The digitalisation of our living and working environment is progressing at an enormous rate. Big Data, Smart Data and Smart Services are increasingly shaping our daily lives. PropTech (English: „Property Technology“) is a term that we are hearing more and more often. This encompasses nothing other than the digitalisation of the real estate sector. All business transactions regarding the purchase, sale, letting and management of real estate are to be transferred to the virtual world through the use of new technologies and smart applications.
Together with Ernst & Young (EY), the German Property Federation (ZIA) has examined the use of digital technologies in the real estate sector from all angles. Based on the study, we have outlined the 7 most important results for you. These illustrate how digitalisation will affect traditional real estate companies and innovative PropTech start-ups in the future.
The Internet of Things brings major changes
The study shows that the topic of digitalisation is at the top of the list of priorities for 90% of real estate companies. 80% already use innovative technologies to simplify their business processes.
The results also show that digitalisation will most of all have an impact on products and services in the area of property marketing. But also, asset managers who need financing for their real estate deals will be greatly affected by smart technologies, such as the blockchain technology. Further development potential lies in the fields of project development and facility management. Start-ups such as lifelife, which are gradually automating the property management of housing companies, are already working on numerous solutions to simplify the processes in the housing sector. As another example, the keyless access system KIWI also supports traditional real estate companies to digitalise their processes through innovative technology. Furthermore, intelligent BIM systems (building information modelling or digital building modelling), as well as cleaning robots, could soon determine the everyday life of real estate companies.
Result 1: Increase in sales through PropTech companies
In contrast to traditional real estate companies, at PropTech companies innovative technologies have long been on the agenda – after all, new technologies build the foundation of most PropTech companies. These, however, are by no means in competition with traditional companies, but instead rather complement them and thus create synergies. That means that the PropTech scene has the potential to significantly increase the sales of established market participants.
Result 2: Efficiency enhancement through digitalisation of business processes
About 70% of the real estate companies said that all data and information relevant to the company are already available in digital form. Over the next five years, this figure will be almost 100%. The figures are similar when it comes to linking company-internal products and services on digital platforms and thus creating virtual data spaces with more transparency. In that way, all parties involved in project development receive easy access to information.
According to the survey, traditional real estate companies are not afraid of new technologies. On the contrary, they see a great added value as they can significantly increase the efficiency of their core processes by digitalising them. With 14%, only a small percentage of respondents fear that digital technologies could pose a threat to their business models.
Result 3: Big Data, Cloud Technologies and Co. are gaining in importance
The areas in which digital technologies are to be used in the future were evaluated almost equally by traditional real estate companies as well as by PropTech companies. As a result, the biggest changes are expected in data structuring, big data / data mining, mobile devices and cloud technologies. Around 80% of the PropTech start-ups see equally great potential in the Smart Contracts that are based on blockchain technology. These include functions such as storing and adapting paperless contracts or automated execution and enforcement of contract clauses. Areas such as artificial intelligence or augmented reality, which are increasingly being used by different industries, are also becoming more and more important. Only robot technology is comparatively less attractive. Only 30% all companies in the real estate sector are excited about the benefits robots can bring to the table.
Result 4: Mobile devices are the nuts and bolts
In a time when people are barely able to turn away from their smartphone, it is essential for companies to adapt their digital content to mobile devices. This is what most real estate companies have already understood. According to the study, 98% of the interviewees already use mobile devices in their day-to-day business in order to facilitate their own work and to simplify the processes of their customers. Especially in facility management, mobile devices are ideally suited for capturing and transferring energy data in a fully automated manner. It is also possible to digitally define and limit a time frame in which service providers, for instance, are given access rights to specific objects. With web applications form KIWI users can grant and manage access rights to their buildings remotely with one click.
Over the next five years, however, the topic is expected to become even more important. According to the respondents of the study, equipping employees with tablets, for them to hold customer presentations or mobile meetings, will be ubiquitous in the future.
Result 5: The requirements on real estate are changing
It is obvious that traditional real estate companies are very positive about new technologies and that they want to invest more in the future. However, it should be noted that the changes not only affect the companies and their processes but also their buildings. Digitalisation will significantly increase the qualitative requirements for spaces (flexibility, layout, equipment, etc.). At this point, both traditional companies and PropTech start-ups are in agreement. Intelligent houses and thus also smart home standards play an increasingly important role in housing construction.
It is a different situation, however, if we look at the demand for real estate. While PropTech companies are forecasting an increasing demand for all types of use (residential, office, retail, production and logistics, health and social housing, hotels and special properties), traditional real estate companies, on the other hand, are experiencing a negative trend in some areas with the largest decline in office and retail real estate. This is because increasing online trade and the replacement of conventional work days with modern working concepts such as mobile work. However, they see growing demand in residential and special properties such as hotels, computing centres and health centres.
Result 6: Berlin as a hotspot for PropTech companies
Berlin is a start-up metropolis. For both young and established companies, the capital has long been one of the most popular locations in the world. Berlin also takes first place in the PropTech industry. Within the scope of the study, a total of 114 PropTech start-ups were surveyed about their focus, place and date of incorporation. It was found that with 42%, or 48 companies, the majority of start-ups were founded in Berlin, closely followed by Munich with 18% and Hamburg with 9%. Most of the PropTechs were launched last year.
Result 7: Cooperation is the key to success
70% of the traditional real estate companies see a lack of skilled workers as the biggest obstacle to successfully implementing their digitalisation strategy. For PropTech companies, the biggest problem is the lack of financial resources. The study shows that only 14% of the incumbents surveyed perceive young start-ups as competition. However, 63% of digital natives think they can challenge the real estate sector.
For an economic success, it would be wise for both parties to join forces, as they can benefit greatly from each other. This does not mean that established market participants should only focus on investing in PropTech start-ups to gain access to innovative technologies. In order to approach and learn from each other it is often already sufficient to exchange information, make introductions to your network or to offer a platform to exchange ideas.
The digitalisation and the Internet of Things will change the real estate industry in the coming years and create a whole new reality. Although the readiness for traditional real estate companies is already there, the figures of the study show that young PropTech start-ups still have a great advantage with regard to digital technologies.
What do you think about the digitalisation of the real estate sector? How can traditional real estate companies manage those changes? Do have already have experiences with PropTechs and new technologies? Where do you see the biggest challenges?
We are looking forward to your comments!