According to research by Savills PLC, one of the world's largest global property service providers - with over 700 offices - real estate around the world is worth approximately $228 trillion.

Global real estate, as an investment asset category, is worth more than stocks, shares and debt investments combined (worth around $170 trillion).

And yet surprisingly, in the startup gold rush of the last twenty years, real estate tech investments have only taken off in the last few years. In 2016, real estate tech companies raised over $4.2 billion to grow and develop new software solutions, according to CB Insights data.

Growth in this market accelerated in 2017, with $12.6 being funneled into property tech companies. Although a sizeable chunk of that - $4.4 billion and most of $550 million went into WeWork, the co-working giant, and Compass, a residential brokerage, from the startup investment bank, SoftBank.

Naturally, given those numbers, real estate investment continues to flow. Some analysts are starting to describe the funding environment as “frothy”, although most are confident growth will continue.

An overview of property tech

CB Insights notes that there are over 120 companies in this space, covering a wide range of innovative solutions. From new listing and search platforms, to marketplaces (residential and commercial), through to marketing, property and leasing management, DIY solutions for home sellers, financing and brokerage platforms, and numerous other solutions.

 

Some of the more notable players in this sector (not counting WeWork and comparable competitors) include Zillow, StreetEasy, Trulia, easyProperty, Offerpad, Knock, Cozy Services, VTS and Nestio. Interestingly, the funding dynamics are different than you find in other sectors. VCs and angel investors aren't bankrolling every deal.

There is competition in this sector to fund deals. As Connell McGill, Co-founder/CEO of building data software firm Enertiv notes: “You have all these families where real estate is their core business, and now there are these new technologies that are aiming to disrupt their space or make their businesses more profitable," McGill said. “These are families that have a significant amount of resources that can be invested [in real estate tech].”

In that sense, real estate tech companies benefit from understanding the environment they operate in. Real estate is big business. Families and private equity firms that own real estate don't want the market disrupting. Instead, it is a market whereby if you've got a solution worth bringing to the table, it should clearly demonstrate where it can add value and remove a pain point, or improve a process.

Property tech companies are only going to grow when they can clearly show how a solution they are offering is going to generate more value/revenue and returns for property owners. It isn't a market for speculative dream investments. Solid revenue models and clear value propositions are far more attractive.

How technology is changing real estate? 

1. Mobile search

From renters to buyers, more customers than ever - in commercial and residential real estate - are searching and making appointments through smartphones. It was once the case that more important purchases required customers to conduct searches through larger screens. Now 58% of property buyers conduct initial searches through smartphones.

Fully responsive, user-friendly mobile websites - and in many cases, apps - are a must-have for real estate agents.

2. Automation

Real estate back-office functions used to be paper-based. Now software is increasingly improving productivity across the sector, automating various workflows and making a lot of time-consuming tasks easier.

To stay competitive, property managers need to assess where productivity improvements can be made, then identify which software development company can fill these gaps. Or they can go the route of custom-building a solution that they can sell to other companies struggling with the same pain points.

3. Chatbots

For the majority of real estate companies, providing 24/7 service isn't a necessity or possible. However, that doesn't mean your customers are going to wait for information during office hours.

Automated, smart chatbots represent the most effective way to provide customer service around the clock. Providing they're programmed with the right information, a chatbot can help a potential customer make an informed choice, book an appointment and give them more information about a property they're interested in.

4. Big data

Real estate companies are sitting on a huge amount of data. Now is the time to start tapping into that resource and unlocking the value of big data.

With the right real estate platforms and support from data scientists, it's possible to start using predictive analytics to anticipate market and customer trends. Adjust strategies accordingly, then find ways to generate more revenue as situations evolve. Instead of being caught out or unprepared for new trends, property companies can anticipate them and increase yields instead of losing money.

What the future holds

In the next few years, we should anticipate merger and acquisition activity as companies look for new ways to grow. Smaller players and competitors are likely to get acquired by more established well-funded firms. We can also anticipate some lateral moves, either through acquisitions, funding or strategic partnerships from connected sectors, such as financial services.

We can also expect that in the next year or so, some real estate technology companies are going to break through into the mainstream, especially in the consumer-facing space. Some of these property tech startups are going to become as well known as Airbnb and WeWork. Finance-related solutions are going to further disrupt and improve the process of buying and managing property. One thing is for certain: real estate is changing and technology is a driving force of those ongoing changes.