As private equity firms, venture capital funds and commercial brokerages continue to pour billions into the Proptech sector, 2019 will be a year when these technologies and new business models will be tested.
While there exist a plethora of solutions for real estate technology developed by PropTech firms, several important trends will shape the marketplace in 2019 as more companies capitalize on technological innovation and growth in the space to serve the millions of businesses and customers.
1. 5G to drive enhancement in digital connectivity
Digital connectivity will become the single most important differentiating factor when it comes to attracting tenants to commercial and residential buildings. With the coming deployment of 5G, the next evolution in cellular technology, more building owners will move to future-proof their real estate assets.
As consumers gain access to 5G through handsets slated to hit the market throughout 2019, and the technology permeates through the marketplace, users will expect similar capabilities inside of commercial real estate buildings, according to Ari Barendrecht CEO of WiredScore, an internet connectivity rating firm.
As the demand for data from both consumers, cloud-based services and smart building IoT devices increases exponentially, more commercial building owners who want to compete for high-paying tenants will need to adapt their structures for 5G.
2. Space-as-service platforms will proliferate
The commercial real estate industry is undergoing massive structural change through a concept known as space-as-a-service. The SPaaS business model, in which landlords essentially provide a suite of services that enable tenants to utilize the space efficiently, entails everything from digital connectivity to furniture, fixtures and even the staffing required to operate their businesses.
SPaaS is a paradigm shift in the way in which the commercial real estate industry has provided products and services to tenants and is changing the role of commercial landlords from rent collectors to service providers.
The tremendous success of PropTech startups in both retail and co-working are among the top areas for growth and diversification with firms like Brandbox, Knotel, WeWork, and The Riveter, a female-centric coworking startup, which recently raised $20 million continue to leverage the SPaaS business model.
3. Co-living spaces to see a massive growth
Rising rents in dense urban areas coupled with the increasing success of co-working enterprises are giving rise to co-living. In recent months investment in co-living PropTech startups has increased tenfold.
Berlin-based Medici and British co-living property startup The Collective has raised $1 billion and $400 million respectively to take on WeLive, WeWork’s co-living offering, Ollie, Common and others.
According to Pew Research Center, more people are renting homes today than in the last 50 years. As rents continue to increase, efficiently designed co-living micro suites and studios that come with bundled of services such as a cinema, a gym, restaurants and other shared amenities are becoming an attractive housing alternative to an increasingly mobile and transient millennial workforce.
4. Smart building apps shift focus to tenant experience
As the emphasis on tenant experience and occupant comfort continue to drive increased rents and remains a competitive differentiator for commercial landlords and owners, smart building apps that enhance occupant’s journey, build community and provide new experiences inside of commercial and residential buildings are proliferating.
Smart building applications are now shifting from traditional energy savings objectives to features that enhance the user experience. The acquisition of PropTech firm Comfyby Siemens is perhaps the most significant indicator of the industry’s shift towards providing improved occupant experiences.
5. Real estate asset fracking
The ability to better utilize existing real estate assets, whether its office spaces, conference rooms, desks or even parking spots is an enormous area for growth in 2019. As more startup offering hotdesking, conference room, and parking reservations emerge it’s likely that soon digital advertising on the front facades on building and other areas will also more quickly become commoditized.
Building owners who can become the first to capitalize on these trends will be able to drive NOI improving their bottom-line and remain market leaders.