The Rise of PropTech and the Adoption of Technology in the Real Estate Sector

The growing digital economy, shifting demands of tenants and the convergence of technology within the real estate sector will have significant implications in the coming years for all companies who occupy commercial real estate, technology companies, real estate developers, operators and investors.  Some of the key factors forcing these changes are:

• The changing property occupier work styles, office needs and demographics e.g.:
  • Companies moving to open floor plans, diverse working locations and break-out spaces within the office, virtual working, utilizing online portals and technology solutions for all building needs and demand for services and amenities in the work space.
  • The rise of co-working and tenant demand for flexibility within the office space, lease term and size of the workspace to accommodate changing headcount.
  • The growth of tech companies as real estate tenants and the importance of recruiting talent who are drawn to a company's workplace and culture e.g. millennial workplace and workstyle needs and expectations.
  • For more information on the workplace of the future, please see our "Future of Work" report.
• The shrinking brick and mortar retail footprint and the growth of ecommerce forcing significant changes in both the retail and industrial real estate sectors.
• The advance and maturing of technology solutions applicable to the real estate sector e.g. PropTech.

Osborne Clarke's "Future Proof Real Estate" report, which surveyed 550 leading technology and real estate thought leaders from across Europe, found that 82% of respondents see the tech industry as having an increasingly important influence on the built environment. This includes both PropTech companies developing the technology solutions and the role of tech companies as tenants shifting the expectations of building occupiers. The respondents concluded that the real estate sector will roll out major transformative technologies by 2020. This trend is being seen on both sides of the Atlantic with some of the largest real estate markets (e.g. New York and London) leading on innovation, implementation of technology and offering greater services to their tenants.

Historically, the real estate industry has been slow to adopt technology solutions relative to other sectors, but this will change in the coming years as operators differentiate on their technology and service offerings to achieve a competitive advantage in the competition for tech-savvy tenants.  The efficiencies and ROI realized by implementing technology into commercial buildings and their operations will give investors better margins and push others onto the technology adoption curve.

According to our research, both PropTech companies and real estate technology buyers see a number of key technologies that are being adopted and will increase in importance in the coming years. The most impact is expected by the adoption of:

• Big Data: both data and software solutions improving property efficiency, sourcing available space, etc..
• IoT: connected building technology and the interplay with the connected consumer tenant.
• Blockchain: smart contracts and technology enabling more efficient transactions.
• Robotics: applied across the logistics market and in industrial and warehouse property.
• AR/VR: changing the retail experience and the way properties are marketed and utilized by the user.
• AI: automating processes impacting building operations and reduced tenant headcount needs.
• Smart Energy: new energy sources, storage, distribution and building efficiencies.
• Autonomous Vehicles: vastly changing the way people interact with the built environment in the way they commute, work, shop, etc.

While many of these technologies will not be widely adopted immediately, others are being widely adopted or in the testing phase. Examples include:

• Technology solutions enabling the growth of virtual and flexible working enabling collaboration across the globe.
• Drone delivery being tested by Amazon and others to solve the "last mile" logistics issue and drones changing the way property surveying is conducted.
• AR/VR and 3D imaging utilized to assist in the design and construction of new developments.
• Robotics and logistics data facilitating the growth and efficiency of ecommerce and delivery.
• Autonomous vehicles are being widely tested and once they are broadly adopted, transportation and logistics will vastly change with significant knock-on effects in the real estate industry such as parking space needs being greatly diminished opening land for other property uses.

These technologies present tremendous opportunities for PropTech companies developing the next wave of technology solutions across the real estate market. It's also increasingly important for real estate developers, operators and investors to have a technology strategy in-place to shape the implementation of these solutions across their portfolio to be competitive in the changing marketplace and maximize their return on investment.

For more information on the growth of technology within the real estate sector, download our Future Proof Real Estate report.