SAN FRANCISCO—2019 was a record-setting year for PropTech. From the highest highs (a record $16 billion in VC investments) to the lowest lows (WeWork implosion), 2019 may well go down as one of the most eventful years to date for PropTech.
And, going into 2020, there is cautious excitement around PropTech, coupled with the possibility of explosive growth ahead. Will 2020 be the year that delivers this explosive growth?
According to Nitin Vig, CEO for Mobile Doorman, 2020 will be even bigger than 2019. Here are some of his predictions for the 10 big ideas that will shape PropTech in 2020:
1. Early adopters of PropTech will start to break away from the competition
One only has to look at adjacent industries (hospitality/travel, retail, etc.) to see how players who embraced tech fared compared to their peers who did not. Take retail for example. While some players vanished (Circuit City) and others became a shadow of their former selves (Sears), there are some that have emerged bigger and stronger (Best Buy). Why? They embraced tech wholeheartedly to not just break away from their competition but also avoid being disrupted by tech giants, i.e., Amazon.
Fortunately, other industries took notice and adopting digital tech has become a $2.3 trillion dollar business worldwide. The real estate industry will be no different. 2020 will likely be the year where players who wholeheartedly embrace tech, specifically PropTech, will start to break away from their competition, leapfrog into 2022-23 and eventually obliterate competitors by 2025.
2. PropTech will need to provide a clear ROI
While PropTech’s early success came from the focus on the user of space, its growth will increasingly depend on its ability to also deliver a financial return to the managers of physical space such as operators and property managers. How does PropTech increase revenue? Reduce operational costs? Increase operational efficiency? Increase renewals? These are the kind of questions PropTech will increasingly face and will have to answer in a ROI positive way in 2020.
For example, while PropTech increases digital engagement of residents, does this engagement actually cause residents to stay longer in their leases? If so, how much additional revenue does this bring and save in costs? And is the net effect of additional revenue and cost saving a multiple of the PropTech costs, thereby ROI?
3. We will go from collecting data to acting on it
From data about how properties are performing to how residents are interacting with physical space to the millions of data points being generated by smart devices (smart locks, digital home assistants), it is no secret the industry is in the midst of a data tsunami.
“But collecting data for data’s sake is futile,” Vig tells GlobeSt.com. “The real power of data lies more in the insights that can be derived from it and the resulting actions that such insights help trigger. And I expect 2020 to be the year where PropTech starts doing exactly that. Expect data to be your friend for making such decisions in 2020 and acting on them.”
4. Experience first will become the default
Experience first has been an inspiration for Bay Area consumer tech companies such as Uber, DoorDash and Facebook. In fact, back in 2012, Facebook first discussed the importance of moving from a focus on the desktop experience to a mobile one–because that’s what their users preferred.
This desire for experiences that are on demand, ubiquitous/anywhere, convenient/one click, reliable and affordable will require PropTech to take an experience-first approach to shape its value proposition in 2020.
5. VC investments in PropTech will rise further
Real estate and property management companies have been adopting PropTech at a feverish pace during the last few years. So much so that a closer look at the last few years of VC investments reveals a steady rise from 2017: $12.6 billion; 2018: $9.6 billion to 2019: $16 billion (through mid-year 2019).
Judging by these trends, this number is expected to continue to rise due to plateauing property prices, and a desire to provide greater service levels and drive operational efficiencies. Higher VC investments in 2020 will likely include the Bay Area if history repeats itself.
6. App proliferation will increase but app fatigue may start to kick in
One of the implications of higher VC investment is that more and newer players will continue to enter the PropTech space. And because apps are a popular method for PropTech players to deliver their services, an influx of new players will also result in further proliferation of apps.
“One downside to this could be app fatigue, where consumers do not want to download any more apps,” Vig tells GlobeSt.com. “I don’t think we are there for PropTech yet. However, towards the latter part of 2020, I would not be surprised if app fatigue starts to kick in. It will be important for apartment operators to consider app consolidation or how to work with PropTech partners to streamline the number of apps needed.”
7. Digital and automation will go beyond self-guided tours and chatbots
Freeing humans from repetitive, low-value tasks has long been the promise of automation. The only difference now for PropTech is that promise is finally coming true. Glimpses of automation are already here as evident with self-guided tours, chatbots and digital work orders. And, the day where the leasing office has a digital assistant isn’t too far away and could gain traction in 2020. This assistant will not only review a list of all possible tasks needing action but more importantly will have the intelligence to direct staff time and attention to only those needing urgent attention.
8. The topic of security will go beyond the IT department into the corporate boardroom
As real estate companies adopt more PropTech, they will increasingly rely on PropTech providers for solutions, including those related to security. And because many PropTech providers are digital natives with applications in the cloud instead of data centers, potential for exposure to cybersecurity risks will likely go beyond IT departments. Specifically, encryption, identify/access management, and better incident tracking and response will increasingly be discussed in corporate boardrooms.
9. Savvy players will adopt innovative approaches to bridge the digital talent gap
Attracting the right digital talent is challenging because of competition from Silicon Valley offering lucrative compensation, i.e., Facebook, Amazon, Netflix, Google etc. But savvy real estate players will start identifying internal talent who can be re-trained to meet the demands of a digital economy and workforce in fields such as IT, digital marketing, automation and more.
10. Change will not be easy but necessary
While these ideas and innovations are promising, they also represent a change from the status quo. And change is never easy, especially for this asset class that has not needed to change in a long time. But this change will be necessary.
There’s ample evidence from other industries on the need for this change. For every Best Buy that changed, there was a Circuit City that did not. For every Netflix that changed, there was a Blockbuster that did not. And for every iPhone camera that sold, there was a Kodak that did not.
“And it’s not because they did not try or want to change. They did,” Vig tells GlobeSt.com. “But that is the thing about change. It is never easy. Where some succeed, others fail. In 2020, for every real estate company that will grab the opportunity that change presents, there will be one that will not.”