I think we can all agree that the term proptech is a little clunky. As always with the trend of creating a portmanteau by merging ‘tech’ into the name of any sector, the result is a very broad phrase that can mean a lot of things to a lot of people.
For me, this is more than an issue of semantics. It feeds into the failure of the proptech revolution to truly take off.
The global proptech market is undoubtedly growing at pace – valued at $31 billion in 2022, it is expected to quadruple in size by 2032 ($133 billion). But at present, we are only just scratching the surface of how huge advancements in data, artificial intelligence (AI), digital connectivity, and the internet of Things (IoT) stand to revolutionise the world of real estate and flex.
Perhaps the current state of the proptech market can be best viewed through the lens of Gartner’s Hype Cycle, which asserts that emerging technologies typically go through this five-stage journey:
For me, “proptech” finds itself in the third stage of this process, and it is critical that communities like Brave’s work together to ensure we come out the other side. This is particularly true in the current economic climate – inflation, rising interest rates and debt servicing costs are placing pressure on the commercial real estate sector, so making a compelling case for investing in new technology becomes more challenging.
At NCG, our conversations with flex space operators and landlords has revealed some fundamental issues with proptech:
Fragmentation
Proptech solutions – hardware and software – are often developed to solve specific issues. This hyper-focused approach is normal among tech startups (acting as proptech vendors), but it presents challenges.
Having to invest in, manage and integrate disparate tech solutions from various vendors complicates operations and increases costs, hindering the realisation of commercial benefits. NCG’s entire ethos is that technology’s true value comes through the strategic, cohesive application of different solutions into one integrated whole.
Skills gap
A common story across most industries, the rapid advancement of tech has outpaced people’s skills, making it difficult for businesses to build the teams of people they need to tap into the potential of trends like AI, data analytics and IoT. Proptech vendors need to do more to assist – solutions must be user-friendly, removing as much reliance as possible on the customer (i.e. community or building managers) having advanced digital skills.
Cost and ROI
The third major issue – and no shock here – is cost. Tech can be expensive; the capital expenditure for implementing hardware can be prohibitively high, while the operational costs of multiple software streams can negatively impact the bottom line. That is why creating a clear business case for a broader tech implementation is essential; one that clearly identifies the commercial benefits that come not just from a single solution, but from a joined-up strategy involving multiple solutions.
Ultimately, it’s up to the service providers and tech companies in the industry to demonstrate how a suite of proptech solutions can help achieve commercial goals and deliver an ROI – for space managers, this will mean they can invest in tech that will reduce operational costs, improve energy efficiency, boost tenant retention, improve customer experience and drive new revenue streams, rather than taking a segmented approach of investing in a single piece of software to control lighting, say, or manage meeting room bookings.
Proptech will shape the future of the industry. But we need to move beyond the model of individual solutions for individual problems. The sector's long-term progress relies on a more mature approach, with greater interoperability between tech and providers, enabling businesses to realise the full benefits proptech has to offer.
To that end, service providers themselves need to adopt a more open approach, including a keen focus on reusing tech that’s already in situ. Too often, one piece of tech has to replace another, rather than being implemented to complement what’s already there – value to the customer will come when existing tech can be better utilised without feeling undue pressure to invest in new and shiny solutions.
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