Real estate has always been a traditional field, its fundamental rules are ancient, and the adage of “less is more” has often been true. Simply put, real estate resists change. Real estate has typically rewarded those who make mildly aggressive decisions but do so within the bounds of data and sound processes. Also, because real estate typically involves debt or equity investors, there have been historical checks and balances on how people operate; those investors are used to seeing and doing things a certain way.
That dynamic is shifting, however, and making a huge impact on the real estate world.
The New Wave of Digital Tools for Real Estate
Proptech, the new wave of digital tools real estate professionals use to perform their jobs, is upending the traditional modes of operating, changing what office workflows look like and shifting the nature of the real estate business itself.
This need has always been there, and understanding why it is emerging now, who is driving the trend, and how it will benefit the field is critical. The foundation of real estate is shifting, and those who understand that, and adopt best practices, will likely be among the most successful in this tectonic shift in real estate practices.
Proptech: A Need Always Present, Recently Revealed
Though proptech and the discussions around it have taken the real estate world by storm, the need for it has been present for a long time. Factors like the pandemic, evolving consumer behaviors, and adjacent technologies certainly affected the proptech outlook and accelerated its adoption timeline. During the pandemic, agents and brokers — among countless other professionals — had to be creative and find ways to display properties virtually and ensure smooth processes from a distance.
That event forced people into a new mode of working, and the changes appear to be sticking. Although more tenured professionals have been slower to adopt proptech and appreciate the future of proptech, proptech tools are moving toward widespread adoption. The traditional culture of real estate has often incentivized keeping the status quo, though in today’s world, not adopting proptech may be a disastrous business decision.
A Generational Divide: Proptech at the Center
There is a clear divide between more tenured real estate leaders and the up-and-coming generation of commercial real estate leaders. At the core of that divide are their perspectives and sentiments on the value of proptech and the future of real estate technology. At the moment, there is a compelling argument that the status quo will remain in place.
About 78% of brokers manage their back-end processes manually with legacy tools such as paper files, siloed emails, and PDFs. That said, the tide is shifting in both offices and venture capital. Since the beginning of the pandemic, nine out of 10 real estate personnel have implemented digital tools in their practices, and 82% believe they will need proptech solutions going forward.
Venture capital firms see the potential of technology supporting the $4.4 trillion commercial real estate market and continually pumping money into the area. While real estate has its roots in tradition, and some concepts date back to medieval times and ancient Rome, there is a shift toward adopting more modern solutions. Ultimately, the next generation of commercial real estate leaders will use proptech as a competitive advantage.
Putting Proptech Into Practice: A Changing Industry Driving Adoption
Technology has penetrated nearly every aspect of our day-to-day lives. Sales teams use CRMs, marketing teams have digital automation solutions, and human resources teams have payroll software. Yet, commercial real estate teams still use spreadsheets, printed PDFs with lease data, and long email chains as a form of workflow collaboration. This makes sense — traditionally, especially when the market is good, real estate has rewarded those who stick to methodical, sound practices and often punished recklessness.
In theory, it’s defensible for more traditional people in the field to point to these legacy tools — and their profits — and note that things have been working. However, there’s a danger in waiting too long or resting on laurels. Many realize that proptech allows for quicker deal flow and makes it easier to find and analyze properties that were formerly out of reach.
Advantages of Information, Collaboration and Productivity
Proptech tools offer such a competitive advantage regarding information, collaboration, and productivity that those who don’t adopt them stand a real chance of being left behind.
Proptech solutions are, literally and figuratively, rewriting the future of commercial real estate by reengineering processes and enabling teams to work smarter and become more efficient and strategic. And increasingly, brokers’ offices are noticing.
How Adoption by New Generations Will Positively Affect Real Estate
Proptech is starting to see an uptick in adoption, especially as a younger generation of real estate professionals takes on more decision-making roles. This new cohort of commercial real estate talent has grown up with technology; relying on spreadsheets and printed PDFs for their organization’s second-largest expense seems unfathomable to them.
By adopting proptech tools and solutions, this younger guard of commercial real estate professionals is catapulting its teams forward. How? By freeing up time on mundane tasks and allowing for higher-level thinking and execution. Instead of having teams manually update and track real estate data points, proptech software manages the manual inputs, freeing humans to make strategic plans and decisions based on the data at hand. The following are the core areas where proptech will affect the future of commercial real estate:
1. Automating Lease Management
Lease management software challenges the status quo of using spreadsheets for real estate processes. Spreadsheets have been the pillar of a manual workflow that spans decades. Proptech solutions are helping commercial tenants automate manual data input and administrative tasks. Digital lease administration workflows create a single source of truth for your real estate and equipment lease data, so you can trust that your leases are being managed intelligently, particularly when deciding to scale.
2. Reducing the Risk of Human Error
My team finds that, on average, 90% of spreadsheets have errors. When your organization’s real estate portfolio grows to more than 30 leases, the likelihood of missing a critical date, not accurately forecasting rent escalations, or simply losing a lease clause puts your company at financial and legal risk. Proptech technology notifies you of upcoming critical dates, makes it easy to search clauses, and helps forecast your rent roll.
3. Elevating Human Personnel for Strategy
Humans no longer want to be bean counters; they want their work to be meaningful and impactful. Automating the manual processes associated with lease management allows human personnel to exercise their critical thinking and strategic prowess. Behind all real estate data is a story about the health, challenges, and opportunities within the organization’s lease portfolio. The people on your team are better leveraged to slice, dice, and analyze that data to make better leasing decisions for your business when they have the time to truly explore that story.
Reliable Data and Practices
With reliable data and sound practices, employees can make better investment decisions and help propel the company forward.
Real estate, though slow to change, does undergo tectonic shifts occasionally. Proptech is one of those tectonic shifts. Those who understand how and why this massive shift has happened and take the necessary steps to adopt proptech tools can ensure they are on the right side of the divide.