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September 9, 2019
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PropTech – a revolution or a catchy slogan?

PropTech – rewolucja czy nadmuchany balon?

Many people – especially those interested in new technologies, real estate or both – have heard the term PropTech. It is a blend formed by joining together the beginnings of words property and technology, and it is hard not to come across it. Just as once the word FinTech (financial technology) could be heard from everywhere, so PropTech has recently become popular. Are we dealing with a real revolution in real estate markets or just a catchy slogan?

PropTech then and today

The first mentions of PropTech goes back a few years only. Someone timidly used the word at a startup conference, someone else said the word out loud at a real estate fair… Over time, the term began to popularize, and it started to appear on blogs of predidents of large companies.

MIPIM – the world’s largest real estate event – has expanded its theme to PropTech and today, under the MIPIM brand, trade fairs devoted exclusively to this issue are also organized.

Different sources give different numbers, but basically we can talk about several thousand companies that operate in this hot new industry.

When we think about it for a moment, “property technologies” are nothing new. It is enough to recall Booking.com, which was launched in 1996 and is in fact an example of a proptech company that has revolutionized the hotel property market. Another example is Airbnb, which appeared in 2007 and brought a complete change of rules on the apartment rental market. This shows clearly that new technologies began to revolutionize real estate markets long before anyone used the word “PropTech”.

PropTech

Problems with the PropTech market

We are not talking about anything new. We are talking about a phenomenon present for years, which, however, has only now been named and has become fashionable. It is a kind of wave on which many want to surf, but only few succeed. The authors of the “PropTech 3.0: The Future of Real Estate” report indicate that many companies in this industry will fail, and a lot of money will be lost. Single players will stay alive, and only they can count on a greater success.

– There are a lot of inflated balloons in PropTech: companies that are heavily funded, but without real value, and their odd valuations are measured by the scale of debt with investors. There are also smaller companies that provide fair solutions, which, however, the market does not need, and start-ups that duplicate the ideas of predecessors, which is the exact reason why no one buys these ideas – says Konrad Okła, creator of the Realko24 platform, which connects tenants with landlords on the commercial real estate market.

According to him, one of the main reasons why these companies fail is that the vast majority of project originators are not people directly involved in the real estate market, but programmers.

– They may have an excellent technological base, but they lack knowledge about the secrets of the industry’s functioning, its problems and solutions that can be implemented – and yet they want to take advantage of PropTech’s popularity and earn on it, mostly with poor results. Most of the companies that win thunderous applause and prizes in proptech competitions and then receive multi-million financing, collapse several months later – says Okła.

An example of a kind of inflated balloon can be one of the most characteristic and largest representatives of PropTech – the WeWork company. Promoting itself as a start-up with great potential (although some experts argue that it does not really have much in common with either PropTech or start-ups), heavily co-financed by international funds, it ultimately brings losses. In 2018 alone, WeWork’s losses amounted to USD 1.6 billion. “Forbes” calls the WeWork’s announced IPO “one of the most absurd debuts on the stock market”, precisely because of the artificially high valuation of the company and its inefficient business model.

PropTech and commercial real estate

It is easy to name prosperous technology companies on the housing or hotel market. However, there are few that offer added value and are able to monetize the commercial real estate market. Realko24 is one of the few PropTech companies on the market of offices, warehouses and commercial spaces that have managed to do two things: deliver value, satisfying the real need of the market, and monetize its idea, i.e. develop a way to earn a fair income.

The success in this case comes primarily from the fact that the creator of Realko24, Konrad Okła, as a former broker, knows the ins and outs of the commercial real estate industry. For years, he worked and succeeded in it, while closely watching the market. Thanks to this, he was able to meet the market’s needs and, by managing a team of programmers, provide a modern solution that is present on international markets today.

– I wanted to add value to both tenants and landlords. Working as a broker, I saw how much energy and money was wasted in this market. It was difficult to admit it to myself, but my and other agents’ work was unnecessary in many cases. That is why I created a technological tool that allows one to find real estate without the participation of a broker, with up to 10 times lower commission. This means that the landlord can give a better offer and the tenant can pay a lower rent.