PropTech taking hold in commercial sector

by Neil Sharma29 Jan 2019

A report from Altus Group has found that the commercial real estate sector is adopting technological platforms to such a degree that tomorrow’s industry will be rendered unrecognizable from today’s.

The Altus Group CRE Innovation Report surveyed 400 commercial real estate executives at firms totalling over $2 trillion worth of assets under management, and noteworthy findings are:

  • 41% of them use automation for benchmarking and performance analysis
  • 36% use automation for budgeting and forecasting
  • 61%  of North American CRE [commercial real estate] executives use an online lending platform

“From a crowdfunding perspective, you’re giving a broad, wide array of investors the opportunity to invest in a piece of real estate, whereas in traditional commercial real estate, you have folks that syndicate money or are tied in with a high net worth individual,” said Ross Litkenhous, global head of business development for Altus Group. “Everybody gets a percentage of a deal. From crowdfunding you’re going out to the masses and asking people to invest in a deal through some sort of online platform, which is not the way real estate has been traditionally done. It’s taking an evolutionary leap.”

According to the report, a combination of new market entrants and technologies, as well as changing demographics, have created disruptive models on the commercial side of the real estate industry. Taking it a step further, companies within the industry have already begun heavily investing in PropTech in a bid to influence the future direction of the industry.

“This means significant opportunity for firms who rapidly embrace innovation and PropTech to streamline their systems and processes to reduce complexity. Staying on top of the disintermediating drivers will help ensure CRE executives are well-positioned to leverage the latest available technologies to their advantage,” read the report.

Adoption still has ways to go. Litkenhous mentions the bell curve—whereon innovators lead the way, followed by early adopters, then the early majority who are followed by the late majority, and lastly the laggards—and reckons the industry is at the early majority phase.

“What that means is it’s gotten enough mainstream coverage and enough folks who have trusted the technology enough to do deals, and they have seen the value,” he said. “Now larger companies and larger players are saying it’s been out long enough that it’s time to adopt. In our survey, we saw 53% of our respondents said they were directly investing in one type of PropTech firm.”

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