PropTech: When Technology Crashes Into The Property Industry
What do you get when you mix the hottest money making sector in the known universe with a dash of geek?
Hint: it's got nothing to do with Hollywood sitcoms.
PropTech is here, and it wants your attention. Right now.
As James Dearsley of the Digital Marketing Bureau recently pointed out, “In Q4 in the US venture capitalists invested $300 million in 32 [PropTech] companies. This is the largest quarterly investment ever and was more than the amount invested in all of 2013. This sector is on the move.”
The merger of high value property development and sales with super smart computer technology is long overdue, but now it's here the only sensible question is, why did it take so long?
The reality is the two industries of property and technology are so dissimilar, it's amazing they ever dated at all. In the blue corner, a risk averse, slightly shy but incredibly wealthy old man. Set in his ways and determined to maximise ROI at any cost. In the red corner a bunch of spotty faced disrupters in skinny Chinos and matching check shirts.
OK, so we exaggerate, but you get the idea. It was only when the geeks proved that smart tech like AirBnB could actually do a decent job of disrupting, that the property sector sat up and took notice. The launch of Zoopla at around the same time in 2008 cemented the idea that property was fair game for the same kind of change that had already hit other vintage industries such as bookselling and travel. While no-one is suggesting that the property industry faces its own Kindle-aggedon, the signs are that many of the old guard incumbents are about to find out what life is like clinging onto the side of the change train.
Sites like RightMove in the UK, and Zillow in the US have clearly shown just how much pent up consumer demand there is for high quality information when buying and selling residential properties, and we're seeing the same sort of thing happen to the commercial sector too. Products like Reoptimizer and Hubble are transforming the way commercial property is managed and utilised. The key thread behind all of these newcomers is the fact that the Internet – and particularly mobile Internet - delivers results quickly and conveniently, which can make all the difference between a happy customer and Mrs Grumpy.
However the big question right now is how will the incumbent real estate giants fight back against the new wave of smartphone powered online services which are springing up like mushrooms in your old Uncle Joe's basement. Online estate agent Emoov which launched in 2010, has now been joined by a growing number of serious rivals, including Purplebricks, Tepilo and Housesimple. In each case the marketing message is the same, use us to sell or buy faster, cheaper and with less hassle.
By all accounts there are now over 35 online agents scrapping for a slice of the lucrative commission pie, which hasn't escaped the notice of the old guard. Which is why a group of the biggest recently launched onthemarket.com. Late to the market, and way behind in terms of market awareness, the agents behind the site – which include megaliths like Knight Frank, Savills and Strutt & Parker – are still struggling to make headway against the massive listing power of Rightmove. So it's probably going to take a lot more money and marketing before they get anywhere in the cut throat world of online services. Let's see how they handle their own form of delayed completion.
Of course real estate agents are not the only property industry segment suffering from the onslaught of the Internet. The venerable classified advertising market has also taken a huge hit on revenues as the online giants suck up all the spend. Print classifieds have been hit particularly hard, and even the most heavyweight newspapers and magazines have been forced upmarket into an ever shrinking niche in order to survive. At the same time the bottom end of the market still stumbles on with landlord ad services such as Gumtree and Craigslist holding the fort.
Meanwhile, sharp financial minds are circling round the wagons as they look for the next Uber opportunity in amongst all the sound and fury. You can tell when a tech sector has reached critical mass when someone sets up a specific VC for the purpose, and Proptech now has Pi Labs, which has been developed specifically to serve eager startups. Billed as 'Europe's Leading PropTech VC', the fund has channelled funds into some 16 projects since its inception two years ago. Their portfolio includes such diverse property services as Trussle.com (the UKs first online mortgage broker) and Roomflick.com (matching people and spare rooms).
The big question on everyone's mind is whether we will ever see a goliath in the PropTech sector, of the size and value of a disrupter like Netflix, Spotify or Uber. There's no doubt the property world has the global spread to offer massive returns to the right project, but whether or not this will happen before another inevitable bursting of a bubble remains to be seen.
Until then we're just going to keep on playing with our new favourite PropTech app, flatmateme.com, and hope we can find a roomie soon, before the market finds a new darling to support.