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Welcome to PropTech

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14/01/2019

The real estate industry contributes 5.4% to GDP and employs approximately 1+ million people in the UK. However technology is disrupting the industry with the promise of improved physical and cost efficiencies, flexibility and a more agile working experience. Welcome to PropTech:

PropTech: is one small part of a wider digital transformation in the property industry. It considers both the technological and mentality change of the real estate industry and its consumers to our attitudes, movements and transactions involving both buildings and cities.” James Dearsley [1].

Key technological disruptors in the real estate sector today are based upon capturing data; effective utilisation of that data; the use of virtual reality to attract funders and investors (in particular, promoting the ability to view development proposals throughout the UK in areas in which funders/investors may have no knowledge or presence); and creating more flexible working environments.

For example, demand in today’s market for space changing, short term access and all-round flexibility can be facilitated through digital means. As the concept of the fixed office changes, landlords are also spotting opportunities to create more flexible co-working spaces which provide networking opportunities, shared research and development and can more easily adapt to the changing agile working environment. A recent example of this is CBRE’s flexible workspace concept, Hana. Hana seeks to enable institutional investors to capitalise on the rapidly growing demand for flexible office space.  At the same time, websites such as Appear Here give landlords the option to maximise the potential of their property, offering short term space to over 150,000 businesses with access to over 10,000,000 sq ft. of space across the globe.  (It is possible that this general shift towards a more co-operative working environment may result in the development and prevalence of a form of licence or alternative leasing structure which provides more flexibility than a traditional fixed term lease.)

Savills Studley has recently teamed up with German AI and PropTech firm Leverton to harness technology which will allow clients to input PDFs of their leases and related documentation into an integration programme which will use artificial intelligence to recognise, structure and store property metrics and information accordingly. A key anticipated advantage of this is to put the portfolio managers on the front foot in terms of strategy and industry and client knowledge, which in turn should facilitate more efficient decision-making.

The PropTech innovation is progressing at such a pace that it is now a priority within the UK’s government’s attempts to increase efficiency – in particular in relation to the streamlining of the house buying/selling process. As part of that, the government plans to introduce PropTech digital solutions, including harnessing the usage of big data to provide up-to-date pricing and timing information to managing agents and owners; and HM Land Registry has already embraced technological innovations with its project to centralise and digitise the local Land Charges Register (which aims to access local authority searches within 10 days, as opposed to the current up to 40 days).

WM Comment

So, PropTech is here, it is developing apace, and it promises to be a significant feature of the future of the real estate industry. Whilst the initial expenditure in new tech that is required before any practical benefits can really be seen may seem prohibitive to some businesses, indications are that the potential advantages to those that adopt and embrace new available technologies could be endless.

Our advice? To use an historical analogy from another form of revolution, don’t be like Decca: “We don’t like their sound, and guitar music is on the way out.” — Decca Recording Company on declining to sign the Beatles, 1962.

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[1] Recently voted the most influential person in PropTech by LendInvest

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