What Is Prop Tech? And What Does It Mean For B2B and ‘The Smart Cities of Tomorrow’

The smart city of tomorrow is nearer than you think.  AI, IoT and other advanced technologies will define these new megalopolises by meshing seamlessly with edge computing and wearable, mobile technology.  From calculating the fastest ride to work, brewing your morning coffee, securing your home or monitoring your health, advanced technologies will impact the daily life of city dwellers at almost every level. These technologies will also impact city planning, construction, building management, architecture and more. It’s here – in these B2B and industrial applications of real estate technology or, PropTech – that opportunities for investors and entrepreneurs abound.

It can sometimes seem that advanced, “disruptive” technologies are revolutionizing every industry. For many old-school, low-tech industries, however, the application of these technologies is just beginning. In the real estate sector there’s been a rush, of late, to develop and deploy the technology, tools and methods usually associated with Alphabet or Amazon. Whether in raw materials or building design, construction or  occupancy, building maintenance or property management, the business of real estate is on the precipice of radical transformation.

Given that real estate is the largest asset class in the world, it’s no surprise that VC firms are pumping hundreds of millions into tech companies jumping into real estate.  The biggest landlords and brokerage houses are also trying to carve out a space for themselves in PropTech.    Major investments in companies like WeWork  – which raised over $4 billion from Softbank last summer and is now raising more capital at a valuation of $35 billion –  are driving the push to modernize real estate. In 2017, alone, investment in real estate technology was $5 billion up form $33 million in 2010.    Apple and Google have also made major investments over the last few years  in the smart home market. Lesser known companies – from construction tech firm, Katerra, to Austin, TX based, TenantCloud  – are raising millions of dollars to integrate design and construction and bring tenant-landlord relationships into the 21st  century. IoT investment, integral to the design and construction of smart homes and cities, is projected to range upwards of $5 trillion in the aggregate between 2016-2021.  Yet, these types of investments and advancements in the application of advanced technology in real estate represent only the tip of an (albeit, increasingly crowded) iceberg.  In the more B2B and industrial applications of PropTech there remains a significant “advanced-technology gap”. One of the biggest reasons for this is the limited access to clean and reliable data.  That’s starting to change.

Cherre, a real estate technology firm, is applying big data analytics to the broker market with a tool that collects and analyses real-time public and private real estate data to help better determine the viability and value of a given asset.   Fundrise, an investment platform that gives investors access to private real estate deals, is also using data to change the way people invest in real estate.  Utilizing its proprietary algorithm it allocates investor funds, as low as $500 per unaccredited investor, to buy fractional interests in properties offering investors opportunities for growth and appreciation in an asset class not normally available to typical investors.

Planning and construction design is also increasingly shifting towards advanced data analytics and early implementations of artificial intelligence. Officially announced in June, MIT initiated its interdisciplinary undergraduate major in urban science combining studies in urban planning and computer science.  “The goal of the program is to train undergraduates in the theory and practice of computer science and urban planning and policy-making including ethics and justice, statistics, data science, geospatial analysis, visualization, robotics, and machine learning.” (MIT PRESS RELEASE School of Architecture and Planning – School of Engineering)

Construction Open Standards Alliance (COSA) is an organization of over 25,000 companies that brings together technology providers and building contractors to drive efficiency and technology adoption. Through open integration standards in construction software, massive shared data sets can be created and mined in incredible new ways.

Safer construction sites and building maintenance are poised for an upgrade, as well,  with further advances in Industrial Internet of Things (IIoT), 5G mobile and edge computing.   Through the use of smart sensors, construction firms can go far beyond simple data acquisition.  Unlike standard sensors, smart sensors allow data processing to happen at the collection point, enabling new processes and methods that will make significant improvements to some of construction’s costliest areas.   Companies such as Massachusetts based, Smartvid.IO, and Silicon Valley startup, Flicq, along with large firms such as Verizon and IBM are just a few of the myriad companies focusing their energies to capitalize in this area.

Simple applications of robotics have also been developed over the last 10 years in construction.  Construction Robotics’, SAM, is the world’s first bricklaying robot.  SAM has been deployed in the building of supermarkets, schools, showrooms and apartment buildings.  Just like the auto assembly line, expect to see more and more advanced robots and cobots (robot assistants) on the construction site.   Through their use construction work will become safer, more precise and efficient.

The ongoing development of smart cities makes it clear that we’ve just scratched the surface of where construction and real estate are headed.  Facing the unprecedented boom in urban areas that most experts predict means the design/planning, construction and management sectors of PropTech will have to morph rapidly to help build and manage these future metropolises.   For those investors and entrepreneurs who identify PropTech applications in the B2B and industrial space today the rewards could be significant tomorrow.

*Thomas Falk is a General Partner at Revel Partners and splits his time between New York and Berlin. Thomas currently sits on the boards of The Trade Desk and Exactag and is a board observer at LiftIgniter. He previously has sat on the boards of Limelight Networks, Adconion and Smartclip. Throughout his career, Thomas has been significantly involved in the growth and exit of many companies including Smartclip, EyeWonder, Falk Realtime, Zoomin.TV, United MailSolutions and StrikeAd to name a few. Previously, Thomas was as President EMEA at DoubleClick, after selling his company Falk eSolutions to the latter in 2006. He left this position when DoubleClick was acquired by Google in 2007 and co-founded Revel in 2011.