History & Definition of PropTech
Property technology, commonly known as PropTech, is changing the real estate industry. PropTech is information technology or a digital interface that enhances real estate transactions.
Anyone can use PropTech ranging from renters, landlords, agents, brokers, homebuyers, and property managers. This technology comes in a variety of platforms and services as a software, essentially reshaping the real estate sector. Leveraging technology naturally leads to efficiencies for any business or consumer, consistently giving users better insights. The most significant benefits of PropTech are:
- accessing market data to analyze investments, leasing, and home purchase
- evaluating post-investment performance
- facilitating real estate transactions remotely
- supporting the leasing process and lease admin
- tenant screening
- examining how residents use the space to enhance tenant relationships
- building and home management systems to make homes more sustainable
- using the information to predict tenants' needs such as air quality, light, etc.
- utilizing AI capabilities to provide neighborhood recommendations
- enhancing overall property technology such as smart buildings using IoT (internet of things)
The Current State of the Real Estate Industry
At the start of the new decade interest rates for mortgages saw historic lows. Now in 2021, the demand for houses far exceeds the supply, causing the market margins to increase exponentially. According to a report from realtor.com, in March of 2021 there were 52% fewer homes on the market. This scenario created a sharp increase in competition for homebuyers and real estate agents, making purchasing a property quite complicated. Thus, fostering an environment for innovation during times of high stakes and expediting property technology integration.
The Business of PropTech
PropTech is also gaining momentum from venture capitalists and investors. VC-backed real estate companies are raising substantial funds. For example, in 2021, RentSpree raised $8 million in Series A funding led by 645 Ventures.
The pandemic accelerated digital transformation in almost every industry. As a result, the demand for touchless interactions propelled by the safety requirements for the Covid-19 virus led to an exponential increase in digital adoption across all businesses. However, while many sectors had technical foundations prior to the pandemic, real estate lingered, being one of the last industries to fully standardize tech across all functions.
Previously, the real estate industry was not recognized for tech-based approaches. In fact, the industry lagged behind in digital innovation for decades. Not only did the lack of digital adoption hurt the bottom line, but it also caused an alarming lack of transparency within real estate. Therefore, this absence of technological innovation resulted in instances of tarnished consumer perception.
The colossal gap in the market paired with the necessity of real estate technology created massive business opportunities, garnering the attention of Wall Street. PropTech companies have surpassed pre-pandemic levels, according to Crunchbase data.
PropTech soared to $21.9 billion in mergers and acquisitions transactions in 2020, according to research from The Real Deal. Because of this prominence, PropTech companies are starting to become popular in Silicon Valley due to the market share opportunity.
Now that PropTech started to gain momentum, who should immediately begin using PropTech to bolster their real estate business? Agents and landlords:
- adds values to their portfolios
- easy in buying, selling, leasing, financing their homes
- data surrounding tenants' needs to create a better experience
- simplifies the application and leasing process
How do you decide which PropTech to use?
Since PropTech is relatively new compared to other industry-specific developments, pinpointing the right tools is crucial. Here's a list of qualities to consider:
- Impacts Your Bottom Line - Addresses a pain point in your current workflow to alleviate any roadblocks. The goal of investing in technology is to increase your revenue. PropTech aims to close any loopholes in your current practices. After streamlining your process, you should expect to see better results with your bottom line. If you do not start to see a return on your investment, then it's time to reconsider which PropTech platform is the best fit for you and your business.
- User Experience - Ease of use is essential in order to obtain widespread adoption. Once the platform becomes complicated, it gets harder to justify any costs associated with wasting time troubleshooting. If you want homebuyers and renters to use the platform, it is crucial to ensure anyone can understand how it works. Another component is mobile accessibility so anyone, anywhere, can use the technology.
- Digestible Insights - You'll want the data that's collected from the software to be something you understand. Once you can adequately interpret the data presented, then you're able to take action on it. If the report is confusing, this inhibits your ability to capitalize on the technology entirely.
- Seamless Adoption - After acquiring the PropTech, having the ability to integrate quickly is essential. If the process to set up is cumbersome, then it might not be the right fit. Make sure to ask questions upfront about the onboarding process to help with your decision making.
- Saves Time - Accelerate a process that traditionally takes longer when done manually. The software needs to run efficiently and have a decent turn-around time in order to make a return on your investment.
Trends in PropTech
- Sustainability - According to Forbes, 77% of people want to learn how to live more sustainably. PropTech can alert users when there is an issue with equipment at the facility and over-consuming energy. For example, if there is a leak in a property's HVAC system, a specific PropTech is equipped to notify owners to fix the problem.
- Touchless Interactions - After Covid-19 forced many businesses to evolve for the safety of customers, touchless interactions became a necessity. People are now accustomed to digital options and will continue to have these expectations after the pandemic.
- Online Leasing and Tenant Screening - Streamlining the tenant application and approval process increases the bottom line for agents and landlords. Having a digital leasing solution creates a user-friendly experience for renters.
- Data Analytics - Equipping agents, landlords, and property managers with data analytics allows them to make tactical decisions. For example, agents can unearth customers' behaviors to help agents deliver a personalized experience for them.
- Neighborhood Analysis - Nearly all homebuyers look for properties online first, making this an essential PropTech moving forward. Renter and homebuyers want to know what their neighborhood is like before they make their final decision.
- IoT Compatible Smart Buildings - Internet of things (IoT) are physical objects that connect to technology. Automated buildings give users access to historical information about the structure, digitally connects to smart devices like cell phones, and sends updates on the house's condition for proactive maintenance.
PropTech Impact on Commercial Real Estate
Commercial real estate is bursting with potential for PropTech. Using technology allows buyers and renters of commercial real estate to make tactical decisions. Metrics provided by PropTech can measure building occupancy and utility usage in real-time. PropTech is also enhancing the art and science of property management via IoT. Like residential real estate, virtual tours of the properties are also a great selling point. This level of control allows commercial real estate to make decisions on a scale they haven't before.
Top Prop Tech Companies
Founded in 2016, RentSpree is an award-winning rental software known in all 50 states for its easy-to-use tenant screening process, renter management, partnership program, and tenant screening API. In just five years, RentSpree has grown its database by partnering with some of the most trusted names in real estate and serves over half a million agents, owners, and renters across the country. For more information on RentSpree, visit rentspree.com.
“Zillow and its affiliates offer customers an on-demand experience for selling, buying, renting, and financing with transparency and nearly seamless end-to-end service. Zillow Offers buys and sells homes directly in dozens of markets across the country, allowing sellers control over their timeline. Zillow Home Loans, our affiliate lender, provides our customers with an easy option to get pre-approved and secure financing for their next home purchase. Zillow recently launched Zillow Homes, Inc., a licensed brokerage entity, to streamline Zillow Offers transactions.”
"Provider of a free online and mobile rental search platform intended to make renting an apartment as easy as booking a hotel. The company's platform offers apartment listings that are updated in real-time and can be filtered based on location, price range, bedroom count, pet requirements, or desired amenities, with the option to receive notifications for apartments with fitting criteria, enabling users to see new and relevant listings."
Why Rental Prop Tech Software is Important in 2022
Property technology is here to stay. 76% of real estate owners indicated that technology is a priority for the next three years, according to a survey conducted by ULI and the law firm Goodwin. Additionally, Investors are betting big on PropTech in 2022, expecting it to go mainstream. Now technology integration is rapidly becoming routine in our everyday lives due to the pandemic. As a result, the probability of businesses within the real estate industry wanting to return to the traditional way of doing things is slim. Despite other industries struggling from the restraints of the pandemic, PropTech flourished, giving it the leverage to accelerate into 2022.