Proptech is not without its detractors. People equate it to another fad that will go the way of cleantech. But new research from JLL showed that COVID-19 gave an additional boost to this sector, with China leading the way and followed by Southeast Asia.
JLL’s latest report, “Reimagine the Future of Real Estate,” examined the Chinese proptech landscape. More than 150 proptech companies and 80 real estate firms were surveyed about their demand for technology and views regarding the industry’s transformation. Nearly half (47%) are looking to increase their proptech budget by up to 30% in the next two years, compared to less than a third of respondents in a similar poll in 2018.
The main reasons: increasing asset resilience for competitive advantage, enhancing the human experience within buildings, streamlining building operations, and health and safety.
Big data and IoT are two areas where many China proptech companies are investing. More than two-thirds (70%) indicated they need big data services in the next two years, while their demand for IoT applications in the industry will more than double from 20% currently to 55% in 2022.
China is not alone. Southeast Asia has also made progress in proptech in recent years. But China’s sheer funding size dominates the region.
The country accounted for a third of all proptech funding from 2013 to 2018 and has remained the largest investment recipient for proptech startups in the last two years, according to previous findings from JLL.
“China is leading the way in proptech partly because of the market size, which gives it tremendous ability to scale,” says Jordan Kostelac, director of proptech at JLL Asia Pacific. “But it has also nurtured a dynamic and innovative ecosystem thanks to investment and engagement from various stakeholders, coupled with a tech-savvy population that demands effective solutions. By highlighting these factors, we get a better understanding of how proptech could similarly accelerate in countries eager to digitalize their real estate industry. I see this aspect being particularly relevant to Southeast Asia, which has a growing number of technology hubs.”
In comparison, Southeast Asia ranked second after China in terms of proptech funding last year. It grew from USD 13.8 million in 2017 to USD 72.9 million in 2019. The region also saw the second-highest number of investment deals for proptech startups in the Asia Pacific.
Like China, various factors in Southeast Asia favor proptech adoption. This includes a young and mobile-first population, rapid urbanization, and increasing real estate footprint fuelled by economic growth and higher market transparency.
“Proptech has several parallels in fintech as we’ve seen in China, chiefly how new technologies offer a way to vault over structural challenges and inefficiencies in an industry to benefit end-users,” says Lou Chen, senior director of research at JLL China.
“For countries looking at China’s innovation-driven proptech ecosystem as a model to drive transformation in real estate, our research shows that optimizing and integrating resources, improving industry standards, stimulating open innovation, and cultivating talent are key. Greater investment in digital infrastructure, a robust regulatory framework as well as ensuring data security and privacy will further increase the confidence of the industry in proptech,” she added.
Image credit: iStockphoto/SasinParaksa