With all the fanfare surrounding AI, fintech, and self-driving cars, there’s one industry that’s building momentum with unparalleled opportunities — property or real estate technology or simply put “Proptech”.
To size up the market, real estate is easily one of the biggest industries in the world. According to Savills, an international real estate advisor, all the commercial and residential assets in the world total to more than USD $217 trillion making up roughly 60% of all global assets. It is the pre-eminent asset class that has the power to influence national and international economies.
Proptech is intimately linked to smart cities development which is a new way cities are competing for talent and businesses. Smart governors are now employing technology to (1) deliver public services, (2) extract efficiency and reduce costs, and (3) crowdsource city resources — which property developers often share the same mission and objectives.
So regardless whether you are speaking to a progressive property developer or smart city manager, you will find technology at the center of their digital transformation agenda.
So we know cities and buildings are turning smart as cars and speakers are, this driving force has familiar common denominators: connectivity, storage, sensor, recognition, and data analytics. The opportunities in cities and buildings are enormous that is why companies like Cisco and IBM have long invested in Internet-of-Everything and Smart Planet respectively. However, both have had difficulty gaining mainstream traction due to the lack of understanding of its complexity.
Not to pick on just Cisco and IBM, as a technology and real estate hybrid professional responsible for technology development and digital strategy for a S$3.2 billion (US$2.32 billion) mixed use precinct in Singapore. I have seen more than my fair share of technology companies ranging from early stage startups to 100-year-old enterprises struggling to win contracts in real estate or city development projects.
Here are my warnings to technology companies vying to enter this new and promising industry:
- Property development and city procurement cycles are long so patience and the right relationships are keys to success.
- New developments have a limited tender window and once closed; tech provider has to wait months if not years for the next one.
- Existing asset retrofits are complex given REIT or investment structures involve multiple layers of approval from different fund managers.
- City or property development companies typically do not have in-house expertise to write tech requirements into delivery contracts so modern technology requirements are often missing due to lack of awareness.
- Building and infrastructure projects have many stakeholders from investors, government agencies, architects, commercial partners, to a variety of consultants and contractors necessary to erect a building thus diluting technology’s role.
- The languages spoken by real estate professionals and technologists are simply very different.
However, there is good news on the horizon. A new venture fund solely focused on proptech called Fifth Wall Ventures just raised US $212 million last month. But what’s more important are the fund contributors to this venture are heavy weights in the real estate industry including:
- Hines – major developer for office buildings
- CBRE – major real estate brokerage firm
- Host Hotel and Resorts – a REIT spin off from Marriott hotels
- Macericha – the 3rd largest mall operator in the USA
- Equity Residential – the largest owner of apartments in the USA
- Lennar – one of the largest home builder in the USA
- Lowes – a home improvement franchise in the USA
- Prologis – a warehouse operator
This fund rise means property development and real estate giants are paying attention. Perhaps this is what the industry needs to spur into the era of smart and connected societies envisioned by so many media, tech giants, academics, and consultants.
Kevin Chen is responsible for technology development, digital strategy, and innovation at Lendlease’s latest urban regeneration project in Singapore. Positioned to be the CBD of eastern Singapore and aligned with Singapore Smart Nation guidelines, the 4 hectare, S$3.2 billion mixed use project consists of retail, residential and office are future ready. Previously to Singapore, Kevin worked for 5 years in Shanghai on various smart building and smart city projects. Kevin is a Silicon Valley native with early career with technology giants. He is now an innovator in the real estate technology space.
He can be found on Linkedin at www.linkedin.com/in/kevinic.
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