Sustainability & Emerging Technologies

Sustainability & emerging technologies: a revolution in the real estate industry

The push towards sustainable living has become tremendously prominent in the last decade. Not just amongst activists, but support for the cause has extended its roots into business models of startups, and investment decisions made by Venture Capitalists (VCs).  New players are constantly emerging in the fight to combat climate risk by providing sustainable living alternatives, and the growing number of Proptech companies across the globe are at the heart of this change.

Today's real estate industry is more dynamic than ever, and the need to adapt is imperative. The Proptech sector has been and will continue to be a catalyst in propelling real estate to the next level. To further aid the growing trend of sustainability within Proptech, sourcing the right experts and creating a culture to foster awareness and education about sustainable opportunities in property is vital in keeping the industry alive. As we now transition into the post-pandemic phase, we need to re-imagine the world of real estate in 2020 and beyond. With these efforts, Proptech can be navigated as a powerful tool to work in tandem with the changes happening in the world, instead of against it.

Sustainable real estate- the way forward

 "Sustainable development calls for concerted efforts towards building an inclusive, sustainable and resilient future for people and planet."- The United Nations (UN)

With its densely populated nature cities around the world have contributed to at least 75% of global greenhouse gas emissions (CO2). According to the C40/Arup Deadline 2020 report, energy usage in buildings accounts for more than 50% of total city emissions. High levels of emissions can be attributed to the inefficient management of buildings that come from the heating, cooling and electricity usage. The World Green Building Association (WGBA) particularly notes that ''upfront carbon- emissions released before a building enters its use phase- accounts for approximately 50% of the entire carbon footprint for new construction occurring in the next 3o years".

Buildings no matter what form, are here to stay and working towards creating and maintaining a resilient built environment is important. It is crucial to decarbonise buildings by adopting energy-saving and clean energy strategies to meet the goals of the Paris Agreement.

In the light of this, whilst we cannot completely eradicate the negative consequences of climate change, initiatives have come forward to encourage and inspire developers to innovate and improve how development processes are carried out from manufacturing, transportation of materials for construction and end of life phases of all built assets. Notably, BREEAM is a globally recognised method to assess the level of sustainability of new developments against a set of standards established to measure the environmental performance of buildings. A key part of BREEAM is its focus on sustainable values for built assets in three areas:

1) Reduction of carbon emissions

2) Low impact & high-quality design

3) Adaptability to climate change

4) Protection of ecological value and biodiversity


Proptech as a solution

Opportunities to take sustainability to greater heights are immense and the PropTech world stands to be a key player in this realm. The UK Proptech Association also highlights that COVID-19 has brought about a change in real estate where Proptech has prevailed in comparison to traditional real estate.

Investor appetite in the RE industry is also being influenced by climate change as we witness the general tightening of environmental, social and corporate governance (ESG) requirements. A 2020 PwC Emerging Real Estate Trends Report echoes similar sentiments, where "shareholders enquiring about the environmental impact of buildings has gone up five-fold". Clearly, investors are drawn to seek out solution-based companies.

Core values of these companies can be strengthened through building capacity from within by hiring talent to push forward their environment and social responsibility goals. At the end of the day, the people are the pillars of an organisation and embedding a strong culture of innovation amongst individuals will provide a comparative advantage.

When considering the issues that sustainable Proptech companies aim to solve, we can take a look at particular technologies that have been implemented.

Firstly, blockchain technology is a receiving interest amongst property professionals for smart contracts. To put it simply, smart contracts allow for the digital execution of deeds over a distributed ledger platform. Leaxcoin, for instance, is a global currency using Ethereum to manage real estate transactions from purchasing real estate to property registry. All of which can be done online! This can effectively reduce paper usage as well as speed up transaction processes which can then translate to cost-saving measures.

The Internet of Things (IoT) is another tool that is growing in popularity to incorporate sustainability into a building after it is built. For example, Google Nest is a proptech solution that is specifically consumer-focused on creating an energy-efficient home. The smart thermostat monitors your activity and builds a schedule around this data through sensors.

CarbonCure, a Canadian startup has developed a system to contain carbon dioxide within the cement used for buildings. As CO2 is injected into the cement during the mixing stage, minerals are formed to improve the compressive strength of the concrete. With stronger concrete, concrete producers can manufacture high-quality building materials and but also use less cement. This not only reduces emissions but also save costs due to lower quantities of cement being used.

When it comes to building and planning, VU.CITY uses 3D modelling techniques and data analytics, allowing city planners and developers to create models and immediately test their proposals within an accurate context. The platform essentially helps people visualise, analyse and collaborate to make better decisions for future built environments.

Skills and technology are complementary

We can agree that in an increasingly digitised world, many operations are becoming automated. It saves money, time, energy and the environment. However, technology is certainly not a substitute for human interaction. A candidate with the necessary core skills to understand, deploy & manage the technology will be a key differentiating factor generating problem-solving strategies.

For clean energy companies such as Greenbird and Arbnco, data is at the core in creating sustainable building technologies and smart cities. Implementing solutions based around the needs of customers are important for these companies and this is where software developers play a major role. Developers with a solid foundation in programming languages like Java and the ability to build backend services in a cloud-based environment are very much desired skills and are always in demand.

Whilst a good understanding of technology is needed, the changing landscape of real estate has prompted the need for a diverse skill set. Particularly within the aspects of sustainability, Proptech solutions need to be implemented at a strategic level and the robustness of this can be determined by hiring Innovation and Sustainability directors, as some large real estate management firms have done. These roles will be crucial and keeping up to date with the progression of the industry in the digital age and what tools can be used to examine the customer experience and the value extracted from real estate.

Overall, from an employment perspective, a high proportion of job roles within Proptech start-ups have remained live despite the uncertainties over the COVID-19 pandemic. Over the next few years, we can anticipate higher demand for specialists who will bring fresh knowledge and expertise to the forefront of the sustainable Proptech business.

Looking ahead...

Sustainable Proptech is a growing sector, and there is no denying that talent & expertise from other industries will be seeking out new opportunities in high-growth startup environments.

Human needs are constantly changing and Proptech companies offering sustainable solutions will place them in an advantageous position. But, the key difference here is the ability of these companies in carrying out strategic talent acquisition. This will help to build a talent pool that will support the values and growth of their business over time. Proptech startups must also ask themselves whether they are doing enough to develop a culture that people will want to be a part of in the long term?

The real estate industry is being shaken up and companies need to remain agile and get up to speed with current technologies in this environment. Proptech companies planning for the future should work towards attracting and retaining highly skilled experts as they venture into an age of embracing digital transformation.


How PropTech is changing the real estate industry

Proptech is reshaping the real estate industry in many ways and offers plenty of opportunities for real estate professionals. Proptech refers to companies that are providing technologically innovative products and novel business models for the real estate markets. The digital landscape is constantly evolving. And so organisations are trying to keep up with these changes – as well as shifting consumer patterns – in order to gain a competitive edge, become more cost-efficient, responding to the diverse needs of clients, and offer innovations. This is the essence of proptech.

While real estate professionals all heard about proptech two years ago, it is still very much in its infancy. There is increasing awareness of how technology is transforming the real estate industry, but companies are also starting to understand why the digital age encompasses so much more than technology.

Industry Experts on Proptech

The KPMG Global PropTech Survey 2018 asked hundreds of real estate professionals what their opinions were on proptech. Key findings of the report include:

  • 97% of respondents think that digital and technological change will impact their business.
  • 60% think that this impact will be very significant.
  • 73% see digital and technological innovation as an opportunity. A further 25% see it as both an opportunity and threat.
  • 90% think that the corporate real estate industry views PropTech as an opportunity/enabler
  • 78% feel that digital and technological innovation engagement from across the real estate industry has increased over the last 12 months.
  • 93% agree with the statement “Traditional real estate organizations need to engage with PropTech companies in order to adapt to the changing global environment.”
  • 66% do not have a clear enterprise-wide digital and technological innovation vision and strategy.
  • 56% rate their business 5 or below out of 10 in terms of digital and technological innovation maturity.
  • 30% of real estate organizations say they currently invest or plan to invest in PropTech start-ups.

Proptech is a Widespread Phenomenon

All over the world, we are seeing a sharp rise in the number of proptech companies. In Europe alone, the Real Estate Innovation Network (REIN) was able to identify 1,622 proptech startups. REIN, in collaboration with PwC and EXPO REAL, have published a PropTech Map, highlighting the top 100 European proptech startups in 2018.

Appetite From Investors

We have seen a dramatic rise in investment in the proptech sector. Indeed, global investment in proptech companies increased by 63% from 2016 to 2017, amounting to $17bn of total investment during that period. Furthermore, the Global Prop Tech Confidence Index for mid-2018 underlines that overall investor confidence in proptech has hit a record high. Aaron Block, Co-Founder & Managing Director of MetaProp NYC, said:

“Along with non-real estate-based institutional investors, the billions of dollars being directed to this investment category has catapulted PropTech to new heights of asset-class desirability.”

Meanwhile, Jordan Nof of Tusk Ventures stresses:

“The biggest change and opportunity will be watching how PropTech entrepreneurs execute on building their businesses during a market downturn, and how the investors who have supported them react. It is when the market gets difficult that we see who is really positioned for success.”

Nof also argues that companies who only make minor improvements in their approach to proptech could struggle in the competitive global market. KPMG make a similar point in their report, noting that many of its member firms are making piecemeal improvements, instead of taking a holistic strategy. Moreover, many of its firms seem to be doing a lot of talking when it comes to proptech, but aren’t putting those words into an actionable plan.

The Impact of Proptech on the Recruitment Industry

Given the rise of proptech, certain jobs are becoming increasingly in demand. This is due to the fact that specific digital, business, and numerical skills are now essential to any proptech company’s growth and success. Recruiters are now sourcing candidates for a variety of jobs, including:

  • Full stack developer
  • Business development manager
  • Product manager
  • Content marketing manager
  • Analyst

Some key players (such as founders of tech companies) are trying to disrupt the real estate industry. These entrepreneurs have a purely tech background, with no past experience of real estate – yet they are utilising their knowledge and skills in order to fill a gap in the market.

One interesting company to keep an eye on is Appear Here, which describes itself as “the world’s leading marketplace for retail space”. Founded by Ross Bailey when he was just 22, the business helps brands to find and book space online, which they say is “as easy as booking a hotel room”. Appear Here has worked with some of the most valuable brands, including Apple, Nike, Coca Cola, Spotify, and Google.

Another promising business is Houzen, set up in March last year, with the aim of revolutionising the online lettings space. It’s a highly successful proptech business that focuses on the residential market. And so far, they have developed the fastest letting search engine that matches properties with ideal tenants. On top of that they sell services to tenants in order to generate additional revenue. Houzen has already a strong track record and they have mandates in place with top tier companies such as Greystar, L&Q, Kennedy Wilson, and Invesco.

Advice to Professionals

As a real estate professional, it’s important to keep up with proptech trends. Then, once you can gauge where the most promising technologies lie, it’s worth investing in them as quickly as possible. Competition for investment is tough. Another key tip is to regularly ask clients for how you could improve your services. This will help to keep you up-to-date with the latest consumer trends. Finally, while technology may be changing the nature of the real estate sector, there is still a need for human expertise. Technological innovations should be viewed as a means for enhancing, not replacing, essential human skills.