Buying and selling real estate is a prolonged process that hasn’t changed much in the last decade. Investors and future homeowners meet with real estate agents to review a list of available properties in their desired area. Together, they study each property, its square footage, and its features. If a property seems appealing, the real estate agent sets up a time and date for the customer to view the property. If the investor or future homeowner decides to pass on the property, then the whole process begins again.
According to the University of Oxford´s professor Andrew Baum, real estate is one of the last industries to adopt technological change and innovation. This provides tech-savvy entrepreneurs with a great opportunity window. As Baum writes, “The opportunity is driven not only by the size of the industry and its lack of tech adoption but also by industry practices plagued by inefficient processes and unnecessary transactional costs defended by self-interested professionals and institutions.”
Another key factor is that millennials are rapidly entering into the housing market. Housing Wire writes, “By the end of 2018, Millennials represented 45% of all new mortgages, compared to 36% for Generation X, and 17% for Baby Boomers.” Millennials desire technological solutions to the real estate industry’s problems and experts are addressing these demands by taking advantage of software outsourcing solutions.
This blog post discusses a robust overview of the PropTech market and how outsourcing provides key growth opportunities for this industry.
An overview of the real estate technology market
Entrepreneurs are meeting these demands by fusing information technology and the real estate market together. Experts refer to this fusion as “PropTech,” or property technology. Other names include “CREtech,” commercial real estate technology, and “REtech,” real estate technology. But what exactly is PropTech and, is it possible to define it clearly?
Simply put, PropTech is a term used to describe technological advancements, products, and services for the real estate market.
The ProTech market is growing significantly. In 2013, PropTech funding averaged around US$2 billion for the year. In 2017, yearly funding increased by 500% to US$12 billion. From 2016 to 2017 alone, the PropTech industry increased by 162%.
With over 2,000 successful PropTech startups entering the market since 2012, Baum reports that each of these firms raised between $25 million and $40 million on average. So what is fueling this growth? How are PropTech companies taking advantage of this new industry’s potential?
Emerging PropTech technologies
Many people use PropTech products and services without even realizing it. Some of the main technologies behind PropTech growth are the use of big data, augmented/virtual reality (AR/VR), blockchain, and the Internet of Things (IoT).
Each of these technologies has unique characteristics and finding the right companies to collaborate with, and the right employees to hire can be a daunting and challenging task. However, some PropTech companies are propelling their growth by outsourcing these technologies to stimulate their progress even further. Outsourcing areas like big data or IoT development can boost market penetration and stimulate growth by allowing offshore/nearshore companies to assist.
Here is a brief description of each of these technologies and how outsourcing can step up their capacities:
With the rise of the Internet, businesses are collecting and storing vast amounts of data from their products, customers, and systems. With this increase, the term “big data” appears often, but there is confusion about what it means.
Forbes describes it as “a collection of data from traditional and digital sources inside and outside your company that represents a source for ongoing discovery and analysis.” Big data consists of digital data like website metrics, social media statistics, and even customer information. It can be anything from financial records to a supply inventory.
PropTech companies utilize big data in a variety of ways. Companies like Zillow, Trulia, and Redfin provide people with up-to-date information on renting and purchasing real-estate. As Finovate’s David Penn writes, “Using big data, geolocation, mapping, and machine learning to present prospective property consumers and investors with the most relevant and attractive offerings is a fundamental way big data technology are making the process more efficient.”
Big data also has a close association with AI. Certain building regulators and controllers utilize both to adjust how machines and systems within a property operate. HVAC systems, smart appliances, and access control are some of the ways buildings use these technologies.
Problems can arise, however, when PropTech companies mishandle this data, and this is why they must have proper storage and security mechanisms in place. In addition, they must have effective data retrieval systems. All of this requires high levels of expertise, especially when dealing with potentially sensitive real-estate related information. Outsourcing big data services, or big data analytics, is one highly effective way to ensure efficient PropTech systems and services.
2. Augmented and virtual reality
Both augmented and virtual reality systems are rapidly increasing in popularity around the world. Augmented reality is the process of superimposing computer-generated images and videos into the real world. The user is able to see the world around him or her, but with other CGI in the frame. Virtual reality is slightly different as it implies the generation of the entire world, not just superimposed images or video.
Real estate and property development companies are beginning to implement AR/VR technologies. Companies like Skycatch are utilizing drones and data processing “base stations” to create highly accurate maps and point clouds for fast, precise, and cost-effective property analysis and development. With their AR technologies, they allow customers to markup and overlay CAD files into drone captured footage and pictures. Their technologies can also gather point measurements to create 3D representations of pre-existing and future objects.
Examples like this are becoming increasingly popular as technology, property development, and real estate begin to merge. But building a PropTech business around AR/VR technologies is no small task. Businesses need dedicated teams of skilled coders, engineers, machine learning scientists, and AR/VR developers. Hiring these people can be challenging as well because it is difficult to determine their skill level after just a few interviews. Outsourcing AR/VR developers, however, is a very good option for businesses: hiring skilled remote teams, instead of hiring local talent, can help transition a PropTech vision into reality.
Cryptocurrencies continue to rise in popularity. Consumers are using currencies like Bitcoin, Ethereum, and Ripple for purchases and transactions around the world. Blockchain is the technology that makes these cryptocurrencies work.
Blockchain technology started in the early 1990s, but it was first tested with Bitcoin in 2009, almost 20 years later. The idea behind blockchain technology is that blocks, or digital pieces of information, are created and verified by a network of computers. When a transaction occurs, this network of computers analyzes the transaction and confirms its details, including the date, time, amount, etc.
Real estate companies are beginning to adopt blockchain technology, for instance with multiple-listing service (MLS) companies such as imbrex. As reported by Forbes, “With the current landscape of real estate data suffering from poor accessibility and fragmented, incomplete or incorrect data, a centralized blockchain MLS system could be one of the first blockchain breakthroughs in PropTech.”
Also, companies like ManageGo are attempting to revamp the rental platform by allowing tenants to pay in cryptocurrencies. This type of platform can bolster both the online reputations for tenants and owners and ensure transparency in the marketplace.
Creating a blockchain platform for real estate and rental companies, however, can be very difficult. Blockchain is still a fairly new technology and finding specialists to work with can be challenging. In addition, these people must be well versed in encryption and mathematics. Outsourcing blockchain development is often a common solution to this problem. Hiring a team of remote blockchain engineers, encryption engineers, and mathematics specialists can speed up development and save money.
4. Internet of Things
The Internet of Things (IoT) describes interconnected devices that share data across the Internet. This could be anything from a smart bulb to a home camera system.
In real estate and property construction, IoT is becoming increasingly more prevalent. Developers are starting to consider what “smart cities” will look like, integrating sensors and monitors all throughout cities. One article explains, “Embedding sensors into infrastructure such as bridges, tunnels, roads and utilities can give these assets the ability to sense, or even respond to problems as they develop, directing their own maintenance to reduce downtime and provide greater operational efficiency.” This is all quickly becoming a reality and the market for smart, effective, weather resistant IoT devices is rapidly opening up.
Fortunately, there are already skilled offshore and nearshore teams to assist in the development of these IoT devices. Outsourcing product and software development to a team of skilled engineers and developers can complete projects effectively and efficiently.
PropTech and the future
New buzz words come and go. But the technology behind them does not leave so easily. PropTech may be the most recent buzz word in the IT world, but the technology is going to impact the future of real estate and property development greatly. Whether it’s with big data or IoT technologies, PropTech will continue to expand and begin integrating with our everyday lives. It will be important for PropTech companies to work with skilled engineers, developers, and analysts around the world to ensure that their new products integrate well with society. Outsourcing provides companies a way to keep up with this growing technological demand in the real estate space