invested in real estate startups in Q1 2017
Despite its buoyancy, the real estate market has often been accused of being stuck in the past, as it remained for such a long time largely impervious to innovation. While this criticism was probably true a few years ago, this situation is now definitely changing with the advent of ‘PropTech’ – i.e. technology solutions for the property sector. The new trend is being driven by a number of dynamic young companies, followed by incumbent players that are anxious to stay in the game. They are all now using digital technology to promote the buying and renting of real estate. CB Insights, a New York-based company that develops software to predict what the next tech trends will be, points out that $1.46 billion were invested in development-phase real estate startups in the first quarter of 2017 – a 25% increase on the previous year. Meanwhile the number of Google searches on the expression ‘PropTech’ has soared since last year.
The United States currently boasts the most dynamic PropTech ecosystem, but Europeans are not sitting idle either, with a large number of innovative startups at work in France, the UK and elsewhere. However, a range of different realities are to be found in this booming segment.
“Much like the term FinTech captures the new wave of finance companies that utilize technology to power their business, PropTech captures the intersection of real estate and technology. This encompasses a range of businesses that are as diverse as the real estate industry itself, from leasing and property management to co-working to investing – anywhere that technology is innovating how property is occupied, managed and transacted …,” writes Charles Clinton, CEO of EquityMultiple, ‘a platform built for modern investors’, which specialises in real estate investment. Below we take a closer look at what is happening.
A THRIVING PROPTECH market
Technology enabling disintermediation
The first main application of PropTech is in streamlining and optimising the process of buying or renting real estate. Here a sizeable number of providers have set out to disintermediate and boost the efficiency of the market by enabling more direct communication between the various parties involved. London-based Zoopla – which was launched back in 2007 and is now already something of a dinosaur in this youthful market – enables customers who wish to acquire or rent real estate to make their searches online without having to go through an estate agent. The firm also sources statistics and specific advice for its users to help them find the house or apartment that best suits their needs. Seattle-based Zillow works in the same niche. In France, Lokora helps people wishing to give up their rented accommodation to find a new tenant to take their place. They receive payment for rendering this service to the apartment/house owner, who is also charged less than if they had to go through an agency.
OPTIMISing real estate SALES
Meanwhile British firm No Agent targets property owners. As the name indicates, it helps them promote and rent out their various houses or apartments without having to pay for the services of an agent. The UK-based startup assists the owner through all the various stages of property letting. First of all, NoAgent helps him/her not only to write an advertisement but also works on Search Engine Optimisation so as to ensure that the ad will be displayed near the top of the list of site search results. It then draws up a short list of potential tenants based on the owner’s stated criteria (a couple or a single person, with or without children, and so on); sets up visits at convenient times; checks that the potential tenant has the necessary income to rent the apartment; draws up the rental contract; and, once the tenant has moved in, ensures that the property is being properly maintained and collects the rent. In France, a startup called MyNotary performs a similar service for real estate sales. Its platform enables all the parties to a real estate transaction – buyer, seller, notary, bank, insurer, etc. – to stay in touch with each other.
This drive to streamline processes affects all areas and all players. US-based SmartZip simplifies the work of real estate agents by processing mass data so as to help them identify owners who are likely to sell property in their particular sector. Boston-based document automation platform LeasePilot facilitates the drafting of commercial leasing agreements, enabling every client to create a document that perfectly suits his/her needs, in his/her language of choice. Meanwhile French company Permettez-moi de construire (‘Allow me to build’) works further upstream, simplifying the administrative steps required to embark on a construction project. the The young firm takes care of everything from drawing up building plans to obtaining planning permission, including conducting negotiations with the local authorities, if necessary.
VR-BASED interior VISUALISATION
However, process automation and disintermediation are not the only areas of innovation when it comes to applying the new technologies to buying and renting property. A number of players are now using the latest digital tools to provide property seekers with an entirely new experience. One particularly promising trend is the use of Virtual Reality (VR) and Augmented Reality (AR) techniques to conduct remote real estate viewings. UK-based Eyespy360 takes panoramic photographs of properties and then offers potential tenants or buyers a tour of the property using a VR headset, their desktop/laptop computer or a mobile device to enjoy a total-immersion experience. French startup Habiteo offers a similar service and in addition, has developed a paperless system so that clients are able to make their bid or submit their rental agreement immediately online with an electronic signature. Californian firm Matterport is another of the leaders in the virtual visit field. One of the more ingenious players is French startup Solen, which measures the level of sunlight that pervades a house or apartment throughout the year and awards certificates to those enjoying good levels of sunlight.
sharing: a new way of life?
From coworking to co-living
new buildingS DESIGNED for communal living
In all these ways, digital technologies are now being used to help optimise the buying and renting processes. However, PropTech can serve not only to make life easier for the various players in the real estate business. It can also help us to undertake a rethink of the entire connection between people and habitat and foster a more civically-oriented – and more Smart City-oriented – approach to the built environment. This means taking account of the new trends that are gaining ground, first in line being co-working. Startups such as Hubble, WeWork and Galvanize have achieved success riding this wave, due in particular to the rise of remote working and the steady increase in the percentage of freelancers in the workforce. Forecasts suggest that by 2027 half of the working population in the United States will be freelance. In France, freelancers already account for some 30% of the working population.
Millennials in particular tend to follow this trend; in the US close to 50% of this age group work on a freelance basis. The startups mentioned above, which specialise in organising collaborative workspaces in cities, have built their success by targeting a young audience. These spaces are in fact powerful instruments underpinning the Smart City concept. By offering collective space for young entrepreneurs to work in, they foster competition, the creation of joint projects, and provide a pool of talent to local authorities looking to harness tech innovation in the service of the community. Sometimes they also run hackathons at co-working spaces with a view to putting digital technology to work on behalf of the entire city.
Millennials in particular seem to favour co-working spaces, and they are also keener on ‘co-living’ spaces than their parents were. Given the increase in town centre rents, many young people nowadays continue to share living spaces after they have completed their studies. In addition to the more traditional joint-tenancy of a house or an apartment, some decide to take up ‘co-living’, a hybrid set-up that is a cross between a hotel, a student residence and a traditional house-sharing arrangement. In general, these spaces comprise private furnished rooms and communal areas such as kitchen and lounge, plus – at the high end of the range – a swimming pool, fitness room and other sports facilities.