Clearing up the confusion: What does PropTech really mean?
Updated: 6 days ago
The explosive growth of PropTech over the last few years would make it hard for anyone involved in real estate to miss. Regardless of your role in the industry, tech is affecting the way job duties are fulfilled and business is done. For managers, technology is a force multiplier, helping individual employees connect with huge building communities and manage complex property systems. For brokers, technology helps prospect successfully and efficiently market properties. For owners and asset managers, technology can help identify inefficiencies and target investment dollars.
Regardless of our job or market, we all probably have a sense of how tech affects us each day. But familiar though it may be, PropTech is harder to define. Not because its meaning on paper is particularly confusing, but because its many appearances, as well as growth in related but different areas like workplace design, come together to make a cohesive definition confusing.
So what is PropTech?
PropTech simply means property technology: technologies of any sort, physical or digital, human or machine, that pertain to real estate and the built environment.
Some PropTech innovations are uniquely focused on real estate. Tenant experience platforms, for instance, are all about property; they couldn't exist outside of the ecosystem of a building. Other examples weren't necessarily about real estate when they first appeared, but are now so closely associated with property that they have become part and parcel with PropTech. One example there would be IoT. Networks of sensors and connected devices don't need to be about property, but they've come to be strongly related to the field. With that in mind, it's important to point out that some broader categories of tech can be contextually PropTech. IoT is one example as described above; another example would be AI.
Now that we have discussed what PropTech is, let's go over what isn't PropTech. Coworking and co-living aren't PropTech. Open-plan offices are not PropTech. A food delivery app that will bring pizza to your lobby is not PropTech. A residential iBuyer is PropTech, but a traditional real estate investor that uses a few advanced algorithms is not PropTech.
Ask whether technology is central to the functioning of a given property company, or if it is an add-on.
These cases point to an interesting observation. For companies that fall into the "property business, enabled by tech" category, there are a lot of gray areas. In general, the safest thing to do is probably to ask whether technology is central to the functioning of a given property company, or if it is an add-on. The former case would indicate that they are probably PropTech; the latter case would indicate maybe not. Perhaps we need an extra category of definition for "tech-enabled property companies" that aren't PropTech themselves but that heavily leverage technology in one way or another. Lots of co-working companies that don't quite qualify as PropTech would probably fall into this bucket.
Another lesson here is that definitions are more or less accurate based on the context of who is using them. High-quality general business & economics publications, like The Economist, tend to use PropTech much more broadly than would be done within the industry itself. This is nothing special to PropTech: any field with a lot of specialized knowledge is going to have stricter definitions than even the well-educated public.
Finally, remember that definitions like this are often relative. Let's say a traditional property company uses a tenant experience platform, AI and data science to help optimize investments, and automated maintenance tools. This company might not qualify as PropTech by our definition, but if all of its competitors are still using Excel and snail mail, it clearly deserves to be in a slightly different category. There's your final takeaway: treat definitions like this with a big pinch of salt.
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