Proptech is an acronym for property technology. It is used to refer to venture capital investment in property technology startups. The focus of proptech is to make financing and completing real estate transactions easier and faster. It also aims to enhance the management of both residential and commercial real estate. Proptech is seen as the fintech of the real estate industry.
It is no wonder that Proptech or property technology startups have seen massive amounts of interest and influxes of cash. Real estate makes up one of the largest asset classes in the world in terms of investments. WeWork is a proptech firm that provides co-working spaces for people. It saw an almost 20 billion dollar investment in it during the past couple of years Other new property tech startups have seen investments in the hundreds of millions such as Katerra which builds factories for the commercial real estate sector.
2019 saw heavy investment in proptech firms such as Knock that work with what is referred to as trade-up buyers and iBuying in the real estate market. Trade-up buyers are homeowners that are looking to sell their existing home so that they can move into a newer, larger home. An iBuyer is a purchaser of a house that offers an instant offer for a home-based on its current condition. 2019 also saw a significant investment in online brokerage companies such as Compass and co-working firms such as Knotel. These investments are a clue of where proptech investment money is currently being spent.
One possible major trend that people should be aware of in the proptech sector is that short term-rentals in the real estate market could see a decline. This is due to two factors. There is a risk of an economic slowdown in the United States in 2020, which could mean that people will cut back on short-term rentals such as vacation homes. The other factor is that the short-term rental market has matured. This means that growth will be slow and competition fierce. Thus, the short-term rental market could see a significant decline in proptech investment.
Areas that could burst onto the scene in proptech investment include startups that make a real estate transaction simpler and faster. Real estate transactions are often very complicated and involve multiple parties such as buyers, sellers, appraisers, and brokers. A platform that could simplify the process could see huge investments.
Other areas that could take the proptech sector by surprise include artificial intelligence and big data. These categories will mostly be used in the construction and management side of real estate. AI and big data can help builders plan more spacious and energy-efficient homes. Property managers can use big data and AI to enhance customer service in the residential real estate environment and to reduce upkeep costs in the commercial setting.