[This article was originally published by the Independent Institute.]
Technology has, as with many other industries, changed real estate development. For several years there’s been a growing, somewhat amorphously defined trend referred to as “property technology”, or “PropTech,” for short.
Like FinTech in the finance industry, it speaks to how computerization improves multiple aspects of housing production. PropTech is fueled by companies that sell different hardware and software services to builders, who use them to streamline their processes.
While not every aspect of PropTech is mainstream, it’s become more common during coronavirus, as the industry observes social distancing. Here’s some different applications of PropTech.
One big change PropTech brought is to the internal operations of real estate companies. The old way of doing things for many developers was having physical files—for land plats, legal documents, bank notes and more.
But PropTech-oriented firms have put all this online by using LegalZoom (legal), QuickBooks (accounting), AutoCAD (architecture mockups), Google Drive (spreadsheets), and more. Zoom is also a useful PropTech innovation, as it prevents staff from needing to meet.
Most of these services are not unique to real estate but have spurred leaner operations in this industry, specifically, as it is notorious for accumulating paperwork.
Land development generally has two major political hurdles prior to any ground being broken. The first is land assembly, which requires developers to search for obscure land titles, knock on doors, and negotiate sales. The second is navigating the entitlement process, which requires lobbying with neighbors, planning boards, politicians, and whoever else affects the issuance of permits.
Different PropTech services work to address this. Citybldr sells technology that lets developers find and determine fair market value of land titles. Coda Compliance streamlines entitlement processes in the Bay Area, while similar companies work in other metros. These services are meant to prevent developers from sinking money into land-use attorneys and consultants.
Jake Auchincloss, a Newton, MA, city councilor who once worked in the PropTech space for Liberty Mutual, says data-driven “super forecasting” firms may eventually enter this entitlement game. They would examine the likelihood of projects getting approved, and assess the risk (in time and cost) of developers applying.
Home construction has seen technological advances for decades; it far predates “PropTech.” But the modern version refers to the use of increasingly sophisticated factory techniques to produce high-quality prefab housing. There are now bona fide modular luxury homes that sell for over $300,000; but also unique ones that can be bought for under $20,000, such as these tiny cabins.
Inside homes, there’s an array of technologies that make dwellings more convenient. RealSimple.com lists these “smart home” applications: doorbells that show you who’s at the door; window shades that respond to voice command; thermostats that follow schedules, and much more.
Once buildings are complete, the old-fashioned way of marketing them includes newspaper ads, listing them on the MLS, and having realtors host open houses.
This strategy is still the dominant one, but PropTech is spurring change. A lot of marketing has gone digital—like buying Facebook and Google ads; or listing on Zillow and Redfin. In-person tours are being replaced with “virtual tours” enabled by Matterport camera technology, which takes 3-D images of rooms. There are “self-guided tours” too, where prospective buyers or renters type on a computerized lock to enter a unit, so they can tour it without having to meet a realtor.
Marcel Wisznia, a New Orleans developer, said he installed virtual and self-guided tour equipment for his apartment portfolio pre-coronavirus. It worked: since the shutdown, over half the units he’s leased have been by people who didn’t physically touch the property beforehand.
Wisznia thinks this virtual leasing will continue well after the pandemic wanes.
“I’m confident that this change in marketing is going to be more permanent,” he said, “and is not just a short-term reaction.”
The same can be said for PropTech in general.