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Property technology: disruptor or enabler?
AT this year's National Day Rally, Prime Minister Lee Hsien Loong reiterated the need for Singapore to become a "smart nation" using the latest technology, making life better for the people and more. There are plans to bring together the current piecemeal uses of technology cohesively nationwide to make Singapore's economy more productive, our lives better, and our society more responsive to the people's needs and aspirations.
Technology has often been referred to as a disruptor instead of an enabler especially when one fails to catch up with the pace of innovation. The use of technology in the property industry, or "proptech" is also gaining much traction today. By definition from the Royal Institute of Chartered Surveyors (RICS), proptech refers to all aspects of innovation and how it impacts the built environment. This includes software, hardware, materials or manufacturing.
From Proptech 1.0 to Proptech 2.0
The first proptech wave began in the mid-1980s where computing power was applied to data and adopted for research, analytics and performance management. Examples include Argus, a real estate software solution for valuation, asset management and portfolio analysis. Computing power also gave Investment Property Databank (IPD) the ability to organise and analyse data describing the performance of commercial property in the UK.
Subsequently, the emergence of the Internet in the 1990s through to the early 2000s saw the widespread adoption and adaptation of the worldwide web by business owners and consumers. Apart from search engines, online portals and databases also slowly found their way to businesses small and large. Such services were made available via government portals (eg REALIS in Singapore) as well as via the private sector, where customisation can be provided to the end-user. The Internet has broken down boundaries and cast a wider marketing reach for property professionals in the brokerage business. Launched in 2007, PropertyGuru was such a platform which enables property agents as well as property developers and owners to showcase their listings on a single online portal.
Building on the success of Proptech 1.0, the next wave of technology advancement in computing power, data availability, and algorithms has brought what is now possibly known as Proptech 2.0. There are many manifestations of such technology in the form of artificial intelligence, virtual/augmented reality, blockchain, and the Internet of Things. A key driver of this wave is also the inflow of venture capital into this burgeoning sector.
According to CB Insights, a venture capital database, the volume of proptech financing globally has been on a steady increase, rising about 36 per cent year on year to US$2.7 billion in 2016, and projected to increase another 10 per cent in 2017 to US$3 billion. In addition, it was also reported that of the US$6 billion in venture capital that has been invested in proptech since 2011, about 70 per cent happened in the past two years.
In fact, CBRE has also invested into a new venture fund solely focused on proptech called Fifth Wall Ventures. Raising US$212 million, the fund contributors to this venture are heavyweights in the real estate industry including Host Hotel and Resorts, a Reit spin-off from Marriott hotels, US-based Equity Residential as well as major warehouse operator Prologis. The government's support and a set of initiatives by SGInnovate will help startups to grow and further expand to neighbouring countries in South-east Asia.
Proptech is generally delivered by three broad mediums: software, hardware and blockchain. While the first two mediums are not new to most, it should be mentioned that they are the two most common mediums used, not exclusively most of the time. Blockchain is the new technology that utilises user-maintained and distributed ledgers for the record and transfer of digital assets across all participants in the network without the need for a centralised third party or exchange. However, for this article, the focus will be on how proptech software and hardware will affect the property industry.
The most common type of proptech software is usually property portals. These portals are either made available via the Internet or through a mobile application. Ever evolving, these property portals have further enhanced their offerings by introducing a myriad of virtual services including convenient links to other related services, data analytics, and virtual tours. There are now portals for commercial leasing (CommercialGuru), public housing transacting and rental (Ohmyhome) to market research (DREA). PropertyGuru also recently launched its first mobile showroom where users are able to walk through potential apartment listings via virtual reality devices.
Beyond property portals, the market also witnessed a rapid growth of service portals especially those that are property related. Today, there are service portals that allow online users to compare pricing, get in contact with, appoint directly, as well as provide service reviews for a vast range of services. This includes services like renovation and interior designers (Qanvast, Homerenoguru), property management services (Pegaxis) to short-term work and meeting spaces (Flyspaces).
While proptech software aims to enhance the experience and convenience of the consumer, it bypasses the traditional third-party service providers such as property agents and consultants; challenging their market share as well as their existing business models and modus operandi.
Nonetheless, proptech software has been swiftly adopted to benefit the real estate industry. Mobile applications are now created for the occupiers to access the development's facilities and for better communication between landlords and occupiers. Today, mobile applications have given building occupiers and shoppers the option to assess and book development facilities, get promotional updates, as well as save them time by being able to monitor the queue situation at restaurants via existing security cameras.
Similarly, applications have also been developed to enable the public and estate managers to report poorly maintained areas or defects to the estate managers for early preventive maintenance. This is done either by posting a photo or a description of the complaint on the app where the locality of the complaint can be tracked and verified by a location tracker.
Proptech software has also fuelled the rise of the sharing economy. It allows asset owners to monetise their surplus or underused assets via collaborative consumption. Already, the sharing economy has impacted the transport industry, hospitality industry, and commercial space providers. With its growth projected to be rising, the sharing economy will continue to challenge incumbent real estate providers.
The growth and availability of hardware has also disrupted the property industry. Building services performance analytics has advanced with the introduction of new measurement and detection devices. Building management systems can be programmed to autonomously sense, communicate, analyse, and react to the occupants and other machines in a non-intrusive manner. Continuous monitoring and predictive capability can allow the building manager to anticipate any repairs or maintenance issues.
Virtual reality (VR) is also fast becoming an avenue for most real estate players to adopt in both marketing and concept visualising. CapitaLand has launched an immersive VR simulation studio as part of its Funan show suite. This has enabled visitors to explore and visualise the interior of Funan mall in 3D, when it is completed in 2019. Lendlease has also utilised a 3D modelling platform to aid the visualisation of Paya Lebar Quarter in its construction phase for planning and executive purposes. There are plans to use VR to manage its facilities when the precinct is completed in 2019.
The advancement of hardware has also facilitated the application of Internet of Things for real estate.
Internet of Things
The Internet of Things, or IoT, is a not a new concept but is definitely making waves in recent times. Fundamentally, IoT is a concept where everyday inanimate objects or devices have the ability to communicate and transfer data over a network without the need for human-to-human or human-to-computer interaction.
For everyday consumers and users of real estate, the impact of IoT remains relatively nascent. Generally, the idea of a smart home gets floated as a product differentiator or as a marketing spin. More often, new residential projects are equipped with "smart home" features that allow the remote access of climate control devices, the operation of certain appliances as well as the operation of home security and monitoring devices. These features are generally only the tip of the iceberg as to what the IoT can bring to the residential market.
Smartphones also allow the transmission of data for analysis. Take retail malls as an example - a personalised shopping experience can be provided by respective shops based on their past patronage patterns, while product recommendations can be made based on their most recent items purchased or even by their online footprint. Personalisation is touted to drive the retail market, as consumers are getting overwhelmed by the myriad of choices in the market.
Opportunities abound for the real estate industry in IoT. The large amount of data collected from user activity and preferences allows building owners and managers to understand their tenants as well as their patrons. On the other hand, there is also the concern surrounding the security and privacy of the data that is being transmitted and shared. Most may frown upon their movement or activity being tracked, and at the same time, fret about data falling into the wrong hands or misused.
Human touch still vital
The advancement of the proptech wave is no doubt inexorable and targeted to improve productivity in every sector. Businesses which fail to keep up will inadvertently be disrupted by this wave.
Nonetheless, while proptech should be adopted to improve processes and efficiency, there are strong views that certain elements of the real estate industry cannot be entirely replaced by technology. As technology is faceless, it cannot replace the bond formed from interpersonal relationships as well as the personalisation of information. This means that experience and knowledge will still bring value to the equation.
So is technology a disruptor or enabler? Only if real estate players fall behind. The winners are those who are able to fill the gaps which artificial intelligence and technology cannot encroach while maximising the boundless opportunities that technology offers.
- Desmond Sim is head of CBRE Research for Singapore and South-east Asia