Book review - 'PropTech 101: Turning Chaos Into Cash Through Real Estate Innovation'

“The wave of tech-enabled innovation transforming real estate today eclipses the revolution wrought by the first skyscrapers”, write Aaron Block and Zach Aarons, founders of New York City-based startup investor MetaProp, in an insightful new book on proptech. The authors, who have invested in numerous proptech startups, give a wealth of examples of how real estate markets are being transformed by new technologies.

If you want to get a good overview of everything that’s going on in proptech, the new book 'Proptech 101 – Turning chaos into cash through real estate innovation', published in the Spring of 2019, is an excellent place to turn to.

The authors, Aaron Block and Zach Aarons, are some of the most experienced people in the proptech field. They are the founders of MetaProp, a New York-based venture capital firm focused on the proptech industry, which since its founding in 2015 has invested in over 100 proptech startups which together have raised over $2 billion and now employ more than 1500 people around the world. They also advise incumbent real estate players and investors on their innovation strategies.

Few people presumably still need convincing that digitalisation will transform real estate markets, but the countless examples highlighted in the book make it clear just how radical this transformation is going to be. In this sense the comparison with the revolution wrought by the skyscraper does not quite capture what is going on: the proptech transformation does not have a single symbol of change. It is multifaceted and consists of a host of relatively small technological changes that nevertheless will take real estate into a wholly new world.

The stuff of sci-fi

To make some sense out of the many-sided proptech transformation, the authors distinguish three “broad categories of threat”, which are by the same token opportunities: automation, disintermediation and functional obsolescence.

On automation, they note, for example, that “already, much of the analysis that used to be done by brokers or other staff in real estate is increasingly performed by software. Much of the data that management companies collected at buildings can now be transmitted automatically by sensors and then integrated and analyzed by software, all controllable from a dashboard accessible by laptop, cell phone, or tablet…” Another example: “Autonomous construction is also advancing rapidly. How will contractors who can build entirely with robots or 3-D-print whole structures affect rivals relying heavily on human labor? These and other automation efforts sometimes feel like the stuff of sci-fi.”

Disintermediation is perhaps an even more shocking topic. “An enormous amount of profit in real estate is earned by middlemen”, write Block and Aarons. “Brokers, leasing agents, deal makers, attorneys, property managers, etcetera. ‘Disintermediation’ is a fancy word for the elimination of the middleman from the process. It is a hot topic in PropTech because, some think, the right platform could eliminate the need for many if not all brokers, leasing agents, and other intermediaries, removing a layer between buyer and seller, landlord and tenant, and so on.”

Functional obsolescence is yet another major threat-slash-opportunity. “Could you imagine renting office space in a building that didn’t have high-speed internet access?” the authors ask. “We are moving into an age in which appraisers who rely on notebooks for inspections, real estate agents who don’t have a customer relations management (CRM) system, and property managers who roam basements reading meters, will appear equally anachronistic.”

Instant buyers

But perhaps the most hard-hitting part of the book are the numerous examples of new players and the innovations they offer. For example, OpenDoor, Knock and OfferPad - iBuyers, or instant buyers – “make instant offers for homes, based on their automated online valuations, and can purchase properties without paying a sales agent’s commission.” A California company called Dynasty “offers an artificial intelligence leasing agent named Lisa … that adapts to learn your existing portfolio software and runs your leasing business while you sleep.”

Bulletin “opens physical stores and lets brands rent sections on a monthly basis to sell their products. Click a button on its website, Bulletin promises, and your goods can be in one of its stores within five days.” Bowery “arms its appraisers with a cloud-based mobile inspection app to deliver high-quality appraisals in less time than top competitors. And so on. The authors note that “It’s difficult to track the high volume of start-ups working on dazzling solutions. We’re continually amazed by the creative tools, solutions, and platforms young entrepreneurs are testing.”

Some readers may resent the influx of what they regard as impersonal technological forces into their “people’s profession”. But that might be a mistake. The PropTech transformation, write Aarons and Block, is, in the end, about people: “about a new mind-set, one that values a culture of innovation and is centered on the customer experience. If our start-ups are also upstarts, it’s not because of dazzling digital tools but because they view real estate as more of a service than a product. They think that information should be transparent and widely available. They value speed and efficiency. They want awkward and time-consuming transactions to take place online with the same ease that they now have in other industries.” And that’s perhaps the most important takeaway from the book.