Five PropTech definitions real estate pros need to know in 2020
It's 2020, and the days of PropTech being a new, poorly-known thing are long gone. Sure, it's still disruptive, but it's anything but a small field: according to Unissu, between 2018 and 2019 investors poured over $28 billion into PropTech companies large and small, empowering the industry to solve challenges from energy efficiency to parking to tenant experience and beyond.
However, while the field may be big, it's still poorly defined for plenty of professionals in the built environment fields and even for those working within PropTech itself. Here are a handful of the most important PropTech definitions you need to know, regardless of your job description.
"The most important takeaway is that many of these terms are relative and mean different things to different people."
There's nowhere better to start than with PropTech itself. PropTech means technologies (or in some contexts, tech companies) that improve some part of the property business. While this typically means real estate, it could also reference other parts of the built world, such as architecture or transit (particularly parking).
Construction is a bit of a grayer area. While tech that affects construction itself is widely called "ConTech", whether or not this is a subset of PropTech or something else entirely is up for discussion. For now, it's best to keep construction uses in the back of your mind when you hear PropTech mentioned.
Next up we dive into four other examples of PropTech tools and platforms you need to know.
Asset fracking is a bit of a newer term, stemming from Steve Weikal at the MIT Center for Real Estate. It means identifying and monetizing (at least in principle) every part of a property asset. This could mean marketing apartment units that haven't been leased up yet as short-term rentals, or charging the community to come in and use some part of your common area, or similar monetization strategies. Asset or "real estate fracking" is widely seen as one of the more transformative industry niches right now.
Digital twins are a virtual representation of a building, in graphical form, that can serve as a useful management tool to connect a property's physical spaces and its various tech platforms. Digital twins help with coordination and management because they offer a visual way to view data from any particular part of a property as opposed to seeing a list of boxes or spreadsheet, and they allow for use from day 1 of construction all the way through leasing and operation. Think in terms of the difference between a command-line interface and the experience of using a desktop file explorer.
This is one of the most obvious trends within real estate, thanks to the high visibility of coworking and co-living companies around the world. Space-as-a-service is a model of real estate delivery where a variety of related services are provided alongside the space itself, often through a digital interface that makes requests or even space booking a lot easier. This could include anything from a simple phone line and mail service all the way to amenities like a tenant experience platform, built-in IoT devices, or a pattern of meaningful events throughout the year.
This is a newer PropTech trend that has seen tremendous growth. iBuying is a method of real estate acquisition, particularly on the residential side right now, where a company will make an instantaneous purchase offer based on a value algorithm, without any broker involvement. The iBuyer, in the United States often companies like OpenDoor or specialized services from Zillow or Redfin, will purchase the property and then resell it, saving the seller the process of marketing and closing on the property. In return, the iBuyer will take a fee similar to a brokerage commission.
This article has given five important PropTech examples but the most important takeaway is that many of these terms are relative and mean different things to different people. In real estate, a cap rate or NOI will always mean the same thing, but PropTech is new, and consequently some people disagree on what these terms mean. If you hear one of these terms used in a slightly different manner, don't be too surprised but try to understand why it is being used in that way.
Read about the three pillars of good tenant experience here!