I just got back from a whirlwind four days at MIPIM, and I can confirm that the real estate’s industry interest for PropTech has reached fever pitch. Engagement by incumbents is really starting to take hold, and I think we may be experiencing that turning point we’ve all been waiting for since the end of 2017. During MIPIM, I was asked to speak on several PropTech panels. One of these was organized by Global PropTech, and they ask me to present some trends for 2019 that I have come across in my many conversations with startups and investors for this column and my other work. For those that weren’t able to attend the panel, or weren’t at MIPIM,
Change real estate incumbents’ mindset. While 2018 was the year PropTech hit the mainstream in terms of awareness, it was slightly disappointing in terms of implementation. Reports by the BPF and KPMG late last year underlined this. The KPMG report, for example, highlighted that the industry recognizes the potential opportunities and challenges PropTech poses, which are not just about tech but center also on the customer, innovation and collaboration. Real progress, however has been slow. In fact, though a staggering 97% of respondents think that digital and technological innovation will impact their businesses, more than half of respondents (56%) ranked themselves as 5 or less out of 10 with regards to their digital and innovation maturity. They may be talking the talk, but are yet to walk the walk. This being said, I interviewed several startups in the UK at the end of last year and they all told me they noticed a significant shift in mindset on the part of the real estate companies they were engaging with; and are all expecting a big push in implementation this year.
M&A activity. There is an expectation for consolidation within the industry, a sign of its growing maturity.
Data, AI and Machine Learning. These three words continue to pinpointed as “hot topics” by startups. In truth, access to data is probably still the single biggest struggle many startups in the PropTech space face, and data sharing principles are sorely needed especially in areas where the private and public realm intersect. AI and ML have been at the top of the list for some time now, and I would argue that they are slowly becoming the expected “operating system” for all future looking tech solutions… but many startups also just throw AI into their name to increase their valuation! In fact a report published last week by London-based venture capital firm MMC Ventures, found no evidence that artificial intelligence was an important part of the products offered by 40 percent of Europe’s 2,830 AI start-ups.
Continued investment growth. Perhaps unsurprisingly, PropTech investors expect investment in Proptech to continue to grow! According to the latest MetaProp Global PropTech Confidence Index, 60% of PropTech investors surveyed plan on making more investments in 2019 compared to 2018, an all-time high and up from 46% six months ago. In my one to one interviews with investors, they expressed the expectation (and hope) that in 2019 the $20 billion invested mark will be surpassed.
Proprietary investment funds. Another strong trend for 2019, that had already started in 2o18 (with, for example, JLL Spark and RET Ventures) but is expected to gain a strong foothold this year, is real estate incumbents creating proprietary investment funds to deploy their digital strategy. Real estate firms are increasingly aware of the value not just of buying products from startups, but of having the opportunity to both participate in the upside of successful startups and to having ownership of them in order to make sure the solutions they need are being built. They have also recognized the importance of letting startups be startups, and therefore keeping them safely outside of their corporate structure.
Smart Tech. Though of course they have diverse individual areas of interest, the single major underlying trend that almost all investors I spoke to globally are excited about and looking to invest in is so-called ”smart” technologies. To a degree, this goes hand in hand with the fact that we expect PropTech to be implemented on a wide scale in 2019. In fact, the most immediately impactful way that it can help real estate is by facilitating the delivery of the now widely accepted principle of real estate as a service. This equates to user experience management, coupled with the sophisticated data analytics and tech – both the IOT hardware and the software that brings it to life and makes it useful – which will allow these learnings to be implemented.