Why are ESG, efficiency and cost savings driving the adoption of PropTech?

What are the main drivers and challenges of PropTech and digitalisation in the profession? Here are the key takeaways from the 2023 RICS Tech Partner Programme survey.

PropTech drivers

ESG, efficiency and cost savings are the most significant drivers for adoption of PropTech, according to the 2023 edition of the RICS Tech Partner Programme survey. Compliance and competitive pressures also feature highly, with COVID-19 and remote and hybrid working the catalyst for greater PropTech adoption this decade. The report surveyed some 170 members of the global RICS Tech Partner Programme community and summarises the current state of play and outlook for 2023 and beyond, examining the drivers and barriers to the use of digitalisation across the built and natural environment.

‘Activity and innovation are taking place at pace across the globe in developed, emerging and developing countries, and technology solution providers are supporting every type of asset across the built and natural environment at every point of the land and property life cycle’, explains the report’s author, Andrew Knight, Data and Technology Lead at RICS.

The digitalisation of the built and natural environment has been driven not only by the emergence of PropTech but also by various demographic, economic and behavioural trends, coupled with the threat of climate change and the continued legacy of the pandemic. Land, real estate, property and infrastructure are being challenged by these changes, and data and technology form part of the solution that the sector will need to adopt. With the technology already available to the sector, it can be argued that the remaining barriers to digitalisation are around people, culture, behaviours, processes and investment.

The evolution of PropTech

There has been a refinement and improvement of technologies this decade, rather than the emergence of new ones. There is raft of technologies available, including automated valuation models, digital twins, sensors, LiDaR, blockchain, robotics, artificial intelligence (AI), big data, virtual reality, augmented reality, the cloud and robotics.

AI in all its various forms is one of the most pervasive technologies to affect the sector. It has both sector-specific use cases, such as automated valuation models (AVMs), as well as generic uses. The strength of AI in data analytics plays a vital role in turning datasets of all sizes and varieties into information that enables decision support and modelling. AI can model complicated scenarios, such as complex construction schedules, in a manner no human could achieve.

With sensors and other devices now connected to the Internet of Things (IoT) and wider adoption across the construction and operation phases of built assets and also in management of land, the sector now has access to vast datasets. In tandem with AI, these datasets support remote data capture, analysis, management and reporting. The ability to host applications and their data on cloud platforms has enabled solutions to be deployed to all sizes of firms and organisations, with software as a service (SaaS) removing the need for in-house IT infrastructure and allowing solutions to be accessed on the desktop via a web browser and remotely on smartphones and tablets.

The data challenge

Data availability, structure, quality, standardisation, sharing, governance and ethical considerations will continue to present challenges. The use of AI across various use cases will require the sector to address challenges around its governance, risks and interpretability.

Issues around data standards, data sharing and data quality emphasise that data as the foundation of the entire digitalisation process remains a significant challenge. The report notes that there will always be issues around commercial sensitivity, but the sector must reflect on the need for more transparency, given that land and property need liquid markets, and the responsibility to address ESG issues and deliver better social outcomes. The report suggests market participants should focus on differentiating themselves on their data-analysis capabilities rather than their possession of the underlying data itself.

Making the business case

Two-thirds of PropTech companies are start-ups, according to the survey. However, a third of respondents were established market participants, many with decades of experience in providing mature and well-proven solutions. With the technology already available to the sector, the remaining barriers to digitalisation are around people, culture, behaviours, processes and investment.  Financial factors are cited as a major barrier to adoption in the report. The pressure to manage costs and investment, particularly during the economic disruption and uncertainty caused by the pandemic, will have stopped or delayed adoption by many market participants. However, there is a need for solution providers to those building internal business cases to demonstrate a clear return on investment.

As the sector continues to digitalise it is critical that issues of cybersecurity, data governance and data ethics are understood and managed by the profession. Increasingly, data on all the sector’s stakeholders and their land and property assets – whether that concerns corporate entities, individual consumers or employees – will be held digitally and will be used to drive decisions that affect them. All these datasets will need to be protected from cyber-attacks.

The role of the profession

The increasingly digital nature of the profession provides an opportunity to broaden its demographic profile and increase interest from the next generation through RICS’ early engagement activities.

As technical standards such as the International Cost Management Standard (ICMS), RICS’ International Building Operation Standard (IBOS) and RICS’ New rules of measurement (NRM) are adopted as part of digital solutions, these types of technical standards will need to be published  in machine-readable forms.

The RICS Tech Partner Programme survey, which also includes as useful glossary of terms, can be downloaded from the RICS website.