Proptech market in China set for a boom says new research

Investment in China’s proptech market set for a boost, says report from real estate consultant JLL

  • New research on the country’s proptech market reveals factors behind this growth and what it could mean for Southeast Asia
proptech market
Investment in China’s proptech market set for a boost, says report from real estate consultant JLL

China is seeing a strong interest in the adoption of property technology – or proptech – with real estate firms and proptech companies looking to increase their budgets for tech tools that address real estate challenges amid the Covid-19 pandemic.

In JLL’s latest report Reimagine the Future of Real Estate examining the Chinese proptech market landscape, more than 150 proptech companies and 80 real estate firms were surveyed about their demand for technology and views regarding the transformation of the industry.

Competition in China’s commercial real estate market has been intensifying over the years. Industry stakeholders such as landlords, developers and investors are actively seeking innovative solutions to achieve sustainable growth. At the same time, China is developing an innovation-driven economy, in which technology has transformed many aspects of established industries. It is expected that real estate is next, and that in China, the window of opportunity has already opened.

JLL’s research report focuses on proptech market and its applications in the midst of the Fourth Industrial Revolution, which emphasizes technological leaps in connectivity, automation and intelligence.

Nearly half (47 percent) indicated they are looking to increase their proptech budget by up to 30 percent in the next two years, compared to less than a third of respondents in a similar poll done in 2018.

These firms cite the need for proptech in order to increase asset resilience for competitive advantage, enhance the human experience within buildings, streamline operations for building efficiency and flexibility, and safeguard the health and safety of end users.

The survey shows that real estate firms are most interested in tech solutions related to big data and the Internet of Things (IoT): 70 percent of them indicate 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 percent currently to 55 percent in 2022.

Learning from China’s proptech development
Even as Southeast Asia is making progress in proptech in recent years, the research highlights China’s continued dominance in the sector in Asia Pacific. The country accounted for a third of all proptech funding from 2013 to 2018 and has remained the largest investment recipient for proptech start-ups in the last two years, according to previous findings from JLL.

China’s burgeoning proptech scene is also a result of its innovation-driven ecosystem, which has benefited from the interplay of diverse real estate stakeholders, from landlords to occupiers as well as technology start-ups, universities and the government, who understand the importance of proptech.

“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, 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 digitalise their real estate industry. I see this aspect being particularly relevant to Southeast Asia, which has a growing number of technology hubs.”

Proptech taking root in Southeast Asia
JLL-backed research shows that Southeast Asia ranked second after China in terms of proptech funding last year, growing from US$13.8 million in 2017 to US$72.9 million in 2019. The region also saw the second highest number of investment deals for proptech start-ups in Asia Pacific.

Like China, various factors in Southeast Asia favour proptech adoption. This includes a young and mobile-first population, rapid urbanisation, 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, JLL China.

She adds: “For countries looking at China’s innovation-driven proptech ecosystem as a model to drive transformation in real estate, our research shows that optimising 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.”

The pandemic is pushing the real estate industry to gather and measure real-time data as landlords, investors and governments look for tangible ways to track market performance.

The amount of data available to property professionals has risen steadily in recent years amid an increased adoption of technology, known in the industry as proptech. But despite the hype around the transformative potential of big data, widespread use of the insights has remained a work in progress.

Now the pandemic has renewed the focus on technology and real-time data. From analyzing rent-collection rates, to monitoring crowds in malls and understanding space utilisation in offices, the pandemic has prompted more property industry players to use proptech to deliver real-time data outputs.

“What we’ve seen around COVID-19 is more adoption on the hardware side where landlords have had to quickly re-specify buildings,” says Matthew McAuley, director in global research at JLL.

High-frequency data in particular is in demand to help make decisions – especially relating to health, mobility and space usage.

In offices, data has helped companies to enable contactless movement, track who’s there at any time, and monitor cleaning frequency. The benefit of such insights in a time of crisis is wide-reaching.

“For landlords, data helps them see how they sit among their peers,” McAuley says. “For governments, it’s about seeing where the distress is, and for investors it’s about pricing and strategic implications.”

Written by Ravi Chandran

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