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The digital transformation of real estate: what is PropTech

In brief:

  • What happens to the market when digital comes into play
  • Digital in the real estate market
  • Supply chain, technology macro-trends and market trends
  • Increase EBITDA per unit area

In the online article “What is Digital Transformation?” the team of SalesForce proposes the following definition: digital transformation is the process by which, through the use of digital technologies, new business models are created, or existing ones are modified, you create New cultural elements, e new customer experiences, in order to be able to keep up with competitive market requirements. Digital transformation transcends traditional patterns, such as the pattern of classic business roles of sales, marketing, and customer service. Information flows rapidly across all divisions, and can be exchanged with customers in real time. It is necessary to reimagine the way we do business, as from paper to spreadsheet. Noticing the effects of digital is easy, just a quick look at the markets: Tesla has revolutionized automotive, Booking.com hospitality, Uber and Flixbus the world of public transportation, Glovo and Deliveroo logistics, N26 banking and finance, just to name the best-known examples. This inexorable process is also affecting the real estate market, and in this context is a trend known as PropTech. PropTech is a technological and mindset change that involves the entire real estate industry, and its consumers, in the movement and transactions of buildings and cities. The concept may be abstract, as it does not refer to a specific action to be taken, but rather to an approach, and a cultural pathway aimed at the entire sector. We are talking about a process that involves both the business side of the industry and the construction side, right down to the technical aspects of the buildings themselves. The PropTech ecosystem consists of many companies, start-ups, and scale-ups operating at various stages of the real-estate supply chain. Broadly speaking, these companies offer one of the following four types of products or services:

  • Technologies or platforms for buying and selling real estate or leases
  • Technology or platform for construction and/or renovation of buildings
  • Management technologies or platforms for selling real estate services
  • Building management technologies or platforms

We have schematized the supply chain that comes together from the offerings of all these companies in the image below.

As you can see, PropTech develops from technological macro-trends., bringing within the real-estate world the expertise that has been developed in recent years in other sectors as well: thus, FinTech companies such as Casavo, which implements new financial models for buying and selling buildings, or ERP and BIM technologies for more efficient management of real estate construction processes, have emerged. And again, thanks to e-commerce platforms, such as AirBnb, sharing-economy and commissioning models (the so-called as-a-service) of real estate have emerged in the hospitality, flexible working and retail sectors, which have created A virtuous circle with specific technologies, mostly IoT-based, for efficient building management in the marketplace. Adoption of these technologies and the right cultural approach to business innovation enable profit maximization in an environment of high uncertainty about the future. Indeed, customers are less and less predisposed to purchase or lease contacts (operational or financial) that commit them for a long period (in this also guided by international guidelines such as IFRS16). The resulting market is more fluid and dynamic, with demands for short-term real estate solutions (a few days in hospitality, a few months in commercial and retail) leading to two main consequences:

  • On the one hand, atenant (tenant) who occupies a space for a short period does not want to spend time setting up the space; therefore, he or she will require plug-and-play solutions, which he or she can use directly without any preparatory steps
  • On the other hand, the owner(landlord), has to take on more and more burdens (furnishing, security, maintenance, etc…), in order to be able to offer a ready-to-use property to his clients, thus optimizing and cutting costs as much as possible.

In this context, it is therefore crucial for real estate operators to equip themselves with technologies and tools that enable easier space management in order to counteract the significant increase in operating costs and react promptly to the rapid profit opportunities that arise. An example scenario may be the Marketing of space directly through e-commerce platforms, with possible dynamic pricing, allowing customers making a purchase to enter the space directly through their smartphones, thanks to An App that manages purchasing, such as opening gates, and access to amenities. There are two immediate effects: lower operating costs and an increase in revenue per square meter, thereby significantly increasing EBITDA per unit area. Access control is the key element in implementing such strategies, controlling access and thus sales. In Sofia Locks we are available for free demos of our IoT and cloud-based smart access control solutions that enable easy reconfiguration of spaces (wireless solutions), that do not require local servers and complex configurations (virtualized), and that achieve complete digitization of access tools (opening via smartphones). Equipping oneself with such types of solutions, designed in a completely smart way, based on modern software and allowing integrations with according to Web 4.0 standards, opens up important new opportunities for development.