From the pandemic to the war in Ukraine, high inflation and interest rates, the eight years since the publication of the first Property Week/Freeths Power of Proptech survey have been marked by huge volatility.
Panel of experts:
- Jonathan Avery, head of technology and data – real assets, Legal & General Investment Management
- Natasha Forde, head of digital solutions – operations, Grosvenor
- Ross Hodges, global head of emerging technology and AI program lead, Cushman & Wakefield
- Samantha Kempe, co-founder and chief investment officer, IMMO
- Ami Kotecha, co-founder and group president, Amro Partners; board member, UK PropTech Association
- Professor Thomas Wainwright, head of the Strategy, International Business and Entrepreneurship Department in the School of Business and Management, Royal Holloway, University of London
- Darren Williamson, national head of real estate, Freeths
- Andrew Saunders, contributing editor, Property Week (chair)
Jonathan Avery
Natasha Forde
Ross Hodges
Samantha Kempe
Ami Kotecha
Professor Thomas Wainwright
Darren Williamson
A key question for the panel of experts who gathered to discuss the sector’s development and key trends was how this volatility has affected the sector.
Does the disruption caused by recent crises pose an opportunity or a threat for proptech?
Prof Thomas Wainwright: The answer is different for different stakeholders. If you’re an institutional investor with a long time horizon, and you want reliable returns, you probably don’t want those kinds of disruption. But if you’re in tech, disruption is your bread and butter; the external forces that create sudden crises can also create big opportunities.
Jonathan Avery: Some crises you have to respond to immediately, like during Covid, when we had to get cameras into our buildings to measure people’s temperature. Everything else stops while you do those kinds of thing, as it’s about capacity. But as a result, we are now used to bringing in new technology all the time. Once your business has that capability, it’s easier to respond to any future crisis.
Natasha Forde: Although I wasn’t at Grosvenor during the pandemic, from what I can see it created the opportunity for us to start future-proofing ourselves and become more proactive, rather than reactive. If another Covid crisis came along now, I think we’d be much better prepared for it, because of the changes we’ve already started to make in the business.
Samantha Kempe: The interest rate crisis has been particularly unhelpful, whether you are in proptech or on main street, because it has just killed transactions. So if you are in a business that is reliant on transactions, it has been an incredibly painful couple of years.
It’s also been harder to sell new products. The general challenge any tech business has is tangibly proving its return on investment when it doesn’t have a five-year track record of partnerships or case studies. And at the moment, institutional buyers are even more cautious about new tech solutions.
Ross Hodges: What we have seen since Covid, the war in Ukraine and rising interest rates, is that while our clients may be spending less, my internal clients are more interested [in proptech] than they were, because they are looking for a way out of the pattern that we are now in, and they are looking to technology to resolve some of their challenges.
The question is: what will happen when interest rates, for example, start to ease off? Will people revert to type, or will they stay on that new path where they see technology as an enabler?
Ami Kotecha: What we are in now is a ‘polycrisis’, with lots of points of failure. It’s not like the global financial crisis, when there was just one. And the big crises are not blips – they have been going on for a while. The climate crisis did not happen overnight, and wars are now happening in many parts of the world. So there are a lot of factors underlying symptoms such as high inflation and interest rates. The UK in particular also has a real issue with productivity, which has plateaued for years.
But I would challenge anyone who says that tech and what we are now calling the fourth industrial revolution of AI [artificial intelligence] is not going to answer some or all of those questions.
It’s already happening – look at the way the property industry has developed flex space. That could never have happened without technology to enable shorter leases and the fractionalisation of ownership.
Darren Williamson: I’m a lawyer, and a typical lawyer’s answer is that every crisis is a threat to one party and an opportunity for another. But the world is so fast-moving and connected now that crises come along faster, too. I don’t think that is going to change, because it just reflects the way that we are living.
What can we learn from eight years of the Power of Proptech survey about the nature of progress in the sector?
DW: There have been some hares and tortoises. Remote working tools such as Zoom and Teams saw a huge spike during Covid, but are now trending back down again as people return to the office. By contrast, AI has been more of a slow burn – its significance was quite modest in the first survey in 2017, but thanks to things like the emergence of generative AI, it has grown and grown to overtake the others.
AK: Real estate has been a later starter [in technology adoption] so we are always playing catch-up a little bit. Everything is converging now, so the more we start thinking about the interoperability of real estate with everything else, the more we’ll find the really big, useful solutions. They may not even be classified as proptech, but as something else.
RH: I agree completely about interoperability. What we are starting to see now is the utilisation of applications that started outside the real estate industry, but can now be applied to it. For example, why are leases still regarded as a specifically real estate issue? A lease is just a contract, so why can’t it follow contract regulation processes like any other legal contract? We really don’t need to think about them differently in any way.
What we are in now is a ‘polycrisis’, with lots of points of failure. It’s not like the global financial crisis, when there was just one. And the big crises are not blips – they have been going on for a while
Ami Kotecha, Amro Partners
SK: While I agree in principle, the real estate industry is very specific. A lot of the users of real estate technology want to see the structures, reports and terminology they are used to. Even with something as simple as yield, different investors have so many different ways of calculating it; there should
be standardisation, but there isn’t.
Proptech companies have finite resources and have to create a product that fits the market as quickly as possible, so they can start generating revenues. In the short to medium term at least, you have to adapt to your customer, because your customers aren’t going to adapt to you.
TW: There has been a bit of hype – you read about things like robot bricklayers, which sound very exciting but are not actually very useful. This recent polycrisis has acted like a filter, road-testing many different technologies to the point of destruction. We’re left with a smaller selection of technologies that have proved useful. AI is one of these. It is now being used by property companies to solve quite specific problems.
What are some of the key challenges facing proptech in 2024?
SK: A lot of proptech companies struggle with the disconnect between themselves and their customers, because they don’t understand those customers very well and the vendor-client relationship makes it hard to get the insights they need. That’s why we [at IMMO] have something many proptechs don’t have: lots of real estate experts in-house. Our real estate people sit next to our product and tech people, and they can have honest conversations with each other to come up with the best possible solutions.
AK: [The cost of new technology] is a big problem. The legacy issues we have in real estate software are mind-boggling, and a five-year amortisation just isn’t realistic anymore.
JA: The speed of change means you are creating new legacy more and more quickly. What is legacy now? Six months? It used to be five years. So we’re moving to focus on the operating cost of tech rather than the capex – getting business people to understand that it’s not just ‘one and done’.
How has proptech changed most since that first survey in 2017?
DW: I am going to say the way that attitudes have changed toward the role of proptech. That’s exemplified by the merger [last year] between the British Property Federation and the UK PropTech Association, which has really pushed the issue to the forefront. There is still some resistance to new technology, but the industry will change – it has to.
JA: What I really see is the shift to services. We are much more of a service industry now. It’s not just about software as a service and the question of build versus buy. We’re now almost at the point where we don’t want the software; we just want the service.
What tech trends do you expect to dominate the next year or two?
SK: AI is going to be the biggest disruptor and accelerator – the pace at which it is evolving is incredibly exciting. We’ve already developed [AI] tools that enable us to grab information from PDFs – marketing material, rent rolls, legal documents and so on – structure it and then automatically populate our underwriting templates incredibly quickly.
For example, we received a packet of information about 2,000 assets in Germany, put it through our system and created a shortlist of assets that would probably meet our investors’ requirements within one hour. That’s a job that would take [human] analysts weeks to do.
RH: One area where we haven’t seen enough innovation is valuations. The names of all the proptech companies I have met that do valuations would probably only fill half a page. I think there is a huge opportunity in that space and it will be interesting to see where it goes.
And a couple of years ago, ESG [environmental, social and governance] was right on the top of the hype cycle. Now it’s going through a bit of a weird period, but I believe it will come back as people start to realise what it really means.
TW: I have similar thoughts about ESG – I would love to see a lot more interest in it over the next 12 months. We have done some research and there is a lot of variation across the industry. If ESG supports your bottom line by reducing some operational costs, people are piling in; but otherwise, it is seen as just not being affordable.
I also think technology will lead to a change in skillsets across the sector. You could end up with a kind of hourglass profile: people with the slick, client-facing skills that are crucial for putting deals together at one end, a group of incredibly tech-savvy individuals at the other and in between the middle- and back-office jobs almost disappearing. But that’s probably going to happen over a slightly longer timeframe.
