PropTech: Real Estate’s Next Wave of Digitization, Embracing AI & New Talent

The COVID-19 pandemic upended where and how the world uses spaces. Office attendance remains dramatically lower than it was before the pandemic. Perhaps even more transformative than soft demand, occupiers have a new set of needs far beyond what real estate companies have traditionally provided. Hybrid work and omnichannel sales require that landlords supply creative physical designs as well as innovative services and solutions. 

Historically slow to change, the real estate industry’s fast adoption of PropTech services provided to tenants, lenders, and other stakeholders increasingly look for the industry to adjust to the tenant and broader marketplace demands. PropTech encapsulates the technologies designed to disrupt and enhance the way we research, rent, buy, and manage property. Digital sophistication has become essential to moving quickly and making data-informed decisions, enabling everything from emissions reporting to tracking and analyzing how a space is used.

Complicating the panorama is the fact that after a decade-long growth market, capitalization (cap) rates have expanded across sectors. Interest rate hikes, combined with higher inflation in many parts of the world, have dramatically altered the financing costs and expected returns for owners, developers, and managers. Coupled with lower labor availability, these higher costs have made development and redevelopment more challenging and less profitable. And that’s where PropTech startups have been able to pick up the proverbial slack, rendering services heretofore unavailable in a modernizing real estate sector. 

In this article, we’ll take a look at a handful of the leading digital service providers changing the game, the forecasts for implementing AI, and finally the in-demand positions in the PropTech sector of the real estate market.

PropTech startups leading the commercial real estate sector

According to McKinsey, a thoughtful customer journey can boost customer satisfaction by 20%. With average building search volume up 210% compared to pre-Covid levels in 2019, the data reveals that companies are evaluating buildings, and more importantly, individual spaces dramatically differently from ever before.

Forbes’ research shows that this is a trend present across the nation; the top two cities with the highest increases in building search volume are Boston (+376%) and Los Angeles (+202%). Once seen as simply gaining a competitive edge in the market, having a suitable digital presence has now evolved into a means of survival. Findings from a survey conducted by Resonai concluded in 2022 that 90% of commercial property tours will be virtual by the end of this year. From that same report, it is estimated 75% of real estate companies overall use virtual tours, as do 86% of companies generating between $50 and 500 million in increased revenue. 

For over two decades, the residential real estate market has been shaped by the consumers’ ability to search online and browse potential homes across familiar PropTech sites like Zillow and Trulia. Residential consumers engage with digital content that plays a pivotal role in facilitating transactions. Ninety-seven percent of homebuyers used the internet in their home search in 2020, according to the National Association of Realtors. 

PropTech startup VTS is currently the number one SaaS solution for commercial real estate and one of the fastest-growing companies in the space. After raising $125 million of Series E funding in 2022, VTS has repositioned itself as a multifaceted platform that delivers  portfolio management, leasing, marketing and building operations into the VTS Platform (consisting of VTS Lease, VTS Market, VTS Activate, and VTS Data). Every business stakeholder in commercial real estate is given real-time market information and workflow tools with more than 60% of Class A office space in the U.S., and 12 billion square feet of office, retail, and industrial space is managed through its platform worldwide.

VTS’ user base includes over 45,000 CRE professionals and industry-leading customers such as Blackstone, Brookfield Properties, LaSalle Investment Management, Hines, BXP, Oxford Properties, JLL, and CBRE. 

The company also issues reports with data accumulated through its streamlined VTS Platform. According to a recent VTS Global Landlord Report, only 44% of landlords are confident that they have the correct insights into their web visits and traffic patterns. This highlights the need for property owners to analyze internet traffic and digital engagement with their spaces in order to position properties effectively to the market, as well as to empower their brokers with realtime marketplace insights and important data regarding sales prospects.

With nationwide demand for office space still only commanding 53% of pre-Covid levels, according to the July 2023 VODI (VTS Office Demand Index), landlords cannot afford to drop the ball on even lukewarm leads, given the current state of the market.

Hoping to merge the customer experience from the full perspective of landlord and tenant needs, in March of 2021, VTS moved beyond the commercial landlord UX and entered the tenant experience space with the acquisition of Rise Buildings. Coupled with VTS’ acquisition of Lane in October of 2021, the PropTech leader sought to bring the best of both softwares together, executing on VTS’ ultimate vision. The team has engineered a transformative technology for its customers to solve today’s unique challenges, overcoming low tenant demand, evolving tenant expectations, and the persistence of hybrid work policies.

Under the banner VTS Activate, the latest sector of the VTS platform is a solution that enables CRE (commercial real estate) owners and operators to create a fully integrated office experience built with critical technology to retain tenants while differentiating their assets and portfolio utilizing data and connectivity powered by the VTS Platform.

VTS Activate provides tenants with a seamless on-site experience and the capability to manage their day-to-day needs and activity within a building on one centralized app. VTS Activate is also the only TenEx solution to provide ‘one-app, access anywhere’ functionality – opening a landlord’s entire portfolio to tenants by providing them the capability to choose where they want to work, giving the workers of today the flexibility they demand and delivering a higher level of value. VTS Activate allows owners to turn their portfolio into an interconnected branded ecosystem – they can now deliver their tenants with offerings and experiences across the many places they choose to work.

Meanwhile, ButterflyMX, the creator of smart video intercoms, package rooms, keypads, elevator controls, key lockers, and other access control technology for multifamily, commercial, and student housing properties, has taken home and housing security to the next level. The PropTech app syncs with your home door, enabling customers to digitally view their guests via their cell phone and permit entrants remotely.

"Since we first introduced the smart video intercom to the world in 2015, we've been installed in more than 6,500 buildings and have opened over 100 million doors," said Aaron Rudenstine, CEO of ButterflyMX. ButterflyMX's unified property access solution connects sleek hardware with powerful software to enable building owners, managers, residents, and visitors to open any door or gate at their property from a smartphone. ButterflyMX's unified property access solution consists of:

• Video intercoms for property access
• Package rooms for seamless deliveries
• Elevator controls for access to a specific floor
• Keypads for access into amenity spaces, garages, and auxiliary rooms
• Key lockers for access into apartment units with traditional locks
• Smart lock integrations for access into apartment units with smart locks

These devices are easily managed through the ButterflyMX OS, a user-friendly online platform where property administrators can adjust access permissions, view entry photos, and integrate dozens of other popular technology solutions such as property management systems, security cameras, and other access control devices.

This provides opportunities for Data Security Analysts, responding to threat detection. Standard roles and responsibilities for people looking to transition to PropTech could expect to maintain the security of the app and thereby securing people’s property. This includes:

• Monitoring security systems and logs for suspicious activity and potential breaches.
• Analyzing network traffic and data patterns to identify vulnerabilities and anomalies.
• Investigating security incidents and determining the scope and root cause of threats.
• Implementing and maintaining security measures like firewalls, intrusion detection systems, and data encryption.

Risk Management and Policy Development:

• Conducting security assessments and identifying potential risks and weaknesses in systems.
• Developing and implementing security policies and procedures to mitigate risks and ensure compliance.
• Providing security awareness training to employees and educating them on potential threats and best practices.
• Staying up-to-date on emerging security threats and adjusting security measures.

AI in PropTech: Updating arcane modes of thinking

Gen AI represents a fresh chance for the real estate industry to learn from its past and transform itself into an industry at technology’s cutting edge. Gen AI has not replaced analytical AI; instead, its open-ended and creative nature introduces a new frontier of use cases that analytical AI does not address. Based on work by the McKinsey Global Institute (MGI), we believe that gen AI could generate $110 billion to $180 billion or more in value for the real estate industry.

One such startup is Giraffe360 based in the UK. The essential 3-in-1 virtual tour camera for real estate agents, the company offers a robotic camera solution that captures 360° photography and virtual tours for real estate agents by creating HDR photography, virtual tours and floor plans with 98% accuracy. Capturing a 2,000 square foot property in under 20 minutes, Giraffe360 utilizes AI to create immersive 360° photography and virtual tours for real estate agents. Their robotic camera captures images that are stitched together using AI algorithms, resulting in high-quality and surprisingly accurate visuals. 

AI is also employed to enhance the images, add floor plans, and provide measurements. This innovative solution revolutionizes the real estate industry by enabling agents to showcase properties in an engaging and interactive manner, attracting potential buyers remotely and streamlining the sales process.

Here's how the platform works:

1. Users select a subscription plan that fits their needs and budget.
2. Users are provided with a virtual tour camera to scan properties.
3. By pressing the capture button on the camera, users create their assets including virtual tours, floor plans, and photography.
4. These assets are automatically sent to Giraffe360's AI editing cloud for processing and enhancement, and then returned to the users via email.
5. Users have access to a dashboard where they can manage their projects, cameras, presets, and user roles.
6. The created assets can be easily shared with clients and prospects through various channels such as websites, social media, and email.

Using Giraffe 360’s camera and stunning photography, the company’s branded AI puts together professional, accurate floor plans in easily shareable formats like .png and .jpg.

The value proposition can be boiled down like this:

• Increased efficiency: No more manual floor plan creation, the specifically designed camera does all the work for you, saving customers time and allowing them to focus on other important aspects of their business.
• Professional look: floor plans are designed with precision, making them look professional and appealing to potential buyers. This has been proven to increase the perceived value of a property and make it stand out from the crowd.
• Competitive advantage: floor plans set you apart from the competition, providing a unique selling point without having to break the bank.
• Speed: Each room takes just a minute to scan. AI generated floor plans and fully developed assets will be delivered to customers in under 24 hours.
• Branding: Potential to brand floor plans, increasing awareness of a given company’s real estate business all the while protecting the privacy of a company’s assets.

Gen AI can also significantly enhance the prospective tenant or buyer's experience, eliminating the need for a buyer to be well versed in marrying utilitarian office requirements with pleasing visual aesthetics. For instance, when a prospective office tenant looks at raw space on a tour or a potential resident views pictures of an apartment on a listing site, they see an empty unit or photos filled with someone else’s finishes and furniture. Virtual reality tours have helped, but these static, non-customizable simulations usually only go part of the way toward showing the end user what the result could be. 

With companies like Floored, purchased by the world’s largest commercial real estate company CBRE or the commercial and retail design app Homestyler, Gen AI tools can help a potential tenant or landlord visualize exactly what an apartment would look like in their preferred mid century modern style or in cherry wood versus walnut finishes. This data can then be fed back into a model to predict which types of furnishings and finishes work best for different customer segments, improving prospect-to-lease conversion and shaping future capital expenditure decisions. 

There can also be e-commerce tie-ins: as a prospective tenant tours a unit, an app can virtually impose a variety of couches, window trims, or kitchen appliances that match a desired design style. If the prospective resident decides to buy or lease, these choices can be ordered and set up to coincide with the move-in. 

These new services populating the PropTech industry provide ample opportunity for AR Developers to enter a field in which the future will be remote virtual tours of properties. If looking to enter the field, AR Developers can expect:

New technologies, like Giraffe 360, populating the real estate field provide ample opportunity for AR Developers to create 3D models, animations, and other digital assets. The programming of real-time rendering, collision detection, and physics simulations for a smooth and responsive AR experience will prove to be essential to the immediate future of these companies; so will implementing spatial audio, haptics, and other sensory technologies to enhance immersion over time. 

Technical Skills will likely include:

• Programming Languages: Proficiency in scripting languages like C#, Java, or JavaScript, with additional knowledge of AR specific libraries and frameworks.
• 3D Modeling and Animation: Strong understanding of 3D modeling software like Maya, Blender, or ZBrush, and animation principles to create realistic and engaging virtual assets.
• Computer Vision and Image Processing: Knowledge of computer vision algorithms for object recognition, tracking, and augmented interactions.
• Mathematics and Physics: Solid grasp of 3D math, linear algebra, and physics simulation for realistic rendering and object manipulation.
• Software Development Lifecycle (SDLC): Understanding of development best practices, testing methodologies, and bug fixing techniques.

Some of the soft skills to look for:

• Creativity and Design Thinking: Ability to conceptualize innovative AR experiences that seamlessly blend with the physical environment.
• Storytelling and User Experience (UX) Design: Skills to craft compelling narratives, design intuitive interfaces, and build engaging user interactions.
• Problem-solving and Analytical Thinking: Ability to identify and overcome technical challenges, optimize performance, and troubleshoot issues.
• Communication and Collaboration: Excellent communication skills to collaborate effectively with designers, programmers, and other stakeholders.
• Attention to Detail and Focus: Highly observant and meticulous to ensure a seamless and visually appealing AR experience.

These are not just exciting new opportunities for skilled professionals, but present real challenges within legacy real estate companies that need to administer enhanced services and then both improve and maintain them over time. Think leases that live on the blockchain, new immersive and dynamic content experiences at the mall, even drone delivery and other last mile innovations.

Most immediately, these are entirely new skill sets to the industry that need to be acquired, woven in and managed going forward. In many cases, these will be fully new teams within these same firms. While many companies will choose to outsource services to start and acquire strategic upstarts, the same way CBRE acquired Floored, many will also choose to bring these skills in-house in order to stand out in a crowded market or buttress a competitive advantage. For firms looking to hire, whether dipping a toe or jumping in headfirst, Worky can help plan, scope, and even manage these new functions.