The real estate sector is one of the last great frontiers for disruption by technology. The $280 trillion real estate industry is the largest sector in the global economy and is undergoing a seismic, transformational shift as it makes up for 20 years of underinvestment.
The supply and demand dynamics of the proptech market have recently converged to create an enormous opportunity for significant value creation and growth. The adoption of technological advancements in real estate has grown, with digitally native consumers, agents and executives representing an increasing proportion of key decision-makers. This growth has been accelerated by the realization that the real estate sector can no longer rely on its past practices, as the COVID-19 crisis required every company to accelerate adoption of digital solutions — marketplaces to replace offline processes, SAAS products to streamline workflows among disparate and remote work teams and new data capabilities powered by machine learning and artificial intelligence. Technology adoption in the real estate sector can no longer be Plan B — the market demands for it to be Plan A.
As the demand picture unfolds, one must ask — where are the iconic companies that are supplying the technology solutions to the real estate market? The fact is that proptech companies are being built today that could not have been built a decade ago. Advances in fintech, technology infrastructure, machine learning and artificial intelligence in the last 5–10 years are enabling the formation of an entirely new generation of companies.
Proptech 1.0 companies historically leveraged foundational technology infrastructure, access to capital markets and digital marketing to compete with legacy technologies and create new ways of doing business. However, they did not have the benefit of those critical enabling technologies to build truly transformational businesses. In the same way Uber was unable to be created before the advent of smart phones and GPS, so too did real estate need its own prerequisite infrastructure in order for it to change.
Proptech 2.0 companies, therefore, are now able to create entirely new business models and products that could not exist before. With algorithmic and machine-based capabilities, companies can now ingest gigantic volumes of data and payment flows, resulting in superior consumer products and end-to-end solutions that are transforming the real estate industry by an order of magnitude.
We are in the early innings of the Proptech 2.0 revolution and at Prudence, we are committed to finding the next generation of iconic companies.