The development and application of technology to traditional industries and sectors continues. Even seemingly straightforward assets and investments such as real estate are not immune. The last few years has seen tech and real estate working together, whether on data analytics, building design and testing, or for platforms to trade property assets.
“PropTech” is taking the real estate world by storm, and with it comes a host of changes and challenges.
The internet will fail[1]……. a solid prediction….
Today the internet could not be more central to everything we do. It is a prime example of the impact of technology on our lives and the best illustration that we ignore technology at our peril. That applies to the old reliable Real Estate sector just as much as any other, which, whether you realise it or not, is beginning to be swamped by a wave of new property technologies or “PropTech”.
In fact PropTech has been around longer than you might think, although it is only in the last two to three years that we are now beginning to see the real impact and disruption that technologies are causing in the real estate industry. That is not to say that real estate has never embraced technology, of course it has, just perhaps not at the rapid pace that things are now starting to happen and which allow us to see and feel technological impacts more tangibly. You may already be aware of some property technology companies, projects, apps, devices and systems but you may not associate them with the “Prop Tech” sector, but do you know what the Internet of Things, AI, augmented reality and blockchain are? Probably not, but you might well need to learn about them and fast as they are some of the key predicted technology trends for the coming year[2].
PropTech is the “adoption of hardware or software technologies to solve problems relating to properties“[3] or as others have put it, a way to streamline processes and improve efficiencies. Examples include: technologies that can gather and provide more information on what buildings contain3; smart or connected buildings that are designed and built to be more economic for their owners, more functional for their occupiers[4] and better linked to their surroundings and local infrastructure; and speeding up the transactional process of granting a lease or purchasing a property.
To a sector that is commonly viewed as slow on the uptake of new technologies, PropTech is impacting all areas (from offices to industrial, residential to student accommodation, retail to mining, planning to construction and beyond) and all stakeholders (including owners to tenants, agents to funders, developers to the person simply passing by the front door of the building on the street). As such, as technology becomes more important to everything it is essential that the sector seizes the opportunities that technology presents. Those opportunities will present themselves in many ways and the challenge is to identify them and find ways to deploy that technology as new and alternative ways to do business and generate revenue from real estate assets. At the same time those changes may fundamentally disrupt some or all of the existing ways of working so that all stakeholders (including the lawyers!) will need to adapt and change. The scale and scope of impact is and will be wide and varied.
What changes and challenges will be faced from a legal perspective cannot be known with certainty in advance (other than that the law will most likely lag behind as it waits to see how matters develop and where legal intervention is needed). Some legal issues to keep an eye on may include:
1. Data will be key in ensuring the growth and success of property technologies and the real estate sector as a whole going forward. The collection and use of data means that real estate stakeholders will need to get to grips with the legal issues surrounding data protection legislation.
2. Similarly, once a building is “connected”, it can become a target for cyber criminals and therefore cybersecurity for property owners and managers becomes a much more relevant consideration;
3. The increasing appetite for flexible and co-sharing workspaces brings implications for what the exact legal nature of an entity’s occupation is; how alterations are authorised and made to properties; and how the security of tenure legislation will continue to apply;
4. Tech companies and providers will become or have already become new players in the real estate market. That creates new and additional relationships for existing stakeholders such as owners and occupiers to learn about and manage;
5. With more data available the speed at which a deal can happen should be greatly increased. Agents will have a greater volume and detail of data available to use for comparables; viewings may be undertaken remotely or using augmented reality; and how documents are negotiated (or at least what is important in the negotiations) will change.
Put simply some issues that were never thought important (or even considered) in the past could now start to become front and centre and changes will undoubtedly be required as the Prop Tech revolution brings new opportunities for all.
Whilst there are many tech start-ups and some will never make it to fruition and fail, you can guarantee there are some that will (some already have) and they should not be ignored. The possibilities are fascinating and exciting and you should consider now how technology can assist and improve your business.
- Airbnb – an online market place that enables people to list and rent out their own residential properties with Airbnb receiving a percentage of fees from each booking. It has been disrupting the holiday lettings market and short term let market for a while (although the recent case of Nemcova -v- Fairfield Rents Limited [2016] shows some of the risks faced by those trying to take advantage of this technology).
- YourWelcome – provides rental tablets containing software to assist holiday and short term lettings guests, such as information on the property and local areas and links or contact information for external companies such as taxi firms and takeaways. A good example of technology opening up new revenue streams, as every click on one of the links generates a share of the profit delivered back to the host. YourWelcome is now looking to move into serviced apartment and Private Rented Sector opportunities.
- Kontor – a niche real estate advisory firm focused on tech start-ups devising technologies for property, that aims to assist with locating and developing spaces that work for these companies instead of the companies having to fit into and adapt to existing spaces. Their focus is on occupier sectors, such as tech companies, rather than the usual local geographic markets.
[1] Newsweek – “The Internet? Bah!”, Clifford Stoll, 1995
[2] Gartner’s Top 10 Strategic Technology Trends for 2017 – http://www.gartner.com/smarterwithgartner/gartners-top-10-technology-trends-2017/
[3] Dr Rick Holland, 24 March 2016 – Heralding the next generation of Prop Tech (https://innovateuk.blog.gov.uk/2016/03/24/heralding-the-next-generation-of-proptech/)
[4] Smart Buildings Magazine – http://www.smartbuildingsmagazine.com