COVID-19’s impact on the real estate industry cannot be understated. As workers moved from their cubicles to their couches, office buildings stood largely empty for months. Yet, as time went on, companies began to wonder if remote work was a sustainable option. And while they were stuck at home, consumers weighed their housing needs and drove unprecedented demand in the residential sector. It’s been a few years since real estate as a whole has felt “normal.”
While the COVID-19 pandemic has proved challenging for the commercial real estate sector, it’s also accelerated many of the trends that were already unfolding in the industry. Evolving tenant expectations, growing technology adoption, and the rise in digital marketing are a few key examples. In fact, we’ve seen more technology adoption since the start of this crisis than in the past three years, signaling that this pandemic has been a significant catalyst of change. The bar has been raised for landlords, and it's pushed real estate forward by light-years.
What is proptech?
Proptech, or property technology, is a growing subset of technology platforms that are focused on improving workflows and access to real-time data by bringing properties and their owners from offline to online. For commercial real estate technology (or CREtech) specifically, these platforms can help reduce paperwork, improve security and efficiency, streamline leasing transactions, and provide better insight into a portfolio by centralizing teams, processes, and data into a single digital workplace.
Proptech is the greatest modernizer of real estate, an industry that Forbes describes as “the largest asset class in the world — worth more than all stocks and bonds combined — yet one of the last to adopt technology.”
How COVID-19 accelerated the adoption of proptech
2020 started out as a strong year, but as we all know, a cliff was coming. COVID-19 tanked the commercial real estate industry, with leasing demand down by 66% from pre-pandemic levels.
Something unprecedented was happening, and the shift in market demand left owners in the dark. Clearly, there was an opportunity for data to inform how commercial real estate should move forward. Proptech had been a "nice-to-have" feature, but changing tenant and broker needs to be compounded by a lack of forward-looking insight, accelerated the adoption of new solutions.
COVID-19 presented new issues and illuminated pre-existing opportunities:
- Tenants preferred virtual tours over in-person visits amidst global work-from-home mandates
- Leasing teams and brokers needed access to information that wasn't centralized — and was likely sitting in a folder on their desk at the office
- Real estate companies needed better data to help navigate unprecedented market conditions
94% of investors believe that COVID-19 will expedite the support of proptech solutions, and it's shown in increased funding. Last year, $9.5 billion was poured into proptech ventures, and with continued development, we'll be better prepared for the "new normal" of the future.
The future of proptech
So what does this mean going forward? Flexibility and accessibility will remain a top priority. Proptech solutions will help landlords deliver on brand-new tenant expectations — from virtual tour options when they’re looking for space and seamless, online lease negotiations to a tech-enabled experience once they’re on-site at their new space.
Another pro: The growing use of proptech solutions makes access to data much easier, helping to shorten the time to conviction for a plethora of business decisions. This will continue to shorten leasing and investment cycles, saving downtime and vacancy costs.
There are a lot of possibilities on the horizon. Expect popular solutions from the pandemic to be standard practice in the future:
- Virtual tours allow occupiers to begin the tour at home.
- 3D space renderings simulate walk-throughs of unbuilt space.
- Digital floor plans help orient layouts for brokers and tenants.
- Scheduling tools accommodate virtual meetings and calls.
- Online space listings deliver marketing analytics to attract the right tenants.
- Digital end-to-end leasing makes the process easier and faster for tenants and tenant rep brokers.
- Tenant experience solutions cater to tenants' needs and expectations around workplace community, amenities, and technology.
Change is here, and there's no going back. As vaccinations bring employees back to the office in new ways, companies will shift their gaze toward properties that address their "new normal." Landlords will need to continue to innovate and adapt to new trends and expectations — with proptech being one of the largest shifts. Post-pandemic, if you’re not adopting new technology, you’re falling behind.
Though the commercial real estate industry was a late adopter of digital technology, the future of proptech couldn’t be brighter. It’s not a matter of whether or not commercial real estate will continue to adapt —it’s a matter of when and how.
Learn more about proptech in a post-COVID world in this on-demand webinar featuring Fifth Wall Co-Founder Brad Greiwe.
