To Disrupt the Real Estate Sector, Project Teams Must Tailor Tech Projects to the Market's Particularities
BY STEVE HENDERSHOT
For decades, buying or selling property has followed the same well-worn path: a commercial or residential listing, an agent showing and a mountain of manual paperwork. Even as technological upheaval swept through other sectors, the real estate industry stood largely unaffected beyond online aggregators to list available properties. The experience of advertising, touring and experiencing the physical space was largely divided from the digital world. Until now.
Established organizations and startups alike are launching a new crop of projects to infuse technology across the real estate ecosystem. Compass recently rolled out hundreds of for-sale signs that are integrated with LED lights and, eventually, will have augmented reality capabilities. The smart signs will allow passersby to learn everything from building specs to local air quality with a swipe of their phone. In London, England, startup Nested developed a platform that uses big data to pinpoint a home's value more accurately than a flesh-and-blood appraisal. In Switzerland, Hegias finished a project this year to develop a real estate virtual reality (VR) platform. And in Singapore, blockchain startup BitOfProperty is developing a crowdfunding platform that allows everyday consumers to invest in international real estate.
Real estate tech project investments from venture capital firms hit US$9.6 billion last year, up from US$1.8 billion in 2015, according to industry research group CREtech. The appetite for property tech, or proptech, projects to yield benefits is clear: In a 2018 survey, 97 percent of real estate executives told KPMG that they expected digital and technological innovation to significantly impact their businesses. In Deloitte's 2019 Commercial Real Estate Outlook report, nearly half of respondents said virtual reality and augmented reality should be a priority for commercial real estate companies.
“Proptech is really coming into the light,” says Nik Sudhakar, director of digital solutions, CBRE Asia Pacific, Hong Kong, China. “We've lagged behind fintech [financial technology] and others for the last few years, but now clients expect technology platforms to play a major part of our service delivery.”
—Nik Sudhakar, CBRE Asia Pacific, Hong Kong, China
Of course, project managers are tasked with turning those project investments and ambitions into successful initiatives with demonstrable benefits. But industry resistance to change and a lack of awareness around emerging technologies can make it difficult to integrate new tools into client workflows.
“You can't just dream up something better,” says Anoop Ranganath, CTO at mortgage-lending startup Eave, New York, New York, USA. “You have to be very grounded in the reality of the constraints you're working with.”
—Anoop Ranganath, Eave, New York, New York, USA
TESTING ONE, TWO, THREE
Product testing is but one area where proptech projects can stumble. In a traditional software-development project, for instance, the team might be tasked with building a minimum viable product and then refining it based on how early adopters use it. But that approach falls flat in real estate: Most transactions are too valuable to risk an untested tool, and many aspects of the industry are heavily regulated, requiring proof of concept before products hit the market.
A project team at ShelterZoom found itself in that chicken-or-egg situation less than two years ago. The team had implemented blockchain technology to add security and transparency to the offer-and-acceptance stage of a real estate deal. But launching, testing and refining the product wouldn't work as it might at a traditional software firm.
To get around that issue, CEO Chao Cheng-Shorland gathered a group of real estate professionals to beta test the product in simulated transactions over a period of several months. Working with professional brokers uncovered a range of problems that Ms. Cheng-Shorland hadn't prepared for, such as transactions with multiple sellers.
Feedback from the testing group also helped ShelterZoom address another key challenge for proptech generally: convincing longtime real estate professionals that adopting new technology will benefit them.
“There's so much technology going on right now that's cool and flashy and fun, but it's critical to assess what really is bringing value to companies or agents,” says Joni Meyerowitz, COO of real estate brokerage @properties, Chicago, Illinois, USA.
—Joni Meyerowitz, @properties, Chicago, Illinois, USA
ShelterZoom's simulated user testing helped the brokers become familiar with the potential of the project software and demystify its underlying technology, blockchain. That led to instant uptake when ShelterZoom's platform launched.
“We had quite a lot of adoptions almost immediately because we really focused on solving real problems, rather than overly focusing on the fact that the underlying technology was blockchain,” says Ms. Cheng-Shorland, New York, New York, USA.
LIVING ON THE EDGE
For a proptech initiative to deliver its full benefits to end users, it can't work only for many cases—it needs to work for most. That's because the more that people need to manually check or correct decisions made by the new tools and software, the slower and more costly the process.
At Eave, Mr. Ranganath managed the 10-person project team that developed software capable of automatically approving mortgages of up to US$20 million. But the team quickly realized that the software's algorithms needed to extend to so-called edge cases, the prospective loans with quirky variables that didn't fit neatly into the central calculations underpinning the software.
So Mr. Ranganath built an underwriting walkthrough of each change or added feature into each of his team's development sprints, with Eave's underwriting team tasked with identifying potential pain points, or gaps that the software might struggle to address.
In one meeting, for example, a team member flagged an issue with how the project software treated couples with rental property income; in certain situations, not enough credit was given to each person. It was an arcane edge case but important to the underwriters because it could make the difference in whether Eave's software approved a given mortgage application. Eave's system is flexible enough that its underwriters can make manual overrides, but the idea is to train its software to handle approvals automatically. The team prioritized that fix during an additional sprint and tweaked the software to automatically handle such end-user cases.
“In most financial institutions, there are all sorts of firewalls in between various departments,” says Mr. Ranganath. “But because we have an integrated team, we're able to iterate very quickly and make changes that actually matter.”
While proptech project managers stretch to accommodate end users outside the norm, they also must keep an eye on the bottom line. That's because most of the hesitancy to embrace new digital tools goes beyond risk and regulation to cost consideration. The developed projects must drive enough efficiencies in operations that they more than justify their upfront price tag.
For example, last year M+A Architects built a system to translate its VR space-visualization mockups into a tool that real estate brokers could use to show off finishes to prospective occupants during the design phase. But Seth Oakley, director, M+A Architects, Cincinnati, Ohio, USA, knew that not every new-build or renovation project will be able to justify the cost of the tool in its project budget.
For its pilot, Mr. Oakley picked an upscale apartment complex and assigned a two-person project team (a 3D visualization artist and software technician) to develop the VR tool tailored to the real estate deal. The three-month project was completed on time but ran over budget. “We lost money, but we learned, and that means on the next one we can do it faster,” he says.
Most of those lessons learned relate to technical aspects of the new tool, but some tie back to how the project was managed. When the client asked for some late-stage changes, Mr. Oakley agreed without fully calculating how much work the additional scope would create. “As project manager, I had to educate myself on how hard things were to change after the fact and to capture the time it would take,” he says. PM
For Rent: Innovation
Technology isn't only changing how people buy and sell property—it can also impact how properties are managed once they're sold.
For example, property tech firm Tayo built a software platform that aims to streamline and digitize the interactions between property managers and residents. It also helps property managers engage with service providers such as plumbers and other repair personnel. It seems like an obvious tech application because the company's automated messages replace a time-consuming maze of phone calls and photocopies.
Yet Tayo co-founder Etienne Friedli, a veteran project manager, soon found his clients weren't ready for a cold-turkey transition. Specifically, among the firm's clients—which range from large property managers to small vacation-rental operators—there were too many contractors and tenants without email.
So in November, a three-week sprint by Tayo's three-person engineering team focused on developing an old-school solution: identifying residents who weren't receiving digital push notifications and converting those notices into PDF documents with corresponding mail-merge address labels that can be printed and mailed. The feature rolled out successfully in December.
“Now we're able to say, ‘Even in the stone-age cases, you can use Tayo,'” says Mr. Friedli, Écublens, Switzerland.
Still, accommodating legacy processes while eyeing the platform's ultimate technical potential is a balancing act. To make sure project teams didn't tilt too far in either direction, Mr. Friedli brought in a user-experience expert to audit the product from a different angle—“someone who could focus on ideal future operations because we tend to over-focus on edge cases,” Mr. Friedli says. That effort has borne fruit, leading to a revamped, more graphically oriented interface that residents use to report problems and schedule repairs.
KPMG's latest global property tech survey of real estate executives shows that many see digital transformation as inevitable—even as the road to navigating that change remains unclear.
think digital and technological innovation will impact their business.
think this impact will be significant.
see digital and technological innovation as an opportunity.
see digital and technological innovation as both an opportunity and a threat.
do not have a clear enterprise-wide digital and innovation vision and strategy.
rate their business as below-average in terms of digital and technological innovation maturity.