PropTech: Property Technology, the new frontier of real estate, Part 1: Introduction

PropTech: Property Technology, the new frontier of real estate, Part 1: Introduction

January 4, 2022
Commercial Real Estate Bulletin

3 minute read

In this 3-part series, we consider the concept of PropTech, its impact, benefits, and challenges.

What is PropTech and why is it important?

Technology and its rate of change continue to be a significant disruptor across all industries, including industrial, commercial and residential real estate spaces. Property-related technology, commonly referred to as “PropTech”, exists at the intersection of real estate and technology, and finds innovative opportunities for technology to enhance the experience and function of the real estate industry, both at the transactional level and with regard to the provision of related support services. This somewhat nebulous concept of PropTech is quickly becoming a focus for entrepreneurs and investors to claim ownership of the term, and overlaps with other start-up related industries, such as ‘contech’ (technology used in the construction industry) and ‘fintech’ (technology used in the financial sector), as well as smart buildings and smart cities. With real estate being the largest asset class in the world, it is only a matter of time before this ecosystem is disrupted by the implementation of technology.

PropTech proponents identify gaps and inefficiencies in the real estate market and related industries, and insert highly innovative technology-driven solutions into sectors traditionally resistant to change, such as buying and renting, management, evaluation, financing and construction. PropTech offers new market opportunities for companies operating in the real estate sector, in particular by modernizing and increasing the efficiency of real estate developer projects, reinventing product and service offerings and developing applications, software, as well as other data analytics to streamline real estate initiatives. Private equity and venture capitalists are taking notice, as investments in this area have grown exponentially over the past few years. For example, PropTech startups in Canada, such as Sonder and ecobee, raised $698 million and $203 million, respectively, from various funding sources.[1] In order to take advantage of this new opportunity, those interested in engaging with PropTech will first want to know what it is, its impact on the market, and the associated risks.

What is the impact of PropTech on the market?

PropTech is fundamentally changing the way we interact with the physical world around us, whether at home, at work or in public spaces. Here are examples of how PropTech integration is disrupting the market:

  • During COVID-19, owners became concerned about air quality in buildings. Poppy, “the world’s first commercial pathogen detection and detection network”, appeared and provided virus monitoring services to building management.[2] Technology applied to real estate has provided a solution to a modern health problem.
  • Fundever’s digital platform provides the space to connect mortgage brokers with commercial lenders, creating a “unified digital marketplace for commercial real estate.”[3]
  • Other companies engaged in PropTech ventures are looking to become the “Uber” of real estate, trying to find the services most people need, like buying a home, and making it a smoother process. accessible and transparent.[4]

The agile nature of start-ups provides a competitive advantage across industries, due to their ability to innovate and radically redesign existing systems. COVID-19 has accelerated the speed of technology adoption – what was once a “nice to have” is now critical to continued functionality. Business needs are reassessed and evolve, as consumer needs and wants grow and change. While it’s currently hard to imagine real estate market disruption on the developer side, through the use of data analytics, blockchain and virtual reality, the way we do business in this sector could be radically different in as little as the next. 5 to 10 years.

In the future Part 2 in this series, we will explore some of the benefits of PropTech, and in Part 3the associated risks.

If you are seeking advice on PropTech matters, including real estate acquisition or leasing, development and construction, software licensing, privacy and data protection, or raising capital, please contact the authors of this newsletter to find out how the technology, construction, real estate, capital markets and intellectual property teams can help you.

[1]Proptech Collective, PropTech in Canada 2021 Report (February 2021), online: Proptech Collective at 18-19 [Proptech Collective Report].
[2]Proptech Collective Report at 33; see also “Poppy” (last visited January 4, 2022), online: Poppy.
[3]“FundEver” (last visited January 4, 2022), online: FundEver.
[4]See, for example, “Properly” highlighted in Toronto Life.

by Alex Bruvels, Robert Piasentin, Kailey Sutton, Kaleigh Zimmerman and Madeline Klimek (intern)

Caution

The above provides an overview only and does not constitute legal advice. Readers are cautioned not to make any decisions based solely on this material. Rather, specific legal advice should be obtained.

© McMillan LLP 2022