Spaceflow explains the definition of PropTech
Update November 3, 2021:
Since we originally shared this article, the real estate world has been through a lot. The impacts of COVID-19 have forced firms in all property verticals to get more innovative with their approaches to business, and in many cases, PropTech has been at the center of this. The growing dialogue surrounding hybrid workplaces is in many ways a discussion about a series of PropTech features such as access control, space reservations, and ticketing.
We address the question of whether this new discussion impacts the definition of PropTech in our new article, available here.
What does PropTech mean? We cover some of the most important PropTech software offerings and platforms in this article, but the term itself is important to discuss, too. The explosive growth of the field over the last few years would make it hard for anyone involved in real estate to miss. Regardless of your role in the industry, tech is affecting the way job duties are fulfilled and business is done. For managers, technology is a force multiplier, helping individual employees connect with huge building communities and manage complex property systems. For brokers, technology helps prospect successfully and efficiently market properties. For owners and asset managers, technology can help identify inefficiencies and target investment dollars.
Regardless of our job or market, we all probably have a sense of how tech affects us each day. But familiar though it may be, the state of PropTech in 2020 is harder to define. Not because its meaning on paper is particularly confusing, but because its many different appearances, as well as growth in related but different areas like workplace design, come together to make a cohesive definition confusing. Indeed, as the coronavirus outbreak opens up new focus points for property owners, even more areas will be seeing PropTech acceleration than ever before.
So what is PropTech?
PropTech simply means property technology: technologies of any sort, physical or digital, human or machine, that pertain to real estate and the built environment.
Some PropTech platforms are uniquely focused on real estate. Tenant experience platforms, for instance, are all about property; they couldn't exist outside of the ecosystem of a building. Other examples weren't necessarily about real estate when they first appeared, but are now so closely associated with property that they have become part and parcel with PropTech. One example there would be IoT. Networks of sensors and connected devices don't need to be about property, but they've come to be strongly related to the field. With that in mind, it's important to point out that some broader categories of tech can be contextually PropTech. IoT is one example as described above; another example would be AI.
Now that we have discussed what PropTech is, let's go over what isn't PropTech. Coworking and co-living aren't PropTech examples. Open-plan offices are not PropTech. The forces impacting commercial real estate, even if they are high-tech in origin, are not necessarily PropTech. A food delivery app that will bring pizza to your lobby is not PropTech. A real estate company investing in real estate to be occupied by tech players is not PropTech. A residential iBuyer is PropTech, but a traditional real estate investor that uses a few advanced algorithms is not PropTech.
"Ask whether technology is central to the functioning of a given property company, or if it is an add-on."
These cases point to an interesting observation. For companies that fall into the "property business, enabled by tech" category, there are a lot of gray areas. In general, the safest thing to do is probably to ask whether technology is central to the functioning of a given property company, or if it is an add-on. The former case would indicate that they are probably PropTech; the latter case would indicate maybe not. Perhaps we need an extra category of definition for "tech-enabled property companies" that aren't PropTech themselves but that heavily leverage technology in one way or another. Lots of co-working companies that don't quite qualify as PropTech would probably fall into this bucket.
Another lesson here is that definitions are more or less accurate based on the context of who is using them. High-quality general business & economics publications, like The Economist, tend to use the term much more broadly when discussing real estate or PropTech news than would be done within the industry itself. This is nothing special to PropTech: any field with a lot of specialized knowledge is going to have stricter definitions than even the well-educated public.
Finally, remember that definitions like this are often relative. Let's say a traditional property company uses a tenant experience platform, AI and data science to help optimize investments, and automated maintenance tools. This company might not qualify as PropTech by our definition, but if all of its competitors are still using Excel and snail mail, it clearly deserves to be in a slightly different category. There's your final takeaway: treat definitions like this with a big pinch of salt.