The transportation business is being disrupting by Uber. Coworking is helping to change real estate from a fixed asset into a service. Airbnb has turned the vacation rental and hotel industries upside down.
Cutting-edge technologies applied to property are creating Proptech, and it’s revolutionizing the world of commercial real estate as we know it.
In this article, we’ll take a look at how Proptech is changing commercial real estate financing, and how to make sense of it all so you can start making smarter decisions based on facts and data.
Property + Technology = Proptech
A report from earlier this year by JLL cited four main ways that commercial real estate processes are being changed by applying technology to property investment and ownership:
- Artificial intelligence – AI
- Computer-aided design – CAD
- Virtual reality and augmented reality – VR & AR
- Big data and analytics
Proptech can be found in all aspects of the commercial real estate industry.
AI is being used in research and analytics. CAD, VR, and AR are helping propel 3D modeling, construction verification inspections, and virtual tours to entirely new levels. Big data is being collected and analyzed in thousands of different ways to remove the guesswork from commercial lending and asset management.
Proptech investment hits a record-setting $12.9 billion in H1 2019
Through the first half of 2019, venture capital investment in real estate tech startups hit a record high of $12.9 billion. That’s greater than the entire previous record year of 2017, according to research firm CREtech. But why is so much smart money being invested in property technology?
The answer is that Proptech investment isn’t the only thing that’s breaking records. Commercial property values are also reaching record highs. While CRE asset prices keep rising, disruption is simultaneously taking place.
The office, retail, and distribution sectors are being reimagined by firms like WeWork in coworking, Amazon in retail services, and Walmart in the online grocery business. In turn, CRE stakeholders are turning to Proptech to drive revenue increases, cut operating expenses, place capital more efficiently, and to avoid becoming dinosaurs.
Using Proptech to grow, prosper and evolve
It’s no secret that the real estate industry has been slow to embrace innovation. KPMG surveyed 270 real estate decision-makers around the world. The firm’s Global PropTech Survey reports:
- 97% think digital technology innovation will impact their business
- 73% see digital technology as an opportunity
- 56% rank their business 5 or below out of 10 in terms of digital technology innovation maturity
- 30% say they currently or plan to invest in Proptech, while the remaining 70% do not
While it’s clear that almost all real estate practitioners understand the importance of Proptech, very few are actually harnessing the power of applying technology to real property. Those that actively rethink their business with technology will continue to thrive, those that don’t will likely become extinct.
As Charles Darwin once said, “It is not the strongest of the species that survives, nor the most intelligent. It is the one most adaptable to change.”
How Proptech is changing CRE finance
At the beginning of this article, we listed four main ways that Proptech is changing the business of commercial real estate: Artificial intelligence, computer-aided design, virtual reality/augmented reality, and big data analytics.
In almost all industries, big data and the way that it’s used is king.
Big data analytics is how Amazon knows what you want to buy almost before you do, how Google or Alexa know what you’re looking for before you’re done typing or speaking, and how Netflix recommends which movies to watch and when.
The commercial real estate industry is no different.
Proptech is used to gather, structure, and understand data to improve the way investors finance property. With access to unbiased information based on transparency and lending activity rather than marketing hype, investors can make smarter decisions when placing capital.
Why Proptech is transforming CRE financing
No area of the real estate industry is riper for transformation than CRE finance. There are two reasons for this:
#1 CRE investment is capital Intensive
Unlike most other industries, commercial real estate is fueled by massive amounts of capital that is still arranged primarily through human advisors with their own agenda.
#2 Real estate is unique
In addition to being scarce, no two pieces of real estate are exactly the same, emphasizing the need to make smarter decisions based on facts and data rather than human emotion.
Three examples of Proptech and CRE finance
Here are three of the many ways that Proptech is being used to simplify and streamline capital investment in commercial real estate transactions:
Built
Built is a platform designed to manage risk and maximize productivity in construction finance. Lenders using Built can import all construction project data onto the platform, oversee draw requests, and ensure that regulatory exams and audits are complied with. The movement of money into projects is accelerated by eliminating manual processes and siloed systems.
Qualia
Qualia is a cloud-based platform for real estate closings. The firm works with all stakeholders in the real estate closing process – lenders, underwriters, brokerages, vendors, institutional investors, and buyers & sellers – to deliver title, escrow, and closing services on an SOC 2 certified platform.
CrediFi
These first two examples show how Proptech is being used once an investment has been made. But before a construction loan can begin or a closing can occur, the most active lenders in the market need to be identified and capital needs to be sourced.
CrediFi simplifies and streamlines capital investment by using big data to analyze lending activity by lender type, geographic market, and asset class.
Which Proptech technology should you adopt first?
While Proptech can help real estate investors and developers streamline projects and optimize profitability, the fact is that nothing happens in commercial real estate until the money flows. That’s why it’s critical to have access to detailed and unbiased commercial real estate financial information.
Any commercial real estate practitioner seeking capital for their property’s refinance or next target acquisition can benefit from the CrediFi Analytics. By using big data from $13 trillion in loan originations on 8.7 million properties and 6 million loans, CrediFi clients can easily locate exact lender contact information and detailed loan origination activity.
