What is PropTech, anyway?
The Polish property market is beginning to join the 21st century and getting with the PropTech programme.
There are two basic roads to technological innovation that real estate firms can take. One is to invest in research and development (R&D) internally and create their own tools. The other is to involve an outside company, usually a startup.
As Anna Walkowska, co-founder of Startup Poland and PropTech startup mentor, points out, adopting and customising a tool developed by another company is incomparably less expensive than building your own. Especially if that tool is backed by venture capital firms or already implemented by early adopters who were happy to experiment. Also, she says, when digital innovation is developed by a company that doesn’t specialise in digital technology (like a real estate company), those new tools tend to be outdated after a year, as nobody is hungry to develop them. Startups improve them continuously, using feedback from multiple clients and knowledge from innovators’ ecosystem.
The most efficient way to find the right PropTech partner is through a startup accelerator: a partnership programme where startups are paired with mentors from bigger companies to develop technological solutions to the client’s problems.
“Start-ups face a lot of barriers if they want to get a corporation as their client. The role of an accelerator is to support them in obtaining corporations for cooperation on a partnership basis,” says Katarzyna Malec, managing director of bChange at Business Link Poland and coordinator of the Urban Quest programme.
“Bringing a product to the market is not enough”, says Tomasz Rudolf, CEO of The Heart. “Many companies are not successful because they don’t manage to acquire a critical mass of customers. The solution could be cooperation with big companies which can be a huge help for young companies’ growth – as a client, partner or investor.”
There are big-scale PropTech accelerator programmes in Western Europe and the US (such as MetaProp NYC), backed by several major real estate agencies and venture capital funds. There are also initiatives like JLL Spark or Concrete which explore acceleration options with startups. In Poland the PropTech accelerators are few, but the interest is growing.
The new face of the workspace
“Innovations and new technologies in the real estate market are the result of an inevitable trend,” says Jarosław Zagórski, Commercial and Business Development Director at Ghelamco. “Right now the most important asset of companies, especially in the services sector, are employees – the talent. We have to create the right work environment for them. If we can make it more attractive thanks to technology, why not do it?”
One of the drivers of end-user PropTech is the sharing economy and generational shift that has taken place in the last decade. Job mobility has increased and the lifespan of companies has become less predictable. We can see that in the growing popularity of coworking spaces and the shortening of lease periods on office space. Coworking spaces, pioneered by WeWork, are also shaping the contemporary culture of business, in which networking and exchange of ideas have become key. Shortage of talent makes attracting employees a priority and a well-designed and equipped office is a big advantage.
What took so long?
Why has financial technology, dubbed FinTech, been around for decades and PropTech has just recently become popular? Maciej Markowski, from SpaceOS, notes that the finance industry has long been the main destination for top-of-the-class computer science graduates. It relies heavily on algorithms and cost optimisation, because that’s how financial firms have always competed with each other.
And while some fields of real estate have a lot in common with finance – after all, property is primarily an investment – they are much less prone to taking risks and experimenting.
As Stanislav Frnka, CEO of HB Reavis Poland notes, “The life cycle of a property investment takes at least a few years and it can be even longer before a building can be declared a success or a failure. The same can be said for the ROI (return on investment) of some proptech solutions. That makes them very difficult to sell, especially for startups who have no successful implementations under their belt.”
Marta Bogacz is a freelance writer who specialises in new technologies and writing like a real human. She manages PR and communications for PLUGin (Polish Innovation Diaspora), a non-governmental organisation that connects Polish innovators worldwide and helps Poland-based technologies go global. Marta uses storytelling to promote the digital transformation and entrepreneurial approach to problems of reality.
What is PropTech?
The confusion about what PropTech actually means stems from the fact that it applies to technology used for many things: different processes of real estate development, different stages of a building’s life cycle, and different kinds of property.
“PropTech is technology that increases the efficiency of planning, managing, trading and using real estate at every stage of a building’s life cycle,” says Maciej Markowski, CEO and co-founder of spaceOS.
Dan Hughes, PropTech leader, former Director of Data and Information products at RICS, defines PropTech as, the label attached to the transformation that is happening to how we build and use buildings and how we do our jobs. PropTech is about the change in the industry, not the technology itself.”
What sets PropTech apart from traditional real estate-related technology is that it’s based on the use of data more than physics, biology or chemistry. It addresses problems in communication, logistics, process optimisation, investment, management and making data-based decisions.
According to Bartosz Dobrowolski, PropTech expert and founder of PropTech Poland, “PropTech is also the sum of all digital solutions that let people be in a space where they want to be rather than where they have to be.”
Logistics and construction
ProperGate has been implemented in Warsaw by HB Reavis at the construction site of Varso – the tallest high-rise building in the EU. The system supports logistics management of hundreds of delivery trucks daily in the strict center of Warsaw. The developer was looking for a solution that would minimise the impact on traffic congestion and improve productivity of operations at a very demanding construction site. Solving that problem helps avoid construction delays and decrease CO2 emissions, automating and improving the effectiveness of many internal processes at the site.
StructView has built two solutions: for developers and for city planning offices. They create interactive 3D visualisations of planned developments. Their City solution has been used by municipal offices to consult projects with the citizens and show how planned developments interact with the surroundings. StructView displays all the location-based data on the 3D model, including GIS, economical and demographic information.
VR Global builds advanced solutions including VR, AR and Touch applications that help Real Estate developers increase sales and enhance marketing of their off-plan investments. Recently, VRG released a dedicated VR platform that enables RE agents to create and host Virtual Open Houses for clients anywhere in the world.
Spaceflow allows building owners to connect all the building’s facilities and the users to each other. Aside from showing building users what amenities are available nearby, Spaceflow allows tenants and office users to collaborate, network or arrange carpoolingcar pooling. The app gives property asset managers the overview of all the buildings in their portfolio – both residential and commercial.
SpaceOS adds a digital layer to a workspace that improves the human experience of its tenants, functioning as a remote control for workspaces. It improves the effectiveness and lowers the cost of managing office or coworking property. SpaceOS helps the tenants and the owners of a building communicate, facilitates community building between the space users and helps manage operations like booking rooms, invoicing, marketing and maintenance. It can be integrated with apps and systems already used at the office.
Industrial property maintenance
SENSE Monitoring is a Polish startup that develops S-One: a system that uses laser sensors to monitor the condition of the roof in industrial and big-scale retail property objects. By eliminating the need for manual checks it lowers the cost of maintenance and safety of the building and its users.
Property trading and listing
ShareSpace is an online platform that matches professionals with office space providers: coworking spaces, serviced offices and conference rooms. The tool simplifies finding the right work space and making the transaction. Legal terms transparency lowers the cost and complexity of the traditional leasing process.
ChromaWay is a technology platform that can be used for land registration and mortgage workflows. In developed markets it solves problems relating to inefficiency, lack of standardisation, and insufficient auditing capability, while in less developed markets it also offers relief from corruption, and a path to digitisation.
Calibrate is a service developed by CBRE that analyses the digital footprints of 15m+ mobile phone users, tracking them to within 5 metres, which delivers actionable insights and outputs for clients, bringing their brand and location strategies to life. Calibrate allows occupiers, landlords and investors to make more scientific investment decisions.
Connected Helmet is a wearable technology developed by Skanska (in collaboration with Intel and Cybercom) for increasing the safety of construction workers. It monitors the wearer’s parameters and anomalies at the construction site, such as accidents or lowered body temperature. It’s connected to a central system that alerts supervisors in case of danger and locates the worker to minimise reaction time.
Bartosz Dobrowolski, founder of PropTech Poland: “Digital technology is already being implemented to optimise construction costs. This building life cycle stage is relatively short but involves significant funds so the savings are easy to justify, both in money and time. But the outcome of this stage – the building – is used for decades after that and landlords are starting to see the value of further cost efficiency and in user experience improvement that PropTech can add in those years to come.”
What problems is PropTech facing?
PropTech startups are facing two major difficulties:
- Reaching the real estate clients who need innovation
“In many cases, there simply hasn’t been the business case to persuade people to use technology. The property sector is one of the biggest, oldest and most established and it hasn’t really changed for many years, says Dan Hughes, PropTech leader. “This means that we are simply not used to innovating, thinking in different ways. We often see R&D s a cost, not as an investment like many other sectors.”
The biggest challenges stand before startups whose technology has the potential to eliminate jobs, or force the users to change their work habits. If the problem they’re solving is not causing the company enough pain, selling their product will be close to impossible
“Very often the main problem with tech companies is that they’re focused on technology and therefore sell technology itself, instead of its value for the user” says Bartosz Dobrowolski,founder of PropTech Poland. “You first have to identify stakeholders and their goals, then understand internal processes and find their pain points. That’s where you might want to apply new technologies.”
VC Investors are wary of backing startups whose value and potential for commercialisation they can’t evaluate without knowing the real estate industry.
Maciej Markowski notes with optimism that some real estate investment funds are looking at PropTech as an option to diversify their portfolios. Which shouldn’t be surprising, considering how much value it can add to their assets.
Who needs PropTech?
PropTech is the only viable solution to many problems which have long been addressed by simply assigning more people and work hours to mundane tasks. Examples of such solutions are Leverton.ai or JLL-owned Corrigo, applications that optimise property management operations by automating data entry and analysis.
“I see the biggest opportunities in AI-based solutions that drive process automation (Property/Asset Management), augmentation of complex processes (Maintenance/construction/planning), and applications that help people have a better experience in and around real estate” says Michael Ewert, Head of Business Intelligence EMEA at JLL.
But innovation doesn’t lie solely in new technologies being used for old processes. PropTech has the potential to disrupt the way real estate transactions are done and the power dynamics that have existed in the industry for centuries.
“The real estate sector is not only clustered in segments – and location based – but also owned by a hardly-definable owner structure. In addition, buildings are not ‘produced’ by a handful of global key players as for example in the automotive sector, which makes it very hard to follow a global approach as you would do in other industries,” says Jens Böhnlein, Global Head Office Solutions & Design at CA Immo. “However, the potential of disruption lies in new ideas that are questioning exactly this structure and by opening this sector to other forms. One of the most interesting examples is the progress of crowd-based investment platforms that were hardly thought of some years ago.”
Julia Arlt thinks what really needs to be changed by PropTech is the middlemen, and looks to Blockchain as one of the possible solutions.
“Blockchain is a new approach to connecting sources of data to each other,” says Or Perelman, Co-founder of ChromaWay. “In the real estate space, in which multiple actors come together to make decisions about large sums of money and weighty commitments, blockchain provides trust. ”
Jarosław Zagórski from Ghelamco says, “Right now we’re focusing on comprehensive digitalisation of office space. The solutions that we are testing and implementing will contribute to increasing the comfort of using office space, increase the efficiency of its usage, including cost optimisation, e.g. maintenance fees. The digitalisation of our buildings will benefit their users, as well as property managers and future owners.”
In research done in 2016 Anna Walkowska, co-founder of ProperGate and initiator of PropTech Poland, identified over 100 challenges that technology can solve at multiple stages of the commercial real estate development and usage. One of them are data management and communication issues in municipal offices. Because getting a construction permit involves numerous departments in the city hall, which are not always in perfect sync, obtaining the permit usually takes a few years. Walkowska claims that this process could be optimized by technology through a collaboration platform and shortened at least by half.
Is PropTech just a fad?
PropTech is not going away. The investment volume has been growing steadily for the last few years, surpassing $2.6 bn in 2016 (compared to $221 m in 2012) according to CB insights.
PropTech is real estate adjusting to changes in the global economy. Just like the gig economy, work automation, changing customer behaviour and increasing amount of data that has the potential to bring significant profit, there’s no putting PropTech back in the box and returning it where it came from.
PropTech in Poland – what’s happening now?
Real Estate Tech – by The Heart Warsaw, JLL, Ghelamco, EY
The Heart, European center for corporate-startup collaboration, launched Real Estate Tech Program in partnership with JLL, EY and Ghelamco. The programme brings together major industry players to define the most pressing innovation challenges, attract and select best late stage startups and work with them towards pilot implementations. The one-year programme is divided into three areas of expertise: cybersecurity & privacy, artificial intelligence & analytics, and human experience in real estate. As part of the programme, The Heart will host onboarding sessions in London, Warsaw and Dubai through the initial phase.
Urban Quest: Business Link, Skanska
Urban Quest is a PropTech scouting programme conducted by Skanska and Business Link Poland for start-ups from Poland, Hungary, Czech Republic and Romania. The focus of the programme is on connectivity (projects and solutions using IoT, smart technologies, mobile platforms, unexpected tools for office environment) and artificial intelligence (solutions using machine learning, robotics or big data analytics). Selected start-ups are mentored by experts to find product-market fit and refine their business model. The organisers also facilitate contact with potential VC investors, provide 3-month acceleration and possible implementation within Skanska office buildings and operations.
PropTech Lab Accelerator by CBRE
In March 2018 CBRE Poland is launched its own startup acceleration programme. They recruited startups that want to enhance the effectiveness of real estate professionals across all market segments. Of particular interest are ideas for workplace enhancement, but CBRE is also looking for innovation in logistics, property leasing, asset management. The agency and the programme partner will help startups develop the business idea and commercialise the product.