Software DeliveryReal Estate & PropTech Technological trends & innovations 2023
Smart cities, digital real estate agencies, and automated development — technologies that recently seemed fantastic are already breaking into our reality. Startups from the field of PropTech are slowly but surely conquering the construction and real estate market.
The construction and real estate market has always been conservative, and its mass digitalization has only begun in the last decade. IT technologies have already started to change approaches to real estate management.
Proptech is a market for IT solutions and digital projects in real estate. These include digital platforms, automated solutions that have combined digital and development, “smart" buildings, and cities. PropTech combines IT technologies throughout the entire life cycle of an object, including both construction (planning, organization, control) and management of a real estate object (maintenance, provision of utilities, management). PropTech appeared about ten years ago, becoming a trend in recent years: last year, the global volume of venture capital investments in the industry increased by a third to $32 billion.
In many European countries, the mass implementation of PropTech solutions has also begun in recent years. But while the digitalization of this sphere is still at the initial stage of its development: in terms of the speed of technology implementation, we are 3-5 years behind Western countries.
Although we can talk about a significant breakthrough in the last couple of years, for example, according to Businessstat data published in 2022, the PropTech market grew more than 3.5 times in 2017-2021. The BIM technologies segment showed the best dynamics, where investments increased by more than four times. However, now the digitalization of the industry will slow down somewhat due to sanctions.
One of the reasons is that foreign companies have developed a significant share of the solutions used in the market. In this regard, the market is reoriented, and the search for optimal solutions is underway. But despite the difficulties that have arisen, it is already clear that introducing innovative technologies is an obligatory stage in developing even the most conservative and regulated business. And the last pandemic only demonstrated the need to implement IT solutions. And even with a lag, PropTech will come to us. What global main trends will set the course of development in 2023?
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Investing in technology
Further development of IT technologies is expected in the commercial real estate market in 2023. In particular, investments in software and asset management tools. 2023 promises to be a good year for the Protech sector as the real estate industry continues introducing more technological solutions. They are necessary to withstand a challenging competitive environment. According to Deloitte forecasts (September 2022), two-thirds of business owners and managers will be ready to invest in technological solutions to improve the operational efficiency of companies and increase competitiveness. In particular, special attention will be paid to PropTech startups in the field of construction and real estate management. Experts predict that by 2025 the industry will become digital.
Mergers and acquisitions of companies
All market participants are concerned about the recession. According to Oli Farago, CEO and co-founder of Coyote Software, investment volumes will inevitably fall in 2023. Therefore, investors' interest will shift from companies that can be scaled to companies guaranteed to make a profit. The money will continue to flow, but a stricter selection will be applied to investment objects. The pressure on technology startups will increase: they must demonstrate rapid self-sufficiency and a clear path to profit.
Against this background, consolidation will become the primary trend in PropTech in 2023. At least in construction technology, customers have clarified that they are looking for platforms rather than point-to-point solutions. Small startups will need help to raise capital in the current economic conditions. We will see the emergence of more prominent players who offer customers a comprehensive approach. Therefore they are of great value to them. In 2023, the strongest will survive: only profitable projects will remain afloat. The pressure exerted, according to forecasts, will lead to a wave of mergers and acquisitions of companies in the field of Proptech. Companies such as Apple, Microsoft, and Salesforce have already started to focus on PropTech.
According to Forbes, the consolidation trend has been observed for several years. By the end of the third quarter of 2022, twice as many mergers and acquisitions were concluded in the PropTech sector compared to 2020.
In 2023, companies and investors in the commercial real estate market that use SaaS solutions will gain a competitive advantage. Such platforms allow you to reduce operating costs and provide flexibility and scalability for the business. Many companies operating in the commercial real estate market are already switching to cloud software solutions.
Over time, SaaS will become the industry standard. Cloud platforms like PlanRadar expand teams' capabilities through data analysis and automation. They reduce the time spent on communication, allowing you to make decisions quickly, track the completion of tasks, and control all processes for business owners, managers, and tenants. There is a growing need for effective decision-making based on data throughout the entire life cycle of an object. Previously, project managers had to rely on intuition when making decisions and managing risks. Today, artificial intelligence technology can find and analyze patterns, reducing risks. For example, to collect and analyze data on the technical condition of an object, allowing you to plan preventive repairs promptly before expensive equipment fails.
Development of client services
Customers are becoming more demanding. They need personalization, innovation, reliable data protection, and operational communication. All this is possible only with the use of software tools and technologies. Digital marketing enters the "battle" for the client, offering customers super–applications and seamless online transactions.
Effective communications come to the fore. A company managing a commercial real estate portfolio must use software solutions to meet the expectations of creditors, tenants, and investors. Tenants need access to online portals where they can view information about leased properties at any time. Companies that do not use technical solutions look less attractive than more advanced competitors. This trend will continue.
Tools for online sales and virtual tours will prevail in the residential sector. The first players in this market have already appeared, but there is no significant competition, which can be a good incentive for large companies to enter.
A new generation of chatbots. They have become a mandatory function for almost every resource, specially dedicated to real estate. The advantages of bots are numerous: they allow you to immediately solve clients' pain points while reducing the cost of the consulting department or freeing the real estate agent from routine tasks. According to Juniper Research, consumers and businesses will save more than 2.5 billion hours on customer service by 2023 only through the introduction of chatbots, primarily if implemented in several languages. The new generation of chatbots will be more advanced and intuitive.
They will be able to:
– send advertisements to potential customers;
– fill out user profiles based on the information provided;
– automatically provide information about the agency or agent;
– send links to a virtual tour and the most suitable recommendations and tips.
Proptech and “green" construction
The “green course” and sustainable development are global trends. More and more technology startups are focusing on building sustainable and energy-efficient buildings. It also suggests a reorientation of consumer priorities: the millennial generation prefers to pay more for greener homes that use environmentally friendly materials.
Proptech is an inevitable factor in the transition to the "green" real estate sector. We see a significant increase in the number of startups and solutions in sustainable development. They combine IoT devices with advanced data processing that allows you to collect, integrate, analyze and present data. For example, the Danish technology newcomer Woodsense has developed a sensor-based and artificial intelligence solution that detects unwanted moisture in wooden structures, thereby preventing more severe damage due to rot and fungus.
Also, the construction and real estate market is under pressure due to the global policy of reducing greenhouse gases. Construction is responsible for 47% of global CO2 emissions. Of these, 27% is for construction work, 10% is for building materials and structures, and the last 10% is for the rest of the construction industry. To reach zero by 2040, developers need to solve problems now and not postpone for later. Therefore, investments in climate technologies will be significant. According to experts, decarbonization of the real estate sector will require a thousand times more investment than is currently spent on technology.
The commercial real estate industry is known for the slow adoption of technologies, although they are needed to remain competitive. And the refusal to introduce innovations can eventually lead to disastrous consequences, inefficiency, and loss of capital.
Technology is a powerful tool for commercial real estate developers. In 2023 and beyond, cloud SaaS, IoT, AI, AR, blockchain, and big data can accelerate their growth in the industry. And the use of cloud services for construction and real estate management is already becoming a necessity. The introduction of technologies already allows you to differ favorably from competitors. With PlanRadar, you can effectively manage your real estate portfolio from anywhere in the world from your smartphone. The platform provides seamless work and convenient communication between all workflow participants. All data is digitized and is always at hand.
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