The true potential of tech in real estate construction
The appearance of a construction site in 2023 bears a strong resemblance to that of the 1920s, characterised by manual bricklaying, paper blueprints, and the painstaking construction of scaffolding towers by hand.
As industries undergo transformations, new opportunities for growth emerge, and this holds true for the property and construction sectors just as it does for any other industry.
Over time, the built environment has seen an array of opportunities arise, particularly through the advancement of property technology (PropTech) and construction technology (ConTech). Despite the immense potential that these technological advancements offer, it appears that these industries are lagging in terms of adoption compared to other sectors.
Being one of the largest asset classes globally and offering a vast market for technology-driven products and solutions, the built environment is ripe for digital disruption. However, the property and construction sectors have been notably slower in embracing this digital revolution.
Despite the growing momentum of PropTech and ConTech over the past decade, a recent report reveals that several property companies in the US intend to decrease their technology investments this year, despite the evident long-term benefits.
Barriers to entry
The main obstacle to digital adoption in small and medium-sized enterprises (SMEs) in the property and construction sectors is the significant investment of time, energy, and cost required to transition from outdated legacy systems to innovative solutions.
For businesses that have operated successfully for years using basic but outdated systems, this transition appears daunting and financially impractical. Furthermore, the introduction of new technology often meets resistance from employees who lack the necessary skills or motivation to embrace it. In addition, many company executives take a reactive approach to new technology, viewing digital adoption as a long-term investment with high short-term costs.
Beyond the initial resource expenditure, the property and construction industries face additional barriers to digital adoption. Lack of standardisation across these sectors can impede the implementation of new technologies. Concerns about data privacy and cybersecurity can also discourage companies from embracing digital solutions.
Moreover, the fragmented nature of the industry, with numerous small to medium-sized firms and independent contractors, poses challenges for coordination and implementation across the board.
ConTech: Ripe for disruption
Many are intrigued by ConTech advancement due to its significant potential to drive decarbonisation and revolutionise an industry known for inefficient practices. Despite challenging economic conditions, the ConTech industry in the US experienced consistent investment in 2022. However, there is a need to bridge the investment gap with other countries, as the US attracted over four times the investment compared to the next most active country, the UK.
The ConTech industry is witnessing substantial interest in areas such as AI, advanced building materials, industrialised construction methodologies, robotics, and machine-assisted applications like 3D printing, BIM, and autonomous equipment. This sector received 20.6% of total funding in 2022. Additionally, green construction companies are gaining traction globally, receiving more than £3.5bn in funding over the past five years, with European cities accounting for half of this funding volume.
The landscape in the Middle East
The ConTech sector in the Middle East, though historically slow to embrace change, has experienced remarkable growth.
Wa’ed Ventures, the venture capital division of Aramco based in the Kingdom, has revealed a strategic infusion of capital into Tenderd. This emerging start-up specialises in AI-driven technologies geared towards real-time emissions intelligence. The platform furnishes clients with AI-driven insights aimed at enhancing asset utilisation and minimising emissions. The focus primarily centers on industries with substantial environment impact, such as construction and logistics. Notable investors have included Y Combinator, Paul Graham, Peter Thiel and BECO Capital.
Another organisation in the spotlight is Flat6Labs, a prominent early-stage venture capital firm in the region. Collaborating with SIAC and Dar Al-Handasah (Shair and Partners), Flat6Labs has introduced the groundbreaking “Makers” ConTech Accelerator Program. This program marks the Middle East’s inaugural accelerator initiative centered on construction technology, aiming to bolster emerging startups within the industry.
The “Makers” ConTech Accelerator Program is set to deliver substantial support to handpicked start-ups, offering up to $100,000 in funding per venture. The program’s objective was to foster innovation within the construction industry by facilitating connections and collaborations among diverse industry stakeholders possessing extensive expertise.
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