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Is PropTech the right term to describe Real Estate Innovation?

By Helen Clark

28.4.23

Over the past 5 years, the PropTech space has rapidly expanded, providing solutions that address more than just the physical building. The results from our recent LinkedIn poll asking whether PropTech is still the right term to cover all real estate innovation found that 56% of people voted ‘no’. As technology continues to advance and embed itself at the core of the real estate industry, this sparks the question as to whether the term ‘PropTech’ is too narrow to be used to describe real estate innovation. And if so, is there a better phrase that captures technology and innovation in the space?  

The term PropTech is generally used to describe the digital transformation of the real estate industry. However, whilst still a relatively new industry, PropTech has evolved into a more complex space with many segments, each with its own set of technologies and solutions. “From property acquisition and management to financing, trading, valuations, ESG, tenant relations, and many other aspects. PropTech still aligns more with the physical building whereas the sector has expanded well beyond that, even towards metaverse investing”, Nick Moore, Founder and Executive Director at Lionpoint Group 

An article published by Forbes last year discussing ‘Why The Term ‘PropTech’ Will Disappear’ argues that “it is not property-facing technologies that will disappear but our perception of them as being a trend and not the norm.” The technology tools that PropTech provides continue to be one of the main drivers of the transformation of real estate, particularly in addressing some of the ongoing challenges the industry faces.  

 

‘PropTech’ to ‘Climate Tech’ 

As it stands, the real estate industry consumes 40% of global energy and has a projected increase of over 50% in building CO2 emissions by 2030. PropTech organisations provide technology solutions to help business’ reach net-zero targets through digitalization and smart sustainability, like Prescriptive Data’s Nantum OS platform that uses AI to automate building systems with real-time occupancy data, and Deepki’s utilisation of its SaaS platform to leverage the data from its ESG performance against its goals into the broader business environmental strategy. Jeanne Casey, Global Head of PropTech & Innovation at Nuveen, commented “I think we will see the lines blur between ‘proptech’ and ‘climate tech’ in 2022 as the definition of ‘proptech’ expands”, and goes on to explain how “Real estate owners and operators will recognize that technology will play a major role in achieving net-zero carbon milestones in the years to come”.  

Global real estate leaders are re-focusing their investment strategy and turning to venture capital that helps reach net zero. The PropTech space provides many technologies that can reduce the negative impact of the industry, from fewer printed materials and decreased forestation due to digitalisation, reduced travel-related emissions because of the ability to work remotely, to less consumed energy through AI and IoT tools (to name a few!). Last year, Fifth Wall, the largest venture capital firm focused on technology for the global real estate industry, announced the $500 million close of its inaugural Climate Fund. The fund aims to invest in software, hardware, renewable energy, energy storage, smart buildings, and carbon sequestration technologies to decarbonize the industry.

Companies with an ESG focus closed 33% of the financing rounds in Q2 last year, showing how investors are targeting green buildings for funding now more than ever. In this way, the smart sustainability solutions that the PropTech space provides will continue to be at the forefront of funding in the next few years, however, will the term ‘PropTech’ remain prevalent in an ever-growing innovative industry? It could therefore be argued that ‘Climate Tech’ could be a more inclusive term that combines the entire technology solutions within real estate innovation.  

 

‘PropTech’ to ‘Built Environment’ 

The term ‘Built Environment’ refers to the human-made surroundings that provide the setting for human activity, ranging in scale from buildings and parks or green space to neighbourhoods and cities that can often include their supporting infrastructure, such as water supply or energy networks. The rapid growth of PropTech and its constant adoption and expansion across broader sectors within real estate has meant that the space has become increasingly in line with the Built Environment.  

For the first time in our history over 50% of the world’s population is living in urban areas, and this figure is predicted to increase to 68% by 2050. With more and more real estate organisations turning to digitalisation in efforts to tackle the challenges that the industry faces, technology within the space will become less of a ‘trend’, and more of a ‘norm’. Real estate players will integrate technology deep into their activities from the beginning. It will become a mindset – a given that no building can be planned, leased or managed without tech. This in turn will mean that the term ‘PropTech’ is no longer necessary as it will become embedded in the core of real estate innovation.  

 

The future of PropTech 

Whilst the growth of the PropTech industry itself faces no risk of slowing down, its constant and widespread adoption of more segments within real estate has shifted its original meaning. PropTech’s definition has now moved beyond just the physical building, becoming a necessity for real estate innovation as it provides the industry with technology and data tools to increase efficiency and productivity, as well as supplying solutions to overcome the various challenges that the real estate industry faces. 

 

References  

Bogdan Nicoară, Forbes; ‘Why The Term ‘PropTech’ Will Disappear’ (March 16th 2022) 

Businesswire; ‘Fifth Wall Closes $500 Million for its First Climate Fund‘. (July 21, 2022)

CRETI; ‘2022 The Future of Proptech Venture Capital’ (2022)  

Helen Clark, LMRE; ‘Sustainability in the Built Environment and What we have Learned from Season 10 of The Propcast’ (December 5th 2022) 

University of Oxford Research; PropTech 2020: the future of real estate (February 2020) 

LMRE are specialist PropTech recruiters, if you need help growing your business or making any key hires please get in touch via the form below!

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