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In theory, commercial real estate companies are eager to embrace the advantages that technology have to offer. In reality, there can be a fundamental disconnect in the relationship between a proptech firm and a real estate company–namely a lack of understanding on the part of young company founders when it comes to decision-making processes in the real estate sector.
“Regulations, IT security and documentation requirements, combined with a myriad of prescribed processes, all create an obstacle course for startups which hinders cooperation with established real estate companies,” said Jörn Stobbe, Chief Operating Officer and managing director of Union Investment Real Estate GmbH, who surveyed 100 global proptech companies on the subject.
The study, which was conducted by Union Investment and the German Tech Entrepreneurship Center, found that more than 52 percent of the digital innovators cited “slow and cumbersome decision-making processes” as a major problem when trying to close deals with real estate companies. For 68% of the respondents, speeding up their partners' decision-making processes was high on their wish list for effective cooperation, followed by a greater appetite for risk on the part of established companies and more willingness to embrace different collaboration models (60% in each case).
For these reasons, pilot projects are the most efficient way of the companies getting to know each other and finding out where the pain points are, Stobbe says. And he adds, perhaps as a warning to both parties: “It's important not to wait until everything is perfect before you get going, though, otherwise you'll probably be too late to market.”
What Proptech Companies Want
Overall, the study confirms that proptech startups are very much interested in cooperative partnerships with the industry, with more than 70% of respondents more or less actively seeking access to established players. Tapping into the knowledge and expertise of large companies is important to these startups (57%), but nearly 80% of the respondents indicated that it is large real estate portfolios — i.e. the assets themselves — that make cooperative partnerships attractive for proptechs. At the same time, they place less emphasis than expected on access to big data, capital or regional markets as their main drivers for forming alliances.
CRE Companies' Internal Qualms
A reluctance to fully embrace proptech is also behind some of these misaligned expectations between provider and user. In a separate study, KPMG's Global Protech Survey highlighted that real estate companies are still slow to adopt these technologies despite the widespread appreciation of what they can deliver.
To be sure, in KPMG's survey the vast majority of respondents view technology and innovation positively; 73% see it as an opportunity and a further 25% see it as both an opportunity and a threat.
However, while property professionals increasingly understand the benefits, the continuing theme from this year's survey is that few are actually putting their words into action, KPMG writes.
More than half of respondents (56%) ranked themselves as 5 or less out of 10 with regards to their digital and innovation maturity. Only 7% consider themselves to be at the cutting edge of proptech.
“Many CEOs are still waiting for their peers to make the first move and will likely look to be 'fast followers'”, KPMG wrote.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
