The Middle East is not afraid to embrace technology in business, nor is it shy of developing grand and ambitious real estate projects. The synthesis of these traits has led the region into an organic relationship with property technology, otherwise known as PropTech.
This article considers what PropTech is, how it is relevant to the built environment, how businesses are harnessing PropTech facets to better engage or enhance real estate portfolios and why the Internet of Things binds us all. We will also consider the advances being made across the Middle East; including in the Kingdom of Bahrain, the United Arab Emirates and the Kingdom of Saudi Arabia.
What is PropTech?
Reduced to its component parts: PropTech is a term to reference the way in which real assets are handled, manipulated, monetised and managed using digital technologies.
If we consider a key goal of both investment and development real estate to be the extraction of value from a property, then PropTech is an umbrella term for the unification of data, software and end-user experience to maximise the opportunity for an increase in that value.
PropTech can be:
- soft (online portals listing properties, digital dashboards);
- hard (satellites, sensors, cabling);
- manufactured (models, 3D printing); or
- material (insulation, bricks, mortar).
By way of a brief background it may not surprise readers that the residential market was the forerunner in adopting PropTech, where the audience for a marketed asset can suffer from saturated agency tactics, frustrations under the stress of moving home and an appetite for immediacy.
The commercial market has been more reticent to adopt PropTech. This is perhaps due to an element of the old adage "if it ain't broke, don't fix it" or alternatively an element of distrust of change in a turbulent global market (consider how early adopters of things like smartphones or cryptoassets were generally people not entities).
Over the past few years, however, start-ups and established real estate players have been more willing to consider PropTech as a necessary part of the industry. In the Middle East particularly a large and far-reaching PropTech market has emerged.
Why is PropTech so important?
Connectivity, responsibility and control.
Wealth management, portfolio control, sales, purchases, schemes and even one's rental empire can now be managed from the comfort of a screen. This is not to mention more readily available things like home maintenance, parental controls, temperature adjustments and voice activated systems. Along with comfort is the necessity of pace in a digitally connected world that has promoted the growth of PropTech.
Connectivity is not just a buzzword and is found applied in all sorts of places. In context of PropTech it refers to the use of hardware, high-speed connectivity and cloud computing. The application of analytics in response to vast amounts of data, and the use of real-time updates lead into our connected Internet of Things or the IoT (see section below for more information on the IoT).
Environmentally speaking access to PropTech allows interested parties to incorporate a responsible element into developments, or even as later additions to homes and offices. For example, renewable energies can be installed then monitored using digital dashboards and the output and storage metrics, down to the minutiae of productivity for that installation, can be monitored.
The value of real assets, both monetarily and in terms of personal meaning, has never been greater. That, then, places a much higher value on the need to control those assets. PropTech is the answer to that need; and is without a doubt only going to grow in importance as a result of it.
The Internet of Things (the IoT)
This article must give an aside to the IoT, being a concept which underpins how PropTech becomes significant on a day-to-day basis.
The IoT describes the interconnection of technology to facilitate ergonomic and hospitable systems that is self-reliant once fed with data.
Sensors, thermostats, broadband, alarms, lighting and lift doors, as examples, can all work in such an interconnected and interdependent fashion with the end goal of furnishing a built environment with a suitability for use, by way of collected information.
PropTech in Bahrain
Feeding the Kingdom's reputation as a financial hub in the region, the Bahrain Economic Development Board last year arranged the GCC PropTech Summit. The thrust of the event was to open a forum for the intersection between technology and real estate, and also to discuss how financial technology is relevant to the PropTech market.
With various apps having been launched from Bahrain or rolled out from the Kingdom that allow comparative house hunting, or competitive asset management to be undertaken from home or the office, PropTech is following the global trend of a residential-first uptake. Aside from the generally high spec appreciated in Bahraini residences (cooling, heating, cleaning mechanisms controlled centrally or from an app) there is a growing demand for sustainable input from developers through technology, and a priority placed on facility through the IoT.
The recent Bahrain International Property Exhibition, where Trowers & Hamlins chaired a high profile panel, showcased the 'Bahrain Bay Hackathon' where industry experts were tasked with providing real-world solutions in an open forum to real estate management and investment issues.
Estater, an app which operates in Bahrain and Kuwait, offers a user-facing platform for listing, sharing, finding or managing a property using GIS mapping, being a regional leader in algorithmic PropTech. 2020 is undoubtedly going to build on the foundations laid by the investment the Kingdom has made in, and in the promotion of, PropTech.
PropTech in the United Arab Emirates
In the last year the UAE has been promoting people-focussed PropTech and has been championing the benefits of smart cities. The IoT as a combining force in cities has been put in the limelight, for example with announcements at the World Urban Forum that several housebuilding start-ups will be approaching the market to more actively prioritise living conditions into urban developments in the UAE.
February 2020 has also seen continued growth of urban apps in the UAE that, for example, will allow potential purchasers or renters to take a full 360 degree tour of each room in a premises, and to set up a payment plan using their smartphones. One of the drivers in the country has been an attempt to normalise expectation versus reality of premises, facilitated more and more often by PropTech.
PropTech in Saudi Arabia
In context of an increasingly public-facing Saudi Arabia, the statistic that venture-backed PropTech companies in the region raised circa $14 billion in the first two quarters of 2019, being a 309% increase from the same period in 2018, is an impressive figure.
Going forward then we must focus on the Kingdom's mammoth infrastructure project that is Neom. This is a $500 billion city that is being developed with the key goal of redefining the way smart cities are known today, with an IoT that is faster, more versatile and more omnipotent than anywhere else on Earth. Taking PropTech usage to currently unexplored levels Neom is rumoured to be angling for the provision of an artificially managed weather system. With an aim of being entirely renewable and carbon neutral in record time, the project is inherently a world leader in PropTech terms.
For further context: mobile phone use in Saudi reached 99.16% in 2018, meaning that handheld devices are, quite literally, the keys to this intuitive new development. Part of the country's 'Vision 2030' scheme is to increase the role that entrepreneurs have in developing and promoting it, shifting deliberately from dependency on oil. Some notable technologies that result from this use of smart devices, and from the government's focus on them, are B8ak, Muqawiloon and Ajeer, all of which aim at bridging the gap between properties, users and corporates.
What next for PropTech?
The purpose of PropTech so far has been to bring together various aspects of societal and corporate value that can be found in real estate. In exercising an increasing control over property usage, and in extracting the most worth from an asset, the future of the PropTech sector seems logically to be aimed towards disruption and community in equal measure. It may be that we see those elements following one another: firstly a practice is disrupted by a new technology, before being harmonised with other existing technologies, with an eventual view to progressively developing urban spaces.
Trowers & Hamlins are market leading in the field of smart cities and PropTech awareness. Please enjoy our resources on these subjects, and be in touch to discover how we can assist you in your next project.
