subsequently can be integrated to enhance existing platform solutions such as an integrated workplace management system (IWMS) or PropTech point solutions can be integrated with other point solutions to create bespoke workplace management platform system for a company. Time will tell if larger software firms, real estate operators and equipment manufacturers continue to acquire PropTech startup solutions to enhance their proprietary offerings or if a more open protocol approach will drive the trend for integrated technology solutions to provide the ability to connect different solutions under a common database and performance tool.

Leveraging these changes

Objectives for the use of PropTech range from SaaS applications to building and portfolio features and more holistic ecosystem  experience, sustainability operations, performance and compliance solutions.

According to Smart Building Forum, Jan. 20, 2021, Peter Fehl said, “Smart building technologies have come a long way but there has been one group left out of this progress: small and medium-sized buildings… More than 90 percent of the U.S. commercial building stock  consists of properties under 50,000 square feet, yet businesses that occupy small- to medium-sized buildings have struggled to effectively optimize occupant comfort, operational performance and asset management. Today there is a need for a more centralized building management system (BMS) that is adaptable to the unique needs of small- to medium-sized buildings.” 

For small- to medium-sized buildings, broad capability can be created through standards-based systems. For example, building upon a safe, Class 2 wiring system, power over ethernet (PoE) based building automation can allow buildings 50,000 sq. ft. or less to incorporate advanced automation cost effectively.

Another fast-emerging solution is Bluetooth mesh. According to Bluetooth.com, “Bluetooth mesh networking enables many-to-many (m:m) device communications and is optimized for creating large-scale device networks.” 

Bluetooth mesh is a scalable solution for any age of the new small, medium or large asset. It can be used to avoid above-ceiling work in older buildings or existing spaces. It can provide a centralized, web-based dashboard that is dynamic, accommodating space changes, utilization and energy monitoring. It can help to create an enhanced occupant experience in a timely, cost-effective manner with the project being built off site, remote monitoring of commissioning progress and simplified commissioning process for the field technicians and reconfigurations and modifications are easily accomplished.

There are many SaaS solutions available today for small- to mid-sized buildings that can integrate with the various smart building BMS protocols and can automate work orders and FM workflows for properties and across portfolios creating a centralized database for CMMS management and reporting.

Smart building strategies can adapt over time if the upfront objectives are clear requiring design flexibility to future proof and create a dynamic automated operating system. The desired results for delivering upon safe, healthy and productive stakeholder experience, efficient operations, energy GHG reduction and savings and equipment optimization. The opportunity exists to accelerate smart building implementations with the system, building and hybrid overlays, which can present the business case through  speed and lower cost to implementation to achieve better operational performance, more consistency, compliance, reliability, operational and energy savings and elevated human experience. 

Begin by considering the type of operating, social and working environment to be delivered, the visioning of the new digital ecosystem will help to prioritize the approach for that, which is important to have up front and the use cases for those various PropTech platforms and/or point solutions. Input should be sought from IT, human resources, public relations and environmental health and safety and the business. 

Outside advisors that are hardware and software agnostic have a strong facility operations background rather than limited to system controls, and can assist with the oversight of project delivery through commissioning can be an effective outside experience to tap for end-to-end services rather than being product specific.

PropTech integration and the hybrid approaches to enable smart buildings will help the CRE and FM industries to advance and progress as has been seen in other business sectors. The promise of sustainable, operational, physical and digital transformation presents a solid business case and building stakeholders will benefit from the empowered experiences they provide.