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The financial investment in technology from year to year is staggering—and accelerating—as investors race for the potential payouts of new technologies that grab the attention of consumers. Think ChatGPT. The tech giants we know—Amazon, Apple, Google, Meta, and Microsoft—are heavily invested in developing new technologies. In fact, big tech dominates tech investment. In the first three quarters of 2023, big tech invested US $173.7 billion in research and development compared to US $105.3 billion invested by venture capitalists in the same period.
It’s interesting to know where the tech investment dollars are coming from, but it’s also important to keep an eye on where those funds are going. Investors are funding research and the development of numerous technologies with the potential to have a huge impact on the real estate domain and beyond.
Investing in Proptech 2024
As 2024 unfolds, research indicates that the percentage of tech investment dollars in some of the top proptech categories will look like this:
- Architecture, engineering, and construction (AEC)—36% of proptech investment funds
- Sustainability—30% of proptech investment funds
- Consumer/broker tech—4% of proptech investment funds
Several factors are driving tech investors to pour money into AEC. The demand for long-term construction is strong, but a shortage of skilled labor continues to plague the construction industry. Despite AEC being one of the biggest global industries, the labor shortage combined with a history of being slow to innovate and digitize is why this space accounts for the high percentage of tech investment funds in 2024. AEC tech investment momentum is also being driven by its potential to transform the construction industry and consumer demand for interoperability.
Increasing climate risk is driving proptech investments in sustainability. By now, you’ve seen the headlines that 2023 was the warmest year on record, and there were 28 climate events costing more than one billion dollars in the U.S. in 2023. As these events create increasing risks and costs for property owners, the demand for decarbonization and energy efficiency, indoor environmental quality, climate resilience and related issues becomes more urgent. Increasingly, property owners are subject to growing government regulations and environment, social and government (ESG) mandates. Proptech solutions will play larger roles in addressing these issues in the near term.
Proptech companies will expand their commitment to consumer/broker technologies while investors increase funding in this area. Technologies that focus on easing transaction pain-points for consumers and real estate agents, property searches, property viewing, contracts, data, smart homes and connectivity (e.g., the Internet of Things [IoT]) will continue to attract investors.
Proptech Business Opportunities in 2024
Proptech tools offer the potential for expanding business opportunities and process improvement for real estate professionals. These technologies can offer efficiencies such as improved transparency and communication with consumers and supportive administrative tasks for agents.
The property search process can be vastly enhanced for real estate professionals and buyers alike by using artificial intelligence (AI) tools. Beyond using generative AI to write property listings or modify staging photos, AI also can be used for 24/7 customer support, workflow automation, predictive property values and analytics, streamlining due diligence and error reduction. For buyers, AI algorithms can analyze vast datasets including user preferences, search histories and property details to offer customized property suggestions in specific locations.
We now have the data and computer power to make sense of the vast amounts of data on real estate and consumers. Data analytics and data management tools can be used to make real estate professionals more responsive to shifting consumer behaviors, market trends and business priorities.
Property viewing is an area of real estate in which proptech is starting to make inroads. There is tremendous potential to transform the viewing process through technologies such as augmented and virtual reality (AR/VR). Soon, potential buyers will be able to view homes and walk through an entire house without being on location by using VR glasses. AR tools will allow real estate professionals to see and record room features, measurements, and characteristics while walking through a home. Imagine being able to put on AR glasses, walk through a home, and within minutes, have a floor plan, 3D dollhouse, and pictures ready to share with consumers. This is the power of AR.
Currently, Meta is in the market with Meta Ray-Ban Smart Glasses, which combines livestreaming and AI technologies. Apple recently announced the upcoming release of its AR glasses, Vision Pro, which have the potential to support viewing properties. There is no doubt that tech companies are close to delivering fully functional AR glasses that will be part of our everyday lives, including real estate, soon.
Understanding property design and layout will be transformed by digital twin technology in both the construction and property viewing phases. An exact three-dimensional digital model of a property can be created so potential buyers can study and explore properties, understand the current conditions of a property (e.g., potential damage, date and place of repair), fire escape plans, and how that property can withstand environmental conditions such as severe weather and natural disasters.
Real estate transactions are another major business area that can be transformed and improved by proptech. Many tech investment reports indicate that data privacy and security and cybersecurity tools will dominate tech investments in the coming year. Privacy and security tools are invaluable to real estate professionals due to the sensitive nature of information involved in real estate transactions. In addition to the need for secure electronic financial transactions when dealing with large sums of money, there are various types of sensitive data needed for real estate transactions that are critically important to secure, including contracts, personal identifiable information (PII), sensitive property information and financial data. Hackers in the digital realm target this information. Improving tools that advance data privacy and security, especially for systems that rely on large datasets, is a high priority for tech investment dollars.
Seize the Opportunities in Proptech
It’s an interesting and exciting time for real estate innovation. Tech investors—big and small—see opportunities and recognize the potential to bring transformative proptech solutions to real estate professionals and consumers.
Technologies that impact and improve the real estate space will continue to be developed and introduced. Understanding what those tools are and how to use them provides the opportunity to evolve and deliver services that tech-savvy consumers want and need.
