What is PropTech and why is it gaining relevance?
October 31st, 2022
5 min read
Property is the literal foundation of most businesses. The development, maintenance, and optimisation of property is an important facet of running a corporate business. But what does property management entail? It is more than just cleaning the floors and keeping the coffee machine operational. Any successful corporation will seek to stay up-to-date on modern technologies and incorporate them into company real estate to maximise economic potential. It is difficult to imagine a modern office without an internet connection, for example.
PropTech, or property technology, is the suite of technologies that deals with the search, renting, purchase, closure, monitoring, and maintenance of property. Proptech solutions like digital property platforms are already widely used for residential and commercial real estate. However, commercial real estate in particular has additional requirements mainly concerned with productivity, efficiency, monitoring, and upkeep. With modern work trends, public health concerns, and employee expectations commercial proptech is becoming a necessary and indispensable part of the corporate toolkit.
Realities of Commercial Real Estate
Owners of commercial property today face more challenges and constraints than before. In addition to the old requirements of keeping space costs affordable while delivering maximum productivity, businesses today must adjust to changing work trends and the phenomenon of hybrid work. The World Green Building Council (WorldGBC) reports that out of the total costs of running an office building, 9% goes towards rent. If a business has half its employees working remotely 3 days of the week, what is its ideal office size that optimises costs while not impacting productivity?
Besides, there is increasing evidence that employee culture is changing decisively towards being more experience- and purpose-oriented. Research also suggests about 40% of employees are dissatisfied with comfort in their office space. How do property owners, both corporates and REIT leasers, make their space attractive to occupants? The issue has implications for employee experience, employee productivity, and employee retention.
There is also the question of energy and its attendant costs. Despite utility costs estimated to make up only 1% of office costs, rising prices make it worthy of some consideration. Increased electricity costs due to global instability are now a permanent reality. At the same time, there is a concerted push from businesses towards sustainability and ESG adherence. 30% of the energy used in a commercial building is wasted, according to the U.S. Environmental Protection Agency. This is another challenge facing owners of commercial real estate.
PropTech to the rescue
PropTech harnesses digitalised technologies like IoT devices, data analysis, and artificial intelligence to address real estate challenges. By discreetly collecting usage and ambient data proptech solutions make available information to owners that enable intelligent decisions regarding office costs, space, and occupant experience. More sophisticated approaches can even automate the decision-making process, giving business owners an easy install-and-forget experience.
A whole 90% of office running costs is reportedly spent on employees and occupants, according to WorldGBC. Because of its distributed nature proptech can affect this mass of the office population and extract significant benefits in user comfort and productivity. At the same time, the largely digitalised technology offers centralised control to owners, enabling better and more efficient modulation of energy-intensive operations.
The incorporation of artificial intelligence into property management adds yet more facets of value. Extensive space usage, tracking, and occupancy data can be fed into AI-based analysis and recommendation engines. This results in intelligent insights that help optimise office space usage in existing settings, and also guides future redesign and right-sizing.
Intelligent Lighting – a PropTech example
Intelligent lighting is perhaps one of the most widely adopted examples of proptech in both residential and commercial real estate. With lighting comprising 11% of a building’s energy use (according to the U.S Department of Energy), coupled with the central importance of light to user experience, the motivation to optimise it is obvious. By using ambient and occupancy data proptech lighting systems can control on/off states, light levels, and light temperatures. The result is an experience that maximises occupant experience, reduces visual fatigue, and minimises energy wastage. Smart lighting systems are estimated to consume 90% less electricity than normal lighting, and as a consequence also operate with greater durability.
In an increasingly digitalised world the trend for proptech adoption can only be up. Data remains the cornerstone of modern businesses and increasingly even households. Whether it is usage data, ambient data, presence data; or property lists, rental data, demographic data, a system that can mobilise vast information into intelligent action is bound to deliver benefits in productivity. With increasing ‘disruptive’ events related to natural disasters, environmental degradation, health pandemics, and government emergency responses, pressures on businesses to be agile and efficient are slated to increase. Proptech stands to gain from these technological, political, and commercial developments; and corporations that administer their real estate with modern technology are likely to be the winners in the new world.