Proptech is all the buzz, just not yet in Asia
Altus survey shows property firms in Asia are less optimistic than rest of the world about its potential.
ARE VENTURE capital funds and commercial real estate companies jumping onto the property technology (proptech) bandwagon without real conviction about its benefits?
A recent survey by consultancy Altus Group reveals an incongruity between bullish proptech projections and commercial property companies’ actual attitudes towards the potential of proptech to disrupt in the industry.
The survey found that respondents in Asia were less optimistic than the global average about the potential of proptech; the only exception where they showed more optimism than their global counterparts was in driverless vehicles.
This compares to global percentages of 15 per cent for blockchain, and 18 per cent for AR and VR technologies. In all, 400 C-suite level and senior executives in commercial real estate companies participated in the survey globally.
Even in areas such as data analytics, artificial intelligence and smart building technologies, the number of respondents in Asia who believe that these will have a major impact on the sector ranged between 20 and 30 per cent – lower than the global percentage (see chart).
Robert Courteau, CEO of Altus Group, told The Business Times that the reason for the apathy of “non-believers” in proptech could be because the fusion of technology into the traditional real estate sector is still a fairly new phenomenon here, compared to the financial, manufacturing and even retail sectors which already have their own array of solutions to track data and perform predictive analytics.
While there has been a rapid emergence of new applications designed to address challenges and pain points in the commercial real estate industry in recent years, many of these solutions have not come to market in Asia, he said.
“The other reason is that people have implemented different applications (in the past), and integration is very complex between major management systems and applications.”
To overcome this, programmes need to allow for export and translation in order to integrate and match data coming in from various sources.
Or they can have an application programming interface (API) developing platform which allows for data sharing with third-party players, he said.
Based on the survey, more than half the companies globally are using significantly more applications now than they were three years ago.
Ironically, this can actually move the industry backwards through the addition of data silos, which consequently leads to problems in data management and keeping data in a consistent format, it said.
Some respondents were also resistant to the automation of processes, not just merely out of fear of losing their jobs, but also due to a lack of available technology and shortage of IT staff who know how to work these applications. This explains why big consultancies have been hiring people from outside the real estate sector to set up these technologies within their organisations.
But Mr Courteau is surprised that for some “older” proptech like smart building technologies, there is still quite a large percentage that does not believe it will make an impactful change on the sector despite the rising adoption rate. Already, early movers have been able to develop more efficient buildings at lower costs.
Perhaps property companies in Asia still need time to overcome their uncertainty and become convinced of the practical benefits of adopting such technologies, he said.
Proptech firms BT spoke to agreed that even in Singapore, there are developers who are wary of proptech, and the low adoption rate here could be because the sales and lease markets are still doing well without it.
51VR’s Singapore managing director Andrew Hu said that while there are developers that want to take advantage of the infancy of the market to establish themselves as being at the forefront of proptech, there are also others who are cautious and feel that the market is not ready for such new technologies such as VR.
However, he believes the trend may shift as more millennials make up the pool of new home buyers. His company uses VR and AR technology to promote property sales.
Tan Kok Keong, co-founder of FundPlaces, a company that operates a blockchain-based online platform where investors can invest in real estate projects, said it is precisely because the traditional models of sales and leasing are still working well in Singapore that developers do not feel the urgency to adopt new ways of marketing, even with the prospect of substantial savings in commission and time.
What the industry needs is a leader, even possibly from the government, to take the bold step forward.
The Housing and Development Board is a good example of this when it recently launched its new online resale portal that prompted industry concerns that it could render the jobs of buy-side agents and valuers redundant, even though the portal can also save homebuyers time and bother in their transactions.
“As for blockchain technology, it is not well understood and remains under-explored. That is why the potential applications are not well conceived in Singapore at this point. Collectively, probably, the people who operate these platforms should be given more airtime to present ideas to developers.”
Comparing it to more advanced markets like the US where massive funding for blockchain-based technologies drive its rapid adoption, he said that in Singapore, there is no real leader pushing for it in the real estate industry.
According to CB Insights, a venture capital database, the volume of proptech financing globally has been on a steady increase, rising about 36 per cent year-on-year to US$2.7 billion in 2016, and projected to increase another 10 per cent in 2017 to US$3 billion. The final 2017 investment figure is not released yet.
Business Times, 8 Jan 2018