With nine out of 10 firms believing proptech will have a significant or moderate impact on the commercial real estate (CRE) sector, it is vital that businesses and investors embrace proptech.
Doing so will help them gain a competitive edge and consider a more mature partnership with proptechs beyond just a strategic investment, says international financial services group, Deloitte.
Proptechs are using existing and developing technology to nurture new, innovative ideas. These help CRE firms enhance operational efficiency, tenant experience, and also information flow, says Deloitte’s 2019 Commercial Real Estate Outlook.
Can be win-win to embrace proptech
While investor enthusiasm for proptech is high, CRE firms have so far had limited engagement with proptechs. In fact, they often view them as a disrupting influence rather than a source of collaboration, says the report.
Deloitte says, “It is important for CRE owners/operators to understand that it is a win-win situation, where CRE companies can match their industry knowledge and business opportunities/needs with proptechs’ technology know-how and nimbleness.”
CRE companies may develop a governance model and guidelines to evaluate proptechs and should consider assessing the size, scale, maturity, level of innovation, as well as the relevance to their existing business.
“Given the investor preference for proptechs, there is merit in CRE companies becoming knowledgeable about areas of proptech that may create value for their businesses.” So says the report, titled, Agility is Key to Winning in the Digital Era.
“CRE companies investing in proptechs need to get more comfortable with enhancing their risk appetite and adopting a fail-fast approach, as every proptech investment may not generate the desired returns,” says Deloitte.
Businesses should also establish quantitative and qualitative metrics to measure their return on investment from proptech investments. This includes firm revenue and also cost-saving targets, market penetration. In addition qualitative measures such as tenant feedback and level of transformation, should be considered.
The top three sectors who most embrace proptech companies are mixed use, non-traditional and also hospitality.
The use of existing and evolving technologies to nurture new and innovative ideas are most likely a key factor in the attractiveness of proptech firms to investors, says Deloitte.
On average, investors plan to commit 14% of their CRE capital to proptech, according to the 500 or so investors and real estate professionals surveyed in the report.
Enhancing efficiency and transparency
“Proptechs are using technology to not only enhance transparency and operational efficiency but also to improve tenant experience and information flow. Ultimately, this improves both property profitability and investor return.”
Investors favour more mature proptech projects with an established track record. Most important is late-stage funding, essentially Series C and above.
For example, almost one in three investors surveyed embrace proptech and say future investment decisions will be influenced by the level of collaboration with a proptech.
In conclusion, the report says CRE companies should consider changing their mindset about proptech companies.
“Do you consider proptechs a threat or opportunity? Do you have a clear strategy and/or internal guidelines on proptech engagement? Do your company executives acknowledge the potential transformation that proptechs could bring?”
They should also firm up their engagement strategy with proptechs. “Do you have a list of decision-making criteria to guide when choosing proptechs? What is your ability to match the proptechs’ pace of development, from contracting to development of proofs of concept and pilots, to demonstrating results? Do you have a dedicated team to engage with proptechs? Have you identified metrics to measure success of your proptech investment?”
- So, do you want to engage with B2B proptech company, Consorto – the first pan-European marketplace for commercial real estate?
Consorto connects professional investors to commercial real estate investment opportunities across Europe. The digital platform also integrates AI-driven deal matching with deal-flow automation.
To find out how to partner with Consorto, upload property projects and also list as an investor, email Chief Executive Officer, Philip Verzun on philip@consorto.com.
