CEO of SmartRentan enterprise smart home and smart building technology platform for property owners, managers and residents.
The residential landscape has an innovation boost. The growing real estate technology industry, or proptech, has introduced several approaches to technology related to the housing and real estate markets. There are many companies that fall into this sector such as Zillow, Arrived, Pacaso and my company SmartRent for example.
Despite the current adverse economic conditions looming, investors are rushing to proptech, at the pace of $4 billion in the first quarter of 2022 alone. In an industry teeming with ideas and innovation, these stakeholders know there are countless ways to make a difference in how people live and how companies manage real estate. Startups can take advantage of this funding if they know where to position themselves.
3 areas that Proptech innovators should focus on:
Several areas of proptech and the real estate industry in general are ripe for new approaches and technologies. Innovative startups entering the space have three focal points they can explore to get noticed.
1. Reduction of construction, operation and maintenance costs
Capital is central to real estate. While many think of a luxury building when discussing the high overhead costs of running a home, this is actually not the case. Landlords of multi-family homes in all shapes and sizes, as well as STR single-family homes, are faced with high operating costs.
The more that can be automated, or the fewer employees are needed to perform certain tasks, the more cost savings there are. For example, real estate owners can look to technological solutions for package management. With the sheer volume of mail coming into apartment buildings every day, if workers aren’t stuck sorting them, they can spend more time addressing construction needs.
These cost savings may even play a role in improving the stock of affordable rental housing. With proper local and state tax credit programs, owners incentivize to price units accordingly or make generous upgrades to account for pricing.
On the new construction side, developers are also navigating unfavorable conditions. Many are struggling to balance high land prices and supply chain bottlenecks with the urgent need to build more homes. Construction and builder-oriented proptech is another welcome area for innovators. Some existing initiatives are working to reduce barriers to building new homes. For example, we see efforts to rearrange urban areas to favor densely populated housing near work and transit hubs; increased adoption of better lottery use through associated housing units in places like California; and newly built single-family homes throughout the Sunbelt.
New technologies and ideas that build on this momentum can help these and other initiatives come together to have a broader impact on affordability and quality of housing.
2. Understanding energy consumption and driving green decisions
A long touted benefit of proptech is the promise of better data collection. Smart meters, sensors and other smart home technologies can provide unprecedented insight into climate risks, energy efficiency, usage patterns and more to make better decisions about decarbonisation.
Existing frameworks have already proven the return on investment of prioritizing better materials and sustainability practices. per hour JLL Report, certifications such as LEED and BREEAM can generate a rental premium of 6% and a sales premium of nearly 8%. In fact, LEED certification has: become so popular that for residents and investors it is increasingly an expectation rather than a nice-to-have. Similarly, JLL researchers concluded that there is also a financial risk of not adopting the latest framework as it becomes more difficult and expensive to sell older, non-durable properties.
There is a need for new innovations that build on this progress. Investors and VCs are looking for ideas around areas such as the next generation of LEED or the tools and technologies that drive us to decarbonization. The goal is to help developers create greener, healthier and more resilient spaces.
3. Increase Liquidity and Access with Better Trades
Another big part of the proptech ecosystem is companies working to increase liquidity and access to property by making it easier for people and businesses to buy and sell real estate. Countless entrepreneurs work on the transaction and investment side of real estate. There are companies working to reduce transaction costs with home listings or offering buy-for-sale solutions that increase investment opportunities for moms and dads with digital investment offerings. Home builders can also partner with such companies to market their communities and help buyers buy new construction quickly and efficiently.
How does this innovation improve the residential landscape? It enables more people to enter the market and build equity. It also makes it easier for landlords and operators to find and buy properties to provide tenants with quality housing. If demand for rental shoot upIt is critical that operators have the tools at their disposal to create smooth rental transactions, such as streamlined rental application processes, virtual and self-guided apartment tours, and easier secure payments.
Given the sustainability of the real estate industry, it’s no surprise that the technology serving the sector is reaching new heights. Moreover, the entrepreneurial landscape is full of passionate thinkers who need to change the world. With these components combined, proptech is poised to revolutionize the housing landscape.