Real estate firms are increasingly putting technology front and centre in their businesses, as the industry continues to grapple with changes brought by property technology (Proptech).
Last year, a total of US$9.6 billion in venture capital was raised for proptech, according to CRETech, down from 2017’s US$12.6 billion, however the 2017 figure was skewed by Softbank’s US$4 billion investment in co-working operator WeWork.
And 53 percent of commercial real estate companies have already invested in at least one type of property technology firm according to a survey by Altus Group of 400 large real estate companies from all over the world. More than two-fifths of firms are using automation for benchmarking and performance analysis, and 16 percent using AI for accounting and property management.
“The combination of new market entrants, new technologies and changing demographics have created disruptive models within commercial real estate,” says Bob Courteau, chief executive of Altus Group. “This presents new opportunities for organisations which rapidly embrace innovation and proptech.”
Real estate accounts for 13 percent of world GDP, but productivity growth is poor compared to other industries, due to a lack of innovation, says Dr Bing Wang, associate professor in the practice of real estate and the built environment at Harvard University. However she says proptech investment has boomed since 2017.
Real estate companies which are integrating proptech include Brookfield, which announced last year that it would invest US$200 to $300 million in proptech over three years via a new venture capital arm. Hong Kong’s Swire Properties has created Blueprint, a combination of co-working facility and proptech accelerator.
JLL is exploring proptech via a number of avenues; last year it teamed up with developer Lendlease to create Propell Asia, an accelerator programme which nurtured five proptech firms at various stages of their evolution. In 2017, JLL’s innovation arm, JLL Spark, opened for business and last year it launched a US$100 million proptech venture capital fund.
“The real estate industry wants to digitalise existing processes, but that is limited thinking; instead we ought to be reshaping our processes to be more effective,” says Jordan Kostelac, JLL’s proptech director for Asia Pacific.
Logistics at the forefront
The logistics sector might appear to be a mundane mix of warehouses and trucks, but it is actually a fulcrum of innovation. Driven by the needs of e-commerce, logistics firms need innovation to ensure faster and more cost-effective deliveries.
Alan Yang, chief investment officer at warehousing specialist GLP, says: “We see the line between technologically-driven operating businesses and real estate blurring. As the cost of technology and computing power continues to decline and the demand for higher speed, reliability, transparency and data-driven decisions in the e-commerce supply chain increases, logistics real estate is experiencing an accelerated introduction and innovation of new technology.
“At the same time, consumer demand for e-commerce is growing much faster than the logistics infrastructure supporting it. GLP seeks to bridge that gap with technology and its global real estate footprint.”
GLP has also established its own venture capital arm. Co-founder and chief executive Ming Mei says: “Roughly three years ago, we started to invest our own capital in adjacent emerging technologies including robotics, big data and automation, to understand how to help our customers be more efficient.
“Over time, we had investors coming to us for advice, and asking invest alongside us, which led us to institutionalising our private equity arm with the establishment of Hidden Hill Capital.
“With that expertise and our global footprint and access, we’ve been able to identify the right technology and incubate it within our real estate portfolio in a way that gives those technologies more data points across a larger customer base, ultimately allowing those businesses to scale faster and us to provide better service to our customers.”
Other logistics real estate firms investing in technology include Prologis, which has partnered with Locix, a specialist in data and autonomous buildings to create solutions for warehouses, such as smart truck berths to aid more efficient docking and routing.
Australia’s Goodman Group is developing a warehouse in Tuen Mun, Hong Kong, which will make use of automation and robotics to process goods faster.
Click to read more about what’s in store for proptech in 2019.