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The Role Of Tech In Capital Market Transactions

Rob Campkin, Head of Corporate Capital Solutions, EMEA Corporate Solutions, Colliers International

Rob Campkin, Head of Corporate Capital Solutions, EMEA Corporate Solutions, Colliers International

When we look at the size of the real estate industry, with $220 trillion in assets increasing at a rate of around 4.4 percent each year, then consider how much of the industry is yet to adopt technology, there’s no doubt that PropTech presents an incredible opportunity for our industry, but one that is not without a significant amount of risk.

We have seen how other industries have been affected by disruptive technology - automotive with Uber, retail with Amazon and hotel and hospitality with Airbnb—and although the real estate industry is playing catch up compared to other sectors, it is making great pace in identifying game-changing technologies which will enhance the client experience and enable greater productivity and efficiency in delivering traditional services.

"New tech and data, connected devices, and sensors are enabling buildings to become more interactive and responsive to people’s needs"

New tech and data, connected devices, and sensors are enabling buildings to become more interactive and responsive to people’s needs. A rise in urbanization and exponential urban growth is forcing real estate incumbents to rethink how to future-proof their assets for higher population densities and consumption needs.

Meanwhile, global Venture Capital (VC) investment in the real estate technology sector grew from $4 billion in 2016 to roughly $12.6 billion in 2017 as VCs aggressively seek to back market leaders. Tech success stories are becoming more frequent, and incumbents can no longer maintain the status quo without additional investment in efficiency and agility to keep up or partner with these new entrants. Investing in technology is now a strategic imperative for all major real estate firms and, as a result, we are seeing many firms launching their own technology funds to build new growth platforms, improve the value of existing businesses and future-proof their organization.

In fact, at Colliers, we are embarking on the second year of our PropTech Accelerator Programme powered by TechStars, which searches for start-up PropTech companies with the potential to make waves in the industry.

I am excited to have been selected as one of the lead mentors for this year’s program and this month we will be meeting with the CEOs and founders of this year’s program and we have 10 new companies which have made it through our accelerator program, of which six could have a positive impact on the capital markets space.

Learning from the Trailblazers

The Finance industry has been a very early adopter of technology and has lead the way in terms of investment, benefiting from online and algorithmic-led high-frequency trading, which has further increased transaction speed and enabled a greater volume of business to be undertaken in less time. The real estate industry can learn a lot from FinTech as it works towards achieving the same goals of increased efficiency, transparency, security, and productivity.

Three years ago, I would have said that the real estate sector has a long way to go in this space, but already we are seeing certain elements of FinTech being brought into our sector. There have been a number of large scale investments in PropTech companies in asset management and capital markets, and the number of PropTech companies with unicorn status (a market cap over $1 billion) has significantly increased over the last two years with the likes of VTS, Katerra, Compas, Cadar, Reonomy, Convene and Industrious making waves.

What Does the Future Look Like

Despite, the headway already made in PropTech, there is still a significant amount of inefficiency in our industry which is ripe for tech innovation, such as the need for even more advanced portfolio and data management which could enable strategies and cashflow modeling to be developed in real-time. The use of augmented reality and virtual reality, financial modeling and underwriting, financial payments and transaction processing, KYC and AML checks, reporting and storing of the critical deal and due diligence documentation are all areas which could be improved by tech to reduce deal lifecycle, increase the speed of production and improve the client experience.

I’m most excited by the application of AI and how it can take over the most basic of tasks, to reduce deal execution time and allow us to operate at a higher cadence.

Real estate is still a slow-moving entity, particularly when dealing with large corporate z organizations which still require board meetings, that occur infrequently, and multiple stakeholders to make decisions. So anything we can do to reduce our average transaction time from say six to two months, will reduce completion risk and accelerate our client’s financial and operational objectives, to allow them to focus on other more core areas of their business.

Looking ahead, I believe we will see a significant change in the digitization and electronification of our sector. Services which require human conversations will still need to happen, and there is no tech out there to replace these essential human interactions, however, more administrative tasks which are currently required to capture, process and analyze data will be taken over by new technology, having a positive impact on our productivity and enabling us to spend more time with our clients - allowing us to identify and create new solutions and solve problems, which can then, in turn, be executed through the use of tech.

As an industry, we need to have a deep understanding of the technology and areas open to disruption and partner with the companies and products that enable us to maintain our edge. It’s imperative that we embrace tech and, in my view, the key to this will have the foresight, skill-base, and access to products to enable our industry to be enhanced by disruption.