PropTechs are revolutionising real estate

 

The years 2015 to 2019 were synonym of fantastic growth for real estate start-ups, also known as “PropTechs”. But how do things stand today?

In the course of the past 5 to 7 years, new digital players have appeared on the scene in every corner of our everyday lives. For some of them, growth has been exponential because they successfully renewed codes in fields such as individual mobility (Uber), tourism (AirB&B), food (JustEat) and banking (N26). For real estate, construction and urban management too, there has been no escaping this new wave of digital technology. Courtesy of technologies that have now matured and of new players determined to upend old habits, we have seen any number of PropTechs emerge around the world. In tackling a sector accustomed to long cycles and models marked by stability, PropTechs (in France alone there are nearly 600 of them) have addressed a number of components in the value chain: marketing, customisation, optimisation of vacancy, services to occupiers, flexibility, co-working, co-living and car parks, etc. Changes have hit a whole range of activities, some of which have been forced to reconsider their roles.
The last 2 to 3 years of active cooperation between traditional players and start-ups have helped create a form of “fashionable” effect, and importantly enabled each one to test and position themselves. While things may sometimes have gone a little too far (notably in valuations, communication and promises), the time has come for consolidation. Most major firms are organised with Innovation Departments that have learned how to manage the internal and external complexities of collaborating with start-ups. At the same time, there is still a large number of PropTech start-ups being created, albeit usually with more robust approaches, being better informed as to the specifics of the real estate sector and better targeted with regard to the industry’s pain points.

Thomas Le Diouron, Founder of the development accelerator Impulse Partners

Impulse Partners groups together around 500 start-ups working in fields related to industry, building, civil engineering and real estate.

What are the consequences of the emergence of these new players?

Firstly, and this is good news, the big companies have gradually learned how to cooperate with these start-ups. Whether through the development of joint projects (proof of concept) or the creation then roll-out of products/services via MVPs (Minimum Viable Products), companies in the construction and real estate sector have begun the transformation of their organisations, often by and thanks to these PropTechs.
Secondly, a number of these major companies have gone a step further by creating their own investment funds or by investing in dedicated PropTech funds. The latter provide the wherewithal to source potential start-ups with which they can work and maybe decide to invest in them directly. In a financial context conducive to significant fund-raising, one particular consequence is to inflate the valuations of these young companies, sometimes unreasonably so.
One thing is for sure: while this infatuation with PropTechs is allowing the real estate sector to transform apace, we still need to keep a close eye on the future profitability of these new players, whoever they may be. While innovation and transformation are as urgent as ever, they should not be pursued at any price.