My finances, my projects, my life
October 25, 2021

What is PropTech?

  Aurélien Dobbels myHOME January 26, 2021 18

A portmanteau of the words PROPerty and TECHnology, “PropTech” is the term given to a set of real estate companies that are revolutionising every link in the construction industry value chain. More and more investors are buying into the idea, and PropTech companies are quickly becoming a fixture at Europe’s largest industry events. Even MIPIM (Marché International des Professionnels de L’immobilier) is getting on board with its specific MIPIM PropTech Europe event. We were intrigued, so we decided to find out more about the PropTech market on your behalf.

The term “PropTech” encompasses and unites a wide range of innovative companies transforming the products, services and, above all, business models of the real estate sector in the broadest sense. Every segment is affected, from residential to offices, logistics, hotels, retail and more.

To bring about this transformation, PropTech uses technology to improve on – and sometimes completely reinvent – the practices and services offered by traditional players in the real estate industry. Here are a couple of examples of the best-known PropTech companies:

    • WeWork – a well-known company offering coworking spaces and services that generated a lot of headlines when its IPO fell through in 2019
    • Opendoor – a company offering to buy people’s homes within 48 hours at a price set by an algorithm

While PropTech offers a wealth of innovation in all its forms, it’s possible to divide it into five broad categories.

Living and working

The “living and working” branch covers every new technology or service that has an impact on the end user’s experience.

Habits are changing and so are lifestyles. The collaborative economy has picked up steam in recent years and coworking has come of age as a core aspect of this trend. It is changing the way we work, cutting the cost of renting office space, offering an interesting and aspirational work environment and providing us with much more flexibility.

In Luxembourg, initiatives including TheOffice have offered coworking spaces for a number of years. Founder Gosia Kramer has also invested a lot of energy into expanding the community. Other players such as Welkin and Meraki, Regus, Silversquare and Urban Office are also active in this space.

Above all, co-living is a lifestyle that offers all the benefits of both private and shared spaces, coupled with services any hotel would be proud of.

After coworking, co-living is a recent addition to the scene. Above all, co-living is a lifestyle that offers all the benefits of both private spaces (bedroom, bathroom, toilet, walk-in wardrobe, office) and shared spaces (kitchen, dining room, living room), coupled with services any hotel would be proud of. Launched in 2020, Cocoonut is the first co-living company in Luxembourg. It focuses on new arrivals in particular and seeks to help them feel at home in their new host country.

Funding and investment

Companies operating in the “funding and investment” branch of PropTech specifically cover the very start of the real estate process: selecting a site and securing investment/funding.

New funding models and practices are emerging. In 2019, for instance, a group of Luxembourg real estate professionals came together to found the Property Token company, which then carried out the country’s first blockchain real estate investment by acquiring a building in Belval.

Property Token carried out Luxembourg’s first blockchain real estate investment by acquiring a building in Belval.

Initially designed and understood as a funding model for the launch of a new product or service, crowdfunding has also made an appearance on the real estate market. Players such as WiSEED and Anaxago are offering a brand new funding model for property developers, as well as providing retail investors with access to a new asset class.

Lastly, on a completely unrelated point, the company Garantme provides a guarantee for renters in France who would otherwise be unable to do so. This is the case for many of the foreign students who come to study in Paris, for example.

Design and construction

As the name suggests, the “design and construction” branch encompasses PropTech companies offering innovative solutions related to the design process, execution of construction works and building handovers.

One well-known player in this segment is Katerra, which was founded by Michael Marks, former acting CEO of Tesla, in 2015. Katerra designs and manufactures components that are then assembled on site. For example, the company manufactures walls with windows in its factory before delivering and installing them in situ.

A company from northern France recently built an entire house in a mere 24 hours using a 3D printer.

Even more surprising is Construction-3D from northern France, which recently built an entire house in a mere 24 hours using a 3D printer. This technique is not only beneficial in terms of time savings – it also drastically reduces the amount of concrete needed compared with the traditional construction process.

Markets and transactions

Looking beyond financing and the construction process per se, PropTech also includes a “markets and transactions” branch. So, the marketing process has its share of innovations too, including the emergence of iBuyers like Opendoor mentioned above.

The iBuyer or Instant Buyer process is a real estate transaction model in which companies buy residential properties directly from private sellers for resale. The term “instant” refers to the fact that this type of activity involves making a cash offer on a property in a far shorter timeframe than a traditional estate agent could provide. Property valuation takes place online and is an instant or near-instant process that makes use of machine learning and artificial intelligence.

Across the Atlantic, companies such as EasyKnock are developing the sale and lease back principle whereby owners can sell their property to an investor, but continue to live there as a renter and even gradually buy it back.

Management and operations

Even in 2020, there are still companies that manage their property portfolio manually using Excel files. Start-ups operating in the “management and operations” branch are developing solutions to streamline building management for landlords, property managers, facilities managers and even asset managers.

Far from being a passing fad, PropTech is revolutionising every link in the construction industry value chain. Each of the branches we’ve discussed already contains companies with global reach and around 40 unicorns have emerged worldwide. These companies may have started small, but they have grown rapidly and are now disrupting the status quo. If you’re interested in the construction sector in the broadest sense in Luxembourg and around the world, PropTech is something you just can’t ignore!