Property Sector : How Technology is Changing the Property Game

The past five years have been a rollercoaster ride for the UK property market. Brexit, the pandemic and regional conflicts have led to inflationary cost increases with higher interest rates resulting in an affordability gap for buyers and renters.

Combined with sector specific challenges including tighter planning, safety and environmental regulations, property values and investment sentiment have been somewhat subdued over the past 24 months.

CBRE’s outlook summary for 2024/25 suggest:

• Property Sales - Whilst interest rates are expected to start falling by the end of 2024, the industry expects the affordability gap to persist into 2025.
  

• Rental - The demand for private residential rental accommodation will continue to increase however available stock levels continue to decline. CBRE reports that 150,000 single occupancy and HMO rental properties were sold in 2023.
  

• New Stock Availability – The ONS reports an approximate 50% reduction in new planning grants in 2023 compared to 2022. Higher costs, planning, safety and environmental regulations continue to frustrate attempts to deliver new stock.
  

• Commercial – slowing demand from the logistics sector, challenging rent collections due to high levels of business insolvencies and excess stock saw this sector underperform in 2023 and this is expected to continue into 2024.
  

• Offices - as the economic outlook improves and more businesses continue encouraging staff to return to the office post pandemic, CBRE forecast a small uptick in overall demand for prime office space.
  

• Student Accommodation – demand continues to outstrip supply with overall student numbers 24% up on pre-pandemic levels. Combined with many private HMO landlords selling up, the UK currently has a shortfall of 580,000 student beds.
  

• Affordable Housing - existing providers have stated they will be focusing on improving the quality of their existing stock rather than building additional capacity. However, affordable housing stock is set to rise in 2024 as new registered providers entered the market in 2023/24 and are expected to deliver new capacity throughout 2024/25.
  

• Potential for Growth – CBRE has identified some areas for future growth with new emerging property centric, service providers. For example senior citizen living accommodation and the continued expansion of technology data centres.

These factors have combined to change the way real estate service providers operate in the UK with an increasing focus on:

• Value added service provision to attract and retain customers

• Demonstrable regulatory compliance and risk management

• Optimised operating costs and efficiency to improve margins
  

Each of these goals increasingly rely on new property specific technology solutions or Proptech as its commonly known.

This article explores the increasing role Proptech plays in supporting the main service providers to the property sector.

Property Development

The property development and construction industries are increasingly reliant on technology to optimise site and property design, manage construction projects, utilise resources and materials efficiently and reduce the industry's environmental impact.

Design

Computer-Aided Design (CAD) software is the foundational technology which allows architects and engineers to create 2D and 3D drawings of site and building plans. These capabilities have evolved to enable Building Information Modelling (BIM) which is a process that creates a digital representation of a building, encompassing its physical and functional characteristics to help predict and avoid costly mistakes in the construction process.

Autodesk and Graphisoft are the dominate providers of CAD and BIM solutions to the property market.

Increasingly, drones are used for aerial photography and videography, site surveying, and progress monitoring. Virtual Reality (VR) & Augmented Reality (AR) allows stakeholders to virtually explore building designs and provide on-site visualization of building plans.

Construction

Producing details proposals including a breakdown of costs and timescales is an important part of construction governance. Tracking inflight projects and providing timely, regular updates to clients has traditionally been via email using spreadsheets. In this scenario, spreadsheet maintenance can be challenging with data often not updated and problems with version control. Construction Management Software streamlines construction workflows, ensures project records and documentation are kept up-to-date and provide clients with an easy to use portals so they are always aware of current progress. Key functionality of CMS software includes:

• Project Management for progress tracking

• Project budgeting and tracking

• Material purchase order management

• Plant & Subcontractor management

• Document management

• Customer Portals for Realtime Progress Tracking

Popular technology suppliers in this field include: Autodesk, Procore, ePromis for enterprise level businesses and Access Group &  Archdesk for SME construction companies.

The integration of Artificial Intelligence (AI) is expected to play an increasingly important role in the future. Likely AI developments include:

• Design: generative AI image creation tools will inspire new creative architecture ideas and improve architect productivity by generating all the necessary documentation to support planning and construction processes.

• Predictive analytics: AI can identify potential risks, delays, and cost overruns within the construction process before they occur.

• Automated construction processes: Tasks like bricklaying and prefabrication could be further automated using AI-powered robots.

• Optimizing material usage: AI could analyse data to suggest the most efficient use of building materials, heavy plant and contractors whilst reducing time and material wastage.

• Internet of Things (IoT) for Buildings:  Sensors embedded in buildings can collect data on energy consumption, temperature and occupancy to minimise environmental impacts.

Property Management

Estate, Lettings, Managing Agents, Housing Associations and Student Accommodation providers will continue to diversify their service offerings seeking new opportunities to bolster revenue streams in an increasingly competitive market.  This has already led to many service innovations in agency capabilities with a focus on customer and landlord services facilitated by integrated property management systems. These systems typically include the following capabilities:

• Marketing properties for sale and rent via company websites, property portals and increasingly social media channels

• Tenant sourcing, viewing, identity & credit checks and referencing

• Tenancy agreement & contract management

• Inventory management

• Rent collection and service charge management

• VAT return submissions, bank account reconciliation and financial reporting

• Co-habiting and co-working solutions

• Utility provision and bill payment

• Property maintenance and contractor management

• Mandatory property compliance checks & certification

• Insurance Management

• Tenant & Landlord Portals

Technology providers in this space include established companies such as: Yardi, MRI, Trace Solutions and Reapit. These providers benefit from a long history of providing software solutions to large commercial and residential agencies however, as the market has become increasingly competitive, new providers have emerged supplying more cost effective and accessible online property management solutions. Companies such as: Re-leased, Arthur Online, Goodlord and DezRez typically provide services to smaller, independent managing agents offering core selling and tenant process automation. These solutions normally rely on third party integrations to support functions such as:

• Accounting -  Xero & Quickbooks

• Inventory Management – Kaptur and Inventorybase

• Maintenance – FixFlo

Over the next 5 years, investment is expected to continue delivering new innovations in the following areas:

Portfolio Management

Data analytics and AI technologies will play an increasing role in tenant selection, rent and exit yield predictions, recommending specific locations and properties for investors & landlords to expand their portfolios, analysing traffic and footfall patterns to optimise retail space utilisation, monitoring warehouse utilisation to optimise stock control and dispatch processing.

Facilities Management

Smart building management and Internet of Things (IoT) meters and sensors, coupled with increasingly sophisticated Building Management Systems (BMS) and AI solutions, will make predictive maintenance recommendations to optimizing energy use, minimise downtime and use image recognition to streamline property inventory processes.

Customer Experience

PropTech solutions will prioritize a user-friendly experience for landlords and tenants, including online portals for rent payment, maintenance requests, portfolio review and communication with agents. These portal will either be built into the core construction and property management systems or be developed using low code platforms, which pull data from core systems to present a unified, customer friendly experience to clients. AI powered chatbots will increasingly provide automated support to tenants and landlords.

Regulatory Compliance Management

PropTech will become instrumental in managing complex regulatory requirements regarding tenant safety, energy efficiency, and anti-money laundering. In addition to adhering to existing mandatory property quality and safety certifications, recent regulatory changes have been introduced requiring larger construction and managing agents to demonstrate compliance with new environmentally focused regulatory requirements including:

• Adhering to tighter MEES regulations

• Generating TPT transition plans

• Complying with ESG regulations

• Adhering to the Bio-Diversity Net Gain regulation

Whilst these requirements are currently only mandatory for larger companies, it is expected that they will be rolled out to smaller businesses soon.

Property Portals

The emergence of property portals, with the launch of Rightmove in 2000, signalled a paradigm shift in property sales and lettings. Zoopla launched in 2007 as a major competitor focusing on innovative website features and market data alongside property listings. Shortly after, Student Cribs (later Sturents) became established as the market leader in student accommodation.  In 2015 OnTheMarket was launched by a consortium of high-street estate agents offering a subscription-based alternative to existing pay-per-listing model and to compliment the agencies' expanding portfolio of technology driven services.

In the future, investors anticipate these platforms will offer a wider range of capabilities and complementary services using emerging data and AI capabilities. This will include features such as personalised property suggestions based on existing landlord portfolios and financing options.

Transaction & Conveyancing

The past decade has witnessed a significant transformation in property sales transactions due to technological advances particularly in financing and conveyancing. Online platforms like MojoMortgages.com and Better.co.uk have streamlined the mortgage application process. These platforms connect borrowers with lenders, compare rates, and facilitate pre-approvals – all digitally. Companies like Zopa and Funding Circle, facilitated by their technology platforms, offer alternative lending options, making the financing process faster and more accessible.

PropTech companies continue to impact the conveyancing industry providing greater efficiency, transparency, and accessibility driven by technology. For example, Infotrack provides software and data services, automating tasks like property searches, local authority checks, and anti-money laundering (AML) compliance which reduces manual work and expedites the sales process. E-conveyancing platforms like Coadjute are enabling a fully digital conveyancing experience, including identity verification, secure document sharing, electronic signatures and real-time case tracking.

Business Operations

In addition to real estate management, property-based businesses also need to

• Attract and retain the best industry talent

• Create a working environment conducive to high productivity and personal development

• Maintain appropriate Governance, Risk & Compliance (GRC) Standards

Employee Experience

The way property firms locate, onboard and retain staff is evolving. Resource managers need to adopt strategies for both permanent and contract associates who specialize is specific areas. In a competitive market for great talent, property firms to be flexible and seen as easy to work with. There are a number of key components to a successful talent management strategy. These include:

Talent Management Systems – these provide easy to use, online processes for resource managers to streamline the staff recruitment, management and onboarding process. Timesheet, milestone & absence tracking should be integrated to payroll to ensure ensure permanent and contract staff are correctly renumerated. 

Enterprise talent management solutions include: Workday, Microsoft, Oracle and SAP.

Solutions such as bamboohr.co.uk and employmenthero.com offer more cost effective options for SME businesses.

Modern Workplace Technology – these are cloud-based services which enable employers to offer staff a flexible working environment using their preferred choice of device (mobile or laptop running Microsoft, Apple or Google operating systems) in any location (office, home or on the move). Universal Endpoint Management (UEM) system enable new/lost or stolen devices to be sent directly to end users and automatically have their data and applications built/restored from the cloud without delay because the IT department do not need to be involved. Finally, modern biometric technologies enable users to login into their devices securely without having to remember and constantly change complex passwords.

Productivity Tools provide standardised, intuitive online business processes and collaboration tools, to increase staff efficiency. For example, easy to use tools to expedite meetings, messaging, voice and video communications, document co-authoring and task management all increase individual and team productivity.

Process Automation capabilities reduce staff's administrative burden with AI assisted business processes acceleration. Example may include: scheduling meetings, generating meeting transcripts and summary notes, generating marketing and sales collateral reduce staff admin overheads.

Staff Engagement - focusing on staff retention with engaging, personalised work experiences such as: ensuring job satisfaction using role definitions, objective setting, personal development & training, mentoring & feedback cycles, providing personalised knowledge management including access to relevant public and corporate documentation, articles, social media posts & personalised news feeds relating to customers and projects that the employee has a specific interest in.

Microsoft are the dominant supplier for modern workplace, productivity & collaboration tools via their Microsoft 365 and Teams application suites. The relatively new Microsoft Viva suite has been developed to delivery a rich set of staff engagement tools.

Governance

Managers are increasingly required to oversee their Governance, Risk and Compliance (GRC) activities including:

·        Publish and maintain corporate security policies

·        Guard against cyber security threats

·        Enforce security policies including zero trust & single sign on (SSO) systems access

·        Maintain Data Leak Prevention (DLP) Controls

·        Report on compliance tracking for ISO, Cyber, GDPR regulations

·        Produce departmental KPI dashboards

·        Conduct regular vendor reviews

·        Demonstrate cost control by monitoring software license usage

Microsoft are also the most popular supplier device, user, data and applications security & compliance through their Endpoint Manager, Entra identity, Defender security and Purview compliance offerings many of which are built into their standard M365 business and enterprise licenses.

Conclusion

With such a wide range of technology options available, property-based businesses would benefit from the input of a Chief Technology Officer. However, many companies cannot justify a full time CTO on a six-figure salary. If this is the case for your business, why not explore the option of working with a fractional CIO/CTO. These are part time, C-suite technologist who can provide strategic advice and guidance for a fraction of the costs of a full time equivalent. For more information, visit www.digitalselection.co.uk or book a free, no-obligation 30 min introductory call here