PropTech – why hasn't it boomed like we thought? - Boodle Hatfield

Your lawyers since 1722

11 Apr 2024

PropTech – why hasn’t it boomed like we thought?

Written by

Sarah Rock View profile
4 min read

In March, our Real Estate team hosted a roundtable, led by industry expert James Pellatt, on the ways in which "PropTech", or Property Technology, can support businesses in reaching their ESG objectives. The discussion explored various facets of this topic, but one point that was raised consistently was around why the uptake of these technologies has not boomed in quite the way that was predicted just a few years ago.

Statistics have been full of promise for the relatively young industry that is PropTech – the use of technology to optimise the ways in which we buy, sell, rent, market and manage properties. Spanning both hardware and software, the term refers to a broad range of technologies such as 3D modelled virtual property tours, rental platforms such as Airbnb, or smart building automation of lighting, heating, security, and data collection.

Implementing technology to streamline industry processes is of course nothing new with digitisation impacting almost every area of our lives in recent years. It was therefore only a matter of time before this took off in the real estate sector, and in 2021 it boomed with the highest value of PropTech investment we have seen to date at over $24 billion USD (around £19bn). However, we have now seen a slowdown in the flow of funds in the past few years, and many are surprised at the lack of widespread uptake of many of these technologies, particularly given the role it could play in reaching the sustainability objectives mandated by the UK government.

The UK government is committed to reaching Net Zero Carbon by 2050, recognising that the built environment will play a major role in attaining this objective and that largescale changes will be required to make this possible. With property owners, investors, developers and operators looking to improve the sustainability of their real estate and now facing increasing legislative measures to do so, it seems logical that many would turn to technology to facilitate this reduction in emissions as quickly and easily as possible.

So how, in theory, could PropTech help to reach sustainability objectives and, ultimately, our Net Zero targets? Our roundtable attendees focussed on 3 main topics:

  • Retrofitting – adapting our existing built environment to run more sustainably and reducing its outputs.
  • Renewables – where we are building and developing new structures, using PropTech from the outset and throughout the supply chain to create smarter buildings, running on renewable energy sources, and automating infrastructure to reduce the energy required to run them.
  • Responsible ownership – it is the responsibility of both a building's owners and, where relevant, occupiers, to see the value in maximising the technologies available to us nowadays to run and maintain our buildings as efficiently as possible.

Our expert speaker, James Pellatt, previously Innovation Director at Great Portland Estates, also suggested the key to harnessing PropTech to improve sustainability lies in the data. Put simply, how can you monitor and reduce, what you are not measuring?

And so, with so many opportunities available for buildings old and new, and for those at every stage of the building process, why has PropTech investment slowed? Our guests discussed some of the roadblocks that they have faced personally, or that their clients have raised with them. Unsurprisingly, many found the cost of some of these more impactful technologies the prohibiting factor. What was also discussed however, was the need to truly commit to integrating these tools, linking up your software systems and creating more of an "ecosystem" in your buildings, supported by the necessary teams to maximise their outputs, rather than relying on investment in singular technologies to make any meaningful impact.

Our speaker highlighted the findings of the UK PropTech Association / British Property Federation Innovation Survey 2024, which found that 65% of those surveyed were still resistant to digital transformation. Almost conversely however, 60% believe that AI technology will have a significant impact in the industry in 3-5 years. What this suggests is that while the majority recognise the potential impact of PropTech and the critical role that technology could play in transforming the environmental impact of our built environment, it is not being made a priority or allocated any significant budget right now. 

It is perhaps convenient to say that significant impacts are just a few years away, but in delaying to 3-5 years' time and not taking advantage of the technologies available to us now, we run the risk of hindering our progress towards Net Zero Carbon deadlines and tangibly reducing the impact of our built environment.

Written by