Rouzbeh Pirouz is Co-Founder and Senior Partner at London-based Pelican Partners, a real estate and private equity investment firm.
It’s impossible to analyse any sector of commercial property without acknowledging the profound changes that the pandemic has wrought.
Many small businesses have been decimated, with some going under completely. However, there is one area within commercial property that is thriving with innovative, forward-thinking solutions to tomorrow’s property market – proptech.
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Proptech platforms and start-ups are on the rise
Many in the global commercial real estate market have woken up to emerging tech and the profound difference it can make to the sector. From innovative valuing tech to different ways to reach clients, there are endless applications for the kind of tech we have now.
Forbes has recently profiled an example of the pandemic pushing someone out of their comfort zone to create something entirely new. After ten years in investment sales out of New York City, Daniel Tropp was thrown off course by the pandemic.
He told Forbes that he had been laid off, saying: “It was a gut punch that took time to process, but I started brainstorming. In hindsight, had the status quo been maintained, I might not have launched AEBOV”
AEBOV offers an industry first interactive property valuation platform that collaborates with property owners in real time. The interactive process covers everything, from tax adjustment, rent roll, any appeals or other specific expenses.
The idea is that a much truer picture is built up of the client’s property value and possible value. Tropp adds that it’s far more efficient, accessible and engaging and, of course, dispense with the endless paperwork previously necessary making it greener.
Tropp is just one entrepreneur out of many in different countries who turned to leveraging proptech to get thrive during the pandemic.
Examples of proptech platforms right now
Others that followed a similar path of development and launch during the early stages of the pandemic include Development AI. This company analyses zoning maps across different markets. Its proprietary software can home in on underutilised properties.
Basis Software uses Excel models to provide a much deeper analysis of real estate portfolios for investors, while Predictre offers a tool that customises all the different strands of data that real estate managers need to make their decisions.
Underpinning all of these proptech ventures is the fact that the pandemic shocked people and businesses into awareness, not only of the emerging tech out there, but that it could transform their business models.
Without an unprecedented disruptor, such as the virus and ensuing lockdowns, it’s likely that some of these firms would have taken a few more years to emerge. The combination of sudden uncertainty and total interruption of business-as-usual forced people’s thoughts elsewhere.
Proptech is providing solutions to major property challenges
The challenges that commercial real estate has undergone over the last 18 months due to the pandemic have forced innovation. And this is what brings opportunities. Those real estate firms that took advantage of these opportunities are those that will stay relevant now and in the future.
New technologies are starting to impact the sector in many different areas, and as investment continues into this type of innovation, this will continue. Companies that embrace and contribute towards this will be able to offer clients what they want – before some of them even know they want it.
While progress is often dictated to by consumer sentiment, innovation also takes on a life of its own. And that’s what’s happening with proptech now. More solutions are being devised by more new start-ups, either working independently or as partners of established firms.
Global investors are backing more and more proptech funds and start-ups
Major global investors are backing proptech companies, including the likes of PwC in Germany and JLL Spark in the US. These two investors are backing venture capital fund PropTech 1 Ventures, which is headed up by Nikolas Samios.
He recently spoke to PlaceTech about the fund, and the types of problems that it intends to solve within the real estate sector. For Samios, one of the major drivers of proptech innovation within the real estate industry comes from the shift to green regulations.
Nationally, at a European level and in the US under President Biden, green regulations are being shunted to the top of the agenda. This informed the main themes that were under discussion at the CREtech London conference, which are: catering to the new world of hybrid working, the rise in climate tech and the move towards retrofitting existing properties.
JLL Spark Global Ventures’ investment in the fund is significant as it’s the first time a US company has contributed towards this particular fund. This is a sign of change, with more investors waking up to the potential of proptech, but also the urgent need for it to deal with the ever-present threat of climate change.
And while this fund is focused on proptech in Europe, this doesn’t preclude start-ups from around the world being funded. The problems that the industry faces are universal and must be tackled at a global level.
Environmental regulations are driving innovation
ESG technology is one of the major growth areas within global proptech. This is obviously driven by the growing implementation of green regulations. Each time a new raft of legislation is announced, there is a shift in attitude from asset managers and real estate firms.
Technological advances have moved from being something that’s considered a nice addition into urgently needed. Transparency is necessary in order to avoid being fined for breaking regulations, charged prohibitively high interest rates or losing out on the stock market.
And sustainability within commercial real estate should now focus on retrofitting, particularly in the West. New builds are giving way to taking buildings that went up from the 1940s to the 1980s in London, for example, and bringing them up to regulation standard.
For example, in the UK, retrofitting properties along the Thames means meeting the UK’s Minimum Energy Efficiency Standards in order to be considered lettable. Obviously, there is still a market for new builds using sustainable construction techniques and materials, but it’s vital to utilise the buildings already in existence.
So, for the industry this brings problems surrounding data collection – how do they find out what the buildings need to be considered up to code? How do they, for example, insulate the buildings in what the Government says must be an “industrialised, scalable way”? Furthermore, how do the property investors and owners get these old buildings to the point where they are net zero – this is where they create more energy than they use?
Proptech can provide solutions for these industry needs, and funds like Proptech 1 look out for start-ups that are developing these. Aside from environmental concerns, there are also lots of basic data needs for every commercial property’s operation and again this can be provided by innovative use of tech.
LandTech continues to go from strength to strength
Another example of a London-based proptech platform that is going from strength to strength can be found with LandTech. The basis of its offering is a solution for development assessment and site sourcing.
At the start of October 2021, LandTech announced that it has won a Series A funding round of £42 million. Funding was led by already existing investors including JLL Spark and Pi Labs, as well as US investment firm Updata Partners.
This funding is going to be used by LandTech to expand internationally and to increase the products that help users identify new development opportunities. According to Jon Seeber, a Partner at Updata, the firm funded LandTech because property development is transitioning ever faster into the digital age.
In an interview with UKTech, Seeber says: “LandTech’s current and future offerings serve as critical infrastructure required to manage traditionally disparate data and collaboration across the industry.”
LandTech has been going since 2015, when its first product launched. LandInsight centralised policy data, property ownership and planning to make the property market far more transparent.
By opening the data to the biggest housebuilders in the UK and to thousands of smaller property developers, the platform has assisted in the building of more than 50,000 houses in the UK. Since then, it has added new products, which include LandFund and LandEnhance, which greatly simplify development funding and planning approval.
LandTech is the fastest growing UK based proptech firm and counts Savills, JLL, BNP Paribas and Taylor Wimpey as clients. While this is predominantly for residential builds, LandTech shows the massive opportunities that are out there for start-ups with the tech knowledge and the imagination to change the industry.
Proptech is democratising the sector and making it more transparent, and while it was already expanding before COVID-19, the pandemic has acted as a conduit to speed up the development of this sector.