2018 was the biggest year ever for PropTech. Both in the adoption of technology and the amount of funding that poured into the space, there has been a snowball effect that has quickened the pace of innovation to new heights. I believe that the snowball will keep rolling into 2019. As a close industry observer and the co-CEO of JLL Spark (which has a global $100 million PropTech VC fund), I have spent a lot of time researching the space and talking to several startups. Here is what I will believe the next year will hold for us at Spark and the industry as a whole.
PropTech adoption will continue to accelerate
We’ve seen a noticeable increase in investors’ and property owners’ appetite to try new technology products. They recognize the positive impact these new products can have on their business. This change in mindset is starting to accelerate PropTech adoption cycles. Previously, we would often see companies doing a two-year review cycle on a new product. In 2019, you’ll see more companies moving quickly to a pilot on a product. If the product demonstrates ROI, they will implement it more widely.
The DNA of real estate tech is changing
In the past, PropTech startups were often started by real estate professionals who saw pain points in the industry that could be addressed by technology. However, that has changed in recent years and now, the technology side is driving change. We’re starting to see seasoned tech entrepreneurs building companies focused on the commercial real estate industry because they see the enormous market opportunity. In 2019 we will continue to see an influx of high-level technology talent entering the PropTech world that will help to accelerate the pace of innovation. We are working hard to look at as many of the new tech companies in this space as we can and to help real estate owners and occupiers determine which ones are the most promising to consider.
AI and machine learning applied to the vast amount of real estate data will begin to show value.
A vast amount of transactional and operating data is generated in the industry. This data can be overwhelming for property owners and occupiers and is often difficult to sort through to pick out key insights. Fortunately, new technology products aim to make sense out of all of the data and provide property owners and occupiers with valuable insights. For example, one of our Fund’s portfolio companies, VergeSense, uses sensors to record exact occupant counts in office buildings and allows companies to identify usage patterns for conference rooms and other office areas. This data can then inform optimal office layout and deployment, including how many conference rooms are needed, what areas of the office are over and under capacity and need to be expanded or shrunk accordingly. Another investment, Skyline AI, leverages proprietary artificial intelligence to source, analyze, acquire and manage institutional-grade property investments. Both are really good examples of what you can expect to see going forward. We’ve seen a lot of AI-driven technology emerge this year and we will see these technologies begin to show their value in 2019.
Tenant experience applications will grow in popularity
In 2018, we have seen a lot of demand for mobile applications that enhance the experience of those who work in commercial office buildings by providing easy access to the building and to a variety of in-building and local services. Although these applications are widely talked about, the PropTech industry has been slow to adopt them. We expect this to change in 2019. We invested in HqO, a tenant experience platform, earlier this year and are starting to see a marked increase in demand for it from real estate owners and operators as we exit 2018 and enter 2019.
Overall, the changing DNA of PropTech startups, the rise in the utility of AI-driven products as well as the demand to improve the tenant experience with technology are some of the many positive trends that will drive the adoption of new products in this category in 2019. We’ve been speaking with a lot of game-changing startups with innovative technology that we’re really excited about. We’re looking forward to partnering with several promising companies in 2019 and helping to support their vision and bring their products to market. 2018 was a banner year for PropTech investment, and we are looking forward to 2019 being a banner year for adoption.