Slowly but surely, tech is reshaping real estate. A lack of digitisation to date — this brick-and-mortar industry still stubbornly relies on Excel and emails — is both a problem and an opportunity for companies in the property tech (or “proptech”) world.
What proptech bets are taking off? And what obstacles remain standing in the real estate world? A panel of experts chewed over these issues at the launch event of Sifted’s proptech report, created in partnership with Pi Labs and Shoosmiths.
The experts in question:
- Steve Barnett, partner at law firm Shoosmiths in London
- Faisal Butt, founder and CEO of proptech VC Pi Labs
- Jade Cohen, cofounder of Qualis Flow, a platform enabling construction teams to collect real-time materials and waste data
- William Rice, founder and CEO of mortgage lender Generation Home
Here’s what we learnt.
1\ Proptech can mean a lot of different things
Proptech is a sprawling sector, adjacent to or overlapping with dozens of other tech subsectors, like climatetech, construction tech, legaltech and fintech. “It’s a very short word to cover a very wide area,” says Barnett.
Some continent-wide trends have put a rocket under European proptech. First and foremost is the industry’s lack of investment in data, software and digital technology, with a heavy reliance on basic office software.
“We’ve noticed it’s getting easier to attract people to proptech; they see the size of the opportunity here because it’s an antiquated space,” says Cohen.
It’s a very short word to cover a very wide area
2\ Pressure to make buildings greener is creating opportunities
Environmental regulations are tightening in Europe, and the continent's ageing building stock is in dire need of a sustainability overhaul. That is helping to push innovations in materials, data, sensors and environmental performance analytics.
“ESG pressures have filtered down the whole construction chain,” says Cohen. “In the last 18 months, we’ve seen a vast [change].”
Buildings legislation like “Part Z” in the UK — which will set challenging carbon emissions rules — is a “key driver for us, if arguably [coming onstream] a bit slow[ly],” Cohen adds.
3\ Proptech is drawing a wider investor audience
Recent big money raises for proptech suggest the potential of the sector is being recognised by an increasing number of investors.
We’re seeing generalist VCs come into our [funding] rounds — that’s the holy grail. You’re starting to see the turn of that tide here
“We’re seeing generalist VCs come into our [funding] rounds — that’s the holy grail. You’re starting to see the turn of that tide here,” says Butt.
4\ Proptech isn’t immune from the talent war
There are more tech roles than there are people to fill them — making it one of the most challenging and competitive hiring markets founders have ever faced.
Proptech players are struggling too. “Founders can’t hire the people they need fast enough,” says Butt.
“It’s easier to hire as a fintech than as a proptech,” adds Rice (Generation Home is more often referred to as a fintech than a proptech). “But there is a bit of a trend moving towards proptech being a more attractive label to have. We are happy to straddle different [verticals],” he says.
Founders can’t hire the people they need fast enough
5\ Big proptech consumer players are missing
European proptechs help developers, investors and managers gather, share and analyse data to improve their bottom lines and deliver projects smoothly. Property industry players, from construction companies and investors to asset managers and agents, are a significant customer base for Europe’s top startups, many of which are funded by property professionals.
“There aren’t really consumer-focused [B2C] proptech unicorns [in Europe],” says Butt. It’s generally easier to build big consumer tech brands in the US, a “large homogenous home market”, he adds.
European markets, by contrast, are very different in terms of laws, cultures and market structures. The continent is “painfully fragmented”, says Barnett.
Butt says that eventually a customer platform will come along that includes all the key real estate players (the conveyancer, estate agent, mortgage broker, etc) and they’ll be “all API-ed together. We’re a long way from that right now though,” he adds.
European markets, by contrast, are very different in terms of laws, cultures and market structures. The continent is “painfully fragmented
There are “very high barriers to entry” for companies looking to disrupt certain parts of the property world, says Rice. Regulation around buildings and homes is often complex — it took Generation Home 18 months to become a [recognised] mortgage provider, ”and we spent more money on legal expenses than I could tell you,” Rice adds.
Earning trust in the sector is hard, too, because you’re very likely dealing with big, one-off purchases like houses. “For customers it’s about permanency — [is your company] going to be around in five to 10 years?” asks Rice. “What would happen if you ceased to exist? To be a challenger, then, it’s also an incredibly high trust barrier to overcome.”
6\ Buying plots in the metaverse will remain a niche pursuit — for now
A relatively new phenomenon sees millions being invested in virtual property. “We are making some investments in AR and VR startups,” says Butt.
Many of these investments are in plots in The Sandbox, a metaverse: one of many virtual worlds filled with digital assets ranging from dresses and trainers to art and cars.
Butt recalls being invited to a dinner of top real estate CEOs who “looked genuinely scared” of the metaverse. “I don’t think it should be the top worry for you,” he told the group.
“I’d keep my eye on it; I wouldn’t start saying we should set up a [dedicated] metaverse fund just yet.”
The Pi Labs research team will publish a metaverse deep dive in the coming months, assessing its practical application for proptech. “We recognise the metaverse has significant potential to complement the physical real estate world, and we’ll be sharing our house view soon — so watch this space,” says Butt.
You can watch the full session here.