PropTech study by Union Investment and GTEC
• Slow and cumbersome decision-making processes are a primary obstacle
• Building use phase offers the biggest potential for cooperation
• Building performance benefits the most from Technology
Great ideas and viable business concepts are often worlds apart. In the context of the proptech market, what separates these worlds from each other is frequently 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.”
Jörn Stobbe, Chief Operating Officer
1. Problems initiating cooperations with established companies
In the recent startup study conducted by Union Investment and the German Tech Entrepreneurship Center (GTEC), which involved polling some 100 proptech companies worldwide, more than 52 per cent of the digital innovators cited “slow and cumbersome decision-making processes” as a major problem when trying to initiate cooperative partnerships with established companies.
2. What start-ups want for good cooperation
For 68 per cent of the respondents, speeding up their partners’ decision-making processes is 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 per cent in each case).
Statement by Jörn Stobbe
“Decision-making processes cannot be changed by taking a disruptive approach. Startups need to learn that complex decision-making processes and the openness shown by many real estate players towards entering into alliances of various forms are not mutually exclusive – in fact, they are two sides of the same coin. Pilot projects are the most efficient way of getting to know each other."
3. Types of cooperation that are most important
For nearly three quarters of the proptechs questioned in the study, pilot projects are in fact the main way of meeting real clients and putting their idea to the test. Of the various forms of cooperation, proptechs find joint ventures and discussions with experts particularly important, whereas there is less demand for co-investment, the development of minimum viable products (MVPs) or joint events.
4. What makes cooperation interesting
More than 70 per cent of respondents are seeking access to established players. Tapping into the knowledge and expertise of large companies clearly plays a vital role (57 per cent), but nearly 80 per cent of the respondents indicate that it is large real estate portfolios, i.e. the assets themselves, that make cooperative partnerships attractive for proptechs.
5. What will be effected most quickly by PropTechs?
Accordingly, proptechs believe that property management, with its direct access to properties, is the field that will be first to experience widespread technological change (63 per cent). Some 42 per cent of the proptechs surveyed believe that transactions will be at the forefront of digitisation.
Statement by Jörn Stobbe
“In Germany, the land register system makes it impossible to digitise the entire transaction process. However, subprocesses such as due diligence or contact functions could definitely be streamlined. Proptechs would therefore be well advised not only to think about large-scale challenges, but to develop an understanding of subprocesses that represent real pinch points”
6. The biggest effects on the real estate industry through tech
When asked about the most significant impact of new technologies on the real estate sector, the overwhelming majority of proptechs (67 per cent) cite improvements in building performance.
7. What tech will effect the real estate industry the most in the next 5 years?
Looking ahead to the next five years, the biggest impacts for the real estate sector are attributed to a group of three technologies: smart building/the Internet of Things, (big) data analytics, and deep learning/artificial intelligence.
About the PropTech-Study
Around 100 proptech startups worldwide were surveyed online for the study by Union Investment and GTEC. The main focus was on Europe, with the majority of respondents being based in Germany, the UK and Spain. Around 50 per cent of the participating startups had been operating for two to three years when the survey was undertaken (October–November 2018); 32 per cent had been in the market for up to one year. Accordingly, most of the respondents (60 per cent) were at the (pre-)set-up stage (seed or pre-seed). Some 32 per cent were at the earliest stage of financing (Series A). The overwhelming majority of the respondents (84 per cent) are currently working with established real estate companies. Real estate industry players have taken equity stakes in around 36 per cent of the startups.