"A tool, not an end in itself"...
No industry is free from the pervasive and disruptive touch of technology. What is surprising, however, is the slow uptake of it in the largest asset class in the world – the real estate industry.
PropTech is a broad term used to describe the growing number of technologically driven start-ups which aim to provide advanced solutions and even entirely new business models to the real estate industry.
It’s impact on the industry has been transformational: platform technologies have given rise to companies such as WeWork and AirBnB, making unoccupied spaces easily accessible; developments in virtual reality are making the possibility of remote viewings even more of a reality; and, developments in computing have led to new ‘smart’ and connected buildings by linking virtual and physical space – the list goes on.
With so many new and exciting technologies flooding the industry, it is more important than ever for firms to understand that technology is a tool which can be used to enhance the existing capabilities of a firm; it does not, however, always provide a competitive advantage. A real problem with the uptake of new technologies, not just by firms but by people too, is that it is easy for the user to get swept up in the excitement of the opportunities it presents and forget that technology cannot provide value by itself – it still requires some form of operation and relevant application by humans too.
Purplebricks is a prime example of a company that used technology as a solution by itself; a dreadful decision for any firm, let alone one in the real estate industry where personal touch plays such a key role. Purplebricks uses online website listing technology and Big data to digitize the buying and selling of property. They claim to have combined technology and ‘human expertise’ in order to cut the high cost of traditional agency fees (costing an average of 1.8% + VAT of selling price) and save money by not having a brick and mortar high street store presence.
Their model also offers home sellers a flat up-front fee to sell their home. This fee covers everything needed to sell their home from a valuation to signposting outside their property coupled with ‘expert knowledge’ from one of their local advisers.
However, their biggest downfall has been the lacking presence of the ‘local advisers’ that were promised. A quick search on TrustPilot for reviews reveals a number of reviews
complaining of the lack of human interaction involved when selling with Purplebricks.
It is hardly surprising as it doesn’t take a mathematician to work out how they can afford to offer such low fees (London - £1,499 / rest of UK - £999). How can they afford these experts when charging such low fees? The simple answer is that they don’t really provide them. Something that they seem to have forgotten is that for the majority of people, selling their home is a huge milestone in their life and can often be a complicated and stressful process; this is precisely why they need a local expert on hand to help them, something that they simply cannot offer with their rock bottom prices.
Purplebricks has gone through the ‘Hype Cycle’ that many new technologies experience. People were initially excited and disillusioned by what was promised by the new service. After people started to realise that in fact it was not all that it seemed to be, they lost trust and many have switched back to traditional estate agents. This is reflected in their share price which fell by 31.19% in 2019 and the fact that they have now withdrawn from US and Australian markets. Their success in UK markets holds steady but with trust wavering they must address the growing number of negative reviews.
Purplebricks may have been too heavily reliant on tech, however by no means does this imply that there is no place for technology.
One example of this is "Work There" which was launched in 2017 by a Savills employee. Work There helps companies find flexible, co-working and serviced office space. This is a sector which has risen in demand as technological advancements have led to a growing number of start-ups, increasing the demand for these type of offices that offer shorter term leases that are more financially viable.
"Work There" has combined website listing technology with the expert knowledge of Savills, a real estate firm that has over 160 years of experience. Their partnership with Savills enables them to still provide customers with expert knowledge in a convenient and modern way.
Perhaps the next logical step for Purplebricks is to partner up with a long-standing firm like Savills, in order to provide them with their much needed personal touch and perhaps leverage their other resources: brand, customer data etc.
Other firms which seemed to have mastered successful integration of technology into everyday practice include Knight Frank and Cushman & Wakefield.
Knight Frank have recently invested heavily into a new ‘HUB’ internal data base which will allow staff to work more efficiently, dynamically and from any location. Examples such as this reflect how technology can be used to streamline activities and improve client service.
Cushman & Wakefield have also taken a client-centric approach to technology with recent acquisitions such as Saltmine. Saltmine uses AI and 3D space visualization to allow Cushman & Wakefield to provide clients with cutting edge space plans, test fits and virtual tours.
As we move into 2020, technological advancements show no sign of slowing down and in order to cater to the new Generation Z clientele, real estate firms must embrace them with open arms; whilst not forget the importance of human interaction involved in all types of property transactions.
PropTech offers exciting new prospects, but they are tools to be applied, not solutions in themselves.
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