The process of developing and marketing properties in the mid-1990s was a business model that was considered impossible to change (Glascock, 2014, p. 25). Constructions firms designed urban landscapes, whereas real estate firms profited from the profit market. In the American construction industry, technocrats developed innovative ideas of engaging their clients (Malloy and Smith, 2015). The emergence of property websites and technological applications gained momentum, which have now become notable online brands. It is such developments that have motivated investors to devise modern methods of marketing properties. According to Toth (2018), the idea of modern day concept of PropTech, has snowballed dramatically, an aspect that has included augmented and virtual reality (AR/VR).
PropTech became visible around 2000 when property listing websites emerged. The introduction of PropTech signaled the digitalization of property industry, an aspect that was projected to be the new revolution of the sector. Ever since, there have been different understanding of the concept of PropTech, the most popular one being conglomeration of property startups which are ambitious in disrupting the industry. The players in PropTech capitalized on technology as major ingredients for their progression (Tóth, 2018).
Home seekers find the idea of PropTech being ideal since the automation reduces agent interaction, clerical tasks and paper works that are required in pursuit of their objectives (Anuta, 2018). Since 2017 virtual and augmented reality are being applied in marketing real estate products. Overtime PropTech has exhibited itself as an aggressive brand whose objective to revolutionize the real estate sector (Tóth, 2018). Previously as most people across the world aggressively adopted the use of the internet, property companies such as Realtor identified a market gap that had not been exploited (Morphy, 2018). The realization of this market gap resulted in the opening of similar company in the UK (Rightmove), and Japan (gohome.com.hk) headquartered in Hong Kong. Despite the dominance of these pioneers in real estate new start-ups have emerged such as No Agent and Goodlord, which capitalized in administrative simplification for private landlords and their tenants.
1.2. Problem Statement
Within a short span of time the growth of PropTech has been robust (Morphy, 2018). Besides, various innovative ideas have also emerged that offer a promising competition against the PropTech venture. The situation has resulted in uncertainty amongst investors regarding the stability of PropTech as an ideal concept that can be capitalized on as the future of building and surveying (Anuta, 2018). As such, the major issue regarding PropTech pertains to the stability of its business model, considering the fact that innovations and market forces have an impact on the real estate business.
1.3. Purpose of the Study
The principal purpose of the study is to analyze the developments of the PropTech idea the milestones it had made to gain momentum as well as its future as a major player in the real estate industry. The study also intends to give potential investors and interested stakeholders sufficient knowledge on PropTech thus forming the basis for the decisions on whether to bank on the idea.
1.4. Aims and objective
The major aim of this study is to analyze the viability of PropTech as the future of building and survey industry, which are the key elements of real estate. It is essential to observe that the construction sector has attracted numerous investors, thus creating the need to perform studies on this trend. The key objectives for this study include;
i. To identify the key drivers of PropTech.
ii. To analyze the interaction of different stakeholders in the PropTech business.
iii. To explain the ethical and legal concerns surrounding the PropTech business.
iv. To project the future prospects of PropTech.
1.5. Significance of the research
This study is important as the outcome of the inquiry will be helpful for potential investors in the real estate industry. Besides, the research will contribute to the wider body of knowledge and hence will be relied on by other scholars and policy makers who are interested in matters real estate. The study will also help in identifying the research gaps, especially on areas that have been given minimal attention by scholars who have reviewed similar topics.
1.6. Research questions
This study will attempt to address the following research questions:
i. Adoption rates of PropTech within the Surveying Industry
ii. How will consumers integrate PropTech within their Organisation and which sector is most likely to integrate first?
iii. What are the key business challenges facing PropTech?
iv. What is the perception of PropTech within the Surveying Industry and what can be done to improve it?
1.7. Focus and Scope of the Study
The researcher will concentrate on the idea of PropTech and other related concepts with a special focus on how, in relations to technology, they have revolutionized the real estate industry. The researcher will also review the major developments that have been made in the building and construction industry. The findings will help the researcher to project the future of PropTech as an ideal solution to the market gaps that have been identified on real estate.
1.8. Limitation of the research
The researcher will limit himself to the scope of the real estate industry, where building, construction, and marketing of property are the key activities. Besides, the researcher will also limit its focus to the aspect of technology and digitalization and how they form the new wave that is disruptive in the real estate business. Finally the researcher will also be limited by time, personnel and financial resources.
1.9. Research roadmap
The researcher will employ a systematic approach when performing the inquiry. For this reason, the study will adhere to universally recognized formats and procedures in the course of research. The work will be organized in chapter format.
In the first chapter, the researcher will introduce the issue being investigated by giving the background of the study. It is in this chapter that the researcher will also explain the problem statement. The research questions, aims and objectives will also be highlighted in the first section of the work. Chapter two will be utilized to augment and synthesize literature form various authors who have performed research on related topics. In this chapter, the researcher will compare previous studies, thus delving into the body of knowledge that forms the foundation of the problem statement.
In chapter three, the investigator will outline the steps followed in identifying data sources, the process of data collection and analysis. The researcher will also use chapter three to justify the methods chosen to perform the inquiry. Besides, the ethical considerations for scientific studies will also be outlined in chapter three.
In the fourth chapter, the results from the application of methods outlined in the previous chapter will be presented. The information will be presented in the form of graphical illustrations with their respective explanations.
In the fifth chapter, the researcher will discuss the results of the inquiry, basing his arguments on the body of knowledge that is documented in the literature review. Thus, the investigator will use the arguments by other scholars to explain and justify the findings in light of previous studies conducted on related thematic areas. In the final chapter, conclusions on the subject matter will be drawn, while making recommendations to the audience and users of this project. In light of this, the major issues identified within the study as well as matters that have not been addressed satisfactorily will be highlighted in this section.
CHAPTER 2: LITERATURE REVIEW
2.1 Introduction
The integration of technological innovations in the real estate sector is bringing about a revolutionary wave that is transforming then processes associated with the production, purchase, sale, and management of property. In this regard, technology companies facilitate the adoption of new business models in the property sector to foster efficiency and effectiveness unlike before. According to Baum (2017), the slow rate of digitalization in the real estate sector over the past decades has open opportunities for the growth of PropTech in the recent past. Besides, the new trends in the sector denote that digitalization is at the core of the property transformation. However, the transformation has also raised ethical concerns that are worth exploring. In this respect, the following sections provide a review of the relevant literature concerning ProTech.
2.2 Understanding the PropTech operating model
Indeed, various scholars have tried to explain how the PropTech model operates. As such, it important to find understand what PropTech means before describing its operational aspects. According to Hughes (2017), the term “PropTech” is derived from ‘property’ and ‘technology’ and it infers to the innovative corporations that facilitate the combination of advanced technological possibilities with the real estate industry through the application of their business models. The definition of implies that PropTech is characterized by the entrance of technology companies that offer new business models in the real estate industry to foster its efficiency, as well as effectiveness. In this view, companies entering the real estate industry with new models of doing business in the digital world play an important role in transforming how people will buy, sell, and manage property (RICS, 2018). However, not all the stakeholders in the real estate sector understand the concept of PropTech. According to GoReport (2018), 33% of the surveyors interviewed do not know the actual meaning of PropTech. In a bid to foster an understanding of how the PropTech system works, Hughes (2016) underlines that it is a convergence of the property and technology. In particular, Kriel (2018) maintains that PropTech facilitates the digitalization of real estate processes associated with the construction, occupation, and management of property. Furthermore, Trofimov, Szumilo, and Wiegelmannm (2016) undrscore that PropTech affects operations in the real estate industry by streamlining the management of transaction, as well as records. Without doubt, PropTech seeks to enhance the level of efficiency in the various aspects of the operations in the property sector.
Yadav, Gupta, and Singh (2018) assert that PropTech is dedicated towards facilitating the connection of the various segments of the real estate industry through the integration of technological advancements. Indeed, at the core of the PropTech sector is digitalization which is directed towards the real estate sector. In this line of thought, Rogers (2016) argues that without digitalization, the fusion between technology companies and real estate companies would not have taken shape. Indeed, the digitalization of the real estate industry exposes it to an array of innovation opportunities that would play an important part in influencing substantial growth and development. According to RICS (2018), 92% of the experts in the property sector associate PropTech with a positive change in the industry. For this reason, professionals in the real estate field identify PropTech as an instrumental part of growth and development. Besides, bolstering growth and development in the real estate industry, Trofimov, Szumilo, and Wiegelmannm (2016) assert that PropTech is also instrumental towards the enhancement of decision-making processes in the real estate sector. In this regard, the PropTech sector is one that seeks to revolutionize processes pertaining to the buying, selling, and management of property.
Moreover, the PropTech operating model is propagated by the digitalization of processes in the property sector. As such, Hughes (2017) insists that real estate companies have to allocate investments towards the adoption of technological to facilitate the fusion of the property and technology. In this regard, it is important to understand that that there is need for increased cooperation between technology companies and property companies to foster the transformation of the real estate industry and thus, bring rise to the PropTech sector. According to FTI Consulting (2018), the real estate industry is expected to record a 39% growth in newtechnology investments in the next 12 months. Currently, PropTech is at its initial stages of development since the real estate sector has been slow to accepting change compared to sectors such as the financial industry (Nasarre-Aznar, 2018). FTI Consulting (2018) unearths that 77% of the professionals in the property sector demonstrate a degree of resistance to change which negatively affects the PropTech adoption rates. As such, RICS (2018) argue that there is a need for the stakeholders to collaborate and reduce the levels of resistance to change in the property sector to facilitate the effective integration of new technologies. According to Geovation (2018), the UK government supports entrepreneurs seeking to enter the PropTech industry by providing funding where relevant start-ups could apply Therefore, for the PropTech model to operate effectively, it is importance for stakeholders in the property and technology industries to continually collaborate towards adoption of digitalized ways of constructing, occupying, and managing property, as well as managing transactions and records.
2.3 Key trends in real estate
Historically, the real estate sector has been slow with regards to the embracement of technological change. Nevertheless, the past few years have witnessed considerable change as digitalization is realizing more integration like more before. A study conducted by Rogers (2016) reveals that at least 68% of real estate managers consider the embracement of technological change as instrumental towards the innovation, as well as trial of new products in the sector. A similar study conducted by Winson-Geideman, Krause, Lipscomb, and Evangelopoulos (2017) uncover that 57% of property firms confirm that the allocation of investments in technological developments have offered their businesses a desirable unique selling proposition (USP). As such, technological trends have taken center stage in the real estate sector as denoted by the adoption of innovations ranging from virtual reality to the use of drones. As Baum (2017) reveals, the major segments of PropTech currently trending include smart buildings/IoT (internet of things), smart city sustainability, market place, crowdfunding; ConTech, 3D/VR (virtual reality), data and research analytics. As such, the various segments mentioned charatecterize the PropTech industry since the innovations have realized considerable integration in the property sector over the past few years.
The adoption of virtual reality (VR) and augmented reality (AR) is a noteworthy trend in the real estate sector. Kim (2015) insists that the adoption of VR in the property sector enhances the viewing of property and thus, improve the interactions of investors and property managers. Furthermore, Juan, Chen, and Chi (2018) underline that the use of VR is an outstanding pattern in the real estate sector and thus, denote the emergence of the PropTech sector. Nonetheless, a survey by the GoReport (2018) uncovers that only 10% of surveyors have started using drones and VR to provide services to clients. The use of such technologies is currently low but it is expected to heighten as the surveying industry continues to embrace technology. A study by KPMG (2017) uncovers that only 34% of the companies in the property sector have an enterprise-wide digital strategy. In this regard, there is a need for more companies in the sector to adopt strategies based on digitalization to speed up the technology adoption rates. VR is undoubtedly an advancement to the use of computer-aided design in the real estate sector. Yadav, Gupta, and Singh (2018) argue that the adoption of VR in the property sector represents an advanced stage of Building Information Modeling (BIM), and a further enhancement to computer-aided design. According to Kim (2015), the initial use of drones for sales and marketing purposes has transcended to the real estate industry by allowing investors to view property regardless of their geographical location pinpoints the ability of VR to render detailed and realistic images contributes to its acceptance in the sector in the wake of its digitalization. Moreover, Scholz and Smith (2016) identify AR as a very effective in allowing agents to highlight or intimately describe the various sections of a home to a tutoring overview. Therefore, the ability of VR and AR to display close to real and detailed images makes it a trendy adoption in the real estate industry, thereby denoting the gradual fusion of technology and property in the contemporary society.
The use of drones in the real estate sector has become a prominent trend as stakeholders continually demonstrate their embracement of technology. According to Perritt and Sprague (2016),the initial use of drones for sales and marketing purposes has transcended to the real estate industry by allowing investors to view property regardless of their geographical location. Baker (2015) asserts that drones have become trendy in the real estate sector owing to the ability of the drone visual technology to capture a 360 degree view of properties. As such, the fact that drones allow potential home owners to view the property and its surroundings before making a decision of viewing it physically enhances the viewing experience by saving on time and money. Furthermore, Perritt and Sprague (2016) highlight that some prospective home owners usually want to have a view of the communities surrounding the property they intend to buy. Therefore, since drones can provide potential property buyers with videos of the surrounding communities, they have witnessed considerable adoption by real estate firms. Besides, Baker (2015) uncovers that drones have shown great integration by property managers and owners since the technology facilitates the development of knowledge into their projects, as well as streamline the execution of site monitoring undertakings. The technology fosters easy and safe monitoring of property and thus, reduces unnecessary costs and project delays (Perritt & Sprague 2016). Therefore, by fostering the timely and cost-effective viewing and monitoring of property by both clients and mangers, respectively, drones have become a typical feature of the modern real estate sector.managers, respectively, drones have become a typical feature of the modern real estate sector. Nonetheless, FTI Consulting (2018) reveals that 72% of the professionals in the real estate sector lack the knowledge required to understand how PropTech works. Similarly, RICS (2018) reveal that 40% of the people working in the property sector lack the knowledge, as well as skills required to operate new technologies integrated in their area of work. The challenges is considerable given that knowledge about how various technologies work is crucial towards streamlining the process of implementation.
The Internet of Things (IoT) has found its way into the modern real estate sector. As Bonomi, Milito, Natarajan, and Zhu (2014) describe it, the IoT infers to a web of physical objects such as devices, equipment, buildings, and vehicles that are linked to the internet via embedded software and devices to facilitate the collection, analysis, and exchange of data. In other words, the IoT is characterized by the instillation of sensors read by internet applications to physical items, as well as structures and thus, allow the acquisition of actionable data. Thanks to the IoT, smart buildings have come to life in the urban environments as denoted by The Edge, which is a 15-stored builder regarded as the smartest building in the world as it is embedded with at least 28,000 sensors (Rathore, Ahmad, Paul, & Rho 2016). Therefore, the mining of data using internet-based sensors attached to buildings denotes that IoT is defining the future of the real estate sector as data becomes an important aspect of ke4y industry processes.
The adoption of big data is also becoming a trendy feature of the contemporary real estate sector. Rathore et al. (2016) hold that the continued integration of big data goes a long way in facilitating the accurate alignment of potential home buyers with suitable and desirable properties. In addition, Kok, Koponen, and Martínez-Barbosa (2017) identify the incorporation of big data in the property sector as a game changer since its combination with analytics speeds up the process of identifying and placing orders on properties. Importantly, big data analysis bolsters the connection between buyers and sellers and thus, denote a greater deal of efficiency and efficiency in processes regarding the purchase and sale of property. Rathore et al. (2016) reveal that big data analysis makes use of huge databases to assess information and thus, help agents to link potential home buyers to sellers. In so doing, big data allows agents to initiate buying and selling processes in real time by connecting the parties needing to engage in transactions pertaining to the change of property ownership.
Furthermore, Kok, Koponen, and Martínez-Barbosa (2017) note that the combination of big data and geolocation is also a distinguished trend in the real estate industry today. In particular, the geolocation technology provides users with maps that denote critical sets of data about properties located in specified areas (Reed & Pettit, 2018). Essentially, geolocation makes it possible for real estate developers to integrate big data in the valuations of properties in varying locations and thus, eliminate the incorrect projection of funds to be allocated for particular projects (Rathore et al, 2016). In the recent past, more and more property developers have integrated the geolocation technology into their systems as a way of fostering the accuracy of valuating properties. Undeniably, the technology would go a long way in fostering the planning aspect of property development.
Moreover, Veuger, (2017) uncovers that the integration of technologies such as blockchain, crytocurrencies, and Bots characterizes the new patterns witnessed in the real estate industry today. As Nasarre-Aznar (2018) reveals, the embracement of blockchain seeks to eliminate the presence of third party actors in the real estate sector and thus, and thus, save property sellers and buyers unnecessary commissions besides streamlining the liquidity of the property markets. In addition, blockchain facilitates the adoption of cryptocurrencies, especially Bitcoin in the property segment and thus, make it unnecessary to pay escrow holders, title searchers, and legal experts (Veuger, 2017). The embracement of Bots is also a trend that has gained considerable trend in the modern real estate continuum and thus, relieve realtors from the stresses of constantly interacting with buyers among other industry stakeholders. Winson-Geideman et al. (2017) assert that currently, the companies that have adopted Bots have witnessed considerable improvements in customer service since the systems provide potential property buyers the necessary feedback regarding fair property value, timing, and location assessment among other responses to property sale inquiries. Indeed, the real estate sector has witnessed an array of technological trends that portray the influence of the growing PropTech industry which seeks to connect the property and technology sectors.
Under the PropTech business model, new companies in real estate collaborate and capitalize on innovation and technological opportunities to exploit gaps in real estate Anuta (2018).(Anuta, 2018). For this reason, the UK government has found it necessary to partner with PropTech start-ups to offer the required financial and R&D support that would foster the growth of the sector (Geovation, 2018). The collaboration is intended to offer innovative solutions that are required in the real estate sector, thus meeting the industry demands. According to Baldwin (2017), the real estate industry has for a long time been considered backward as far as the adoption of technology is concerned. The author bases his assumption on the fact that over 40% of companies in the real estate sector operate using traditional mechanisms such as the use of paper-based processes and spreadsheets to manage their businesses. In another study, GoReport (2018) reveals that 66% of the surveyors interviewed still engage in the traditional collection of data through pen and paper. However, a gradual shift towards the adoption of technology has been witnessed in the real estate because of the influx in the number of people and resources that are pumped into the business. Furthermore, the survey unearths that only 53% of surveyors have used the most basic PropTech tools such as smartphones to gather data on site (GoReport, 2018). The report further uncovers that the use of high-end PropTech tools reduces time spent to execute particular surveying tasks besides fostering accuracy (GoReport, 2018). Thus, the need to improvise systems of managing large volumes of data and monitoring construction processes as well as administering market strategies requires integrated systems that are connected to the central administration point, thus reducing the coastcost and improving conveniences in real estate management (Azhar, Khalfan and Maqsood, 2015). The minimal barriers to entry into the PropTech model has attracted upcoming and existing companies such as Zillow, Airbnb and Uber, which have emerged as major distractors in the real estate business. In fact, business which have failed to adopt innovations risk failure and exclusion from the market (Anuta, 2018). According to Ball and Pratt (2018), organizations that still rely on traditional mechanisms in their industries experience difficulties transitioning to the new models because of the restructuring requirements. In an argument by Barkham, Bokhari and Saiz, (2018), large organizations are mainly structured in scalable manner which is convenient for making money in the present. However, this does not imply that their mode of operation cannot be flaked to allow them make profits in future. Nonetheless a study conducted by FTI Consulting (2018) unearths that the cost of implementing new technologies is usually 30% higher than the cost associated with the integration of other systems in the real estate sector. In this light, the high cost of implementation is a barrier that discourages PropTech start-ups. Thus, many incumbent organizations in the industry have demonstrated slow navigations towards adopting internal innovations while others seek to grow their business models outside by partnering with emerging start-ups that are pillared by innovations (Barkham, Bokhari & Saiz, 2018). PropTech startups, therefore, operate a network domain, where resources and talent are incorporated with technology to leverage each other’s strength, thus enabling them to offer game changing solutions (Baldwin, 2017). A survey undertaken by the KPMG (2017) uncovers that 89% of the respondents assert that traditional real estate firms need to collaborate with PropTech firms to facilitate the effective adaptation to the changing global environment. Furthermore, FTI Consulting (2018) reveals that the integration of technology in the property sector would contribute to a 25% global expansion of the industry by 2019.
The startups pool their abilities and resources an aspect that thrust them the level of offering services that are demanded for in the industry and solving sophisticated puzzles that emerge from the ever changing customer preferences.
2.4 Understanding the real estate spectrum
The current inquiry is centered on the real estate industry and fusion with industries that apply technology models in their operations. As such, gaining a sound understanding of what the real estate spectrum is imperative. According to Glaeser, Huang, Ma, and Shleifer (2017), real estate infers to physical or real property. Furthermore, Hartmann (2015) defines real estate as the land, property, buildings, underground rights below the land, as well air rights above the land. In this context, the real estate spectrum is considerably wide. Glaeser et al. (2017) uncover that the real estate spectrum incorporates the residential, industrial, commercial, and land segments. AS such, understanding the uniqueness of each of the real estate types is relevant since it would foster an in-depth understanding of how technology influences the overall operations of the players in the sector.
According to Brueggeman and Fisher (2011), residential real estate encompasses newly built homes, as well as the ones on resale. Single-family homes dominate the residential real estate segments in the contemporary settings. Furthermore, other categories of residential real estate include townhouses, condominiums, triple-deckers, vacation homes, and high-value homes (Hartmann, 2015). Glaeser et al. (2017) classify commercial real estate as business-oriented properties such as offices, hotels, educational and medical buildings, and strip malls and shopping centers. Furthermore, the industrial real estate type incorporates manufacturing property, warehouses, and buildings (Shi & Tapia, 2016). In the commercial real estate segments, buildings are commonly used for purposes of research, production, storage, and well as the distribution of finished goods to business partners and consumers. Nonetheless, Brueggeman and Fisher (2011) argue that some of the buildings used for the distribution of goods may also fall under the commercial real estate classification. Moreover, the land type of real estate encompasses vacant land, agricultural production farms, as well as ranches. The subgroups of vacant land include site assembly, reuse, and underdeveloped land (Dunning, Levy, Watkins, & Young, 2018). As seen, the real estate spectrum is considerable wide given that the various categories identified operate in diverse ways.
As Shi and Tapia (2016) reveal, he real estate sector operates through the production, purchase, and sale of property. As such, the operations of the real estate sector influence the level of economic growth and development recorded in any given country, Barwick and Pathak (2015) unearth that the construction of new houses accounted for at least 7% of the United States (US) economy in 2017. In this respect, the construction of new houses is an integral operation of the real estate industry since it goes a long way in bolstering the
