There are now over 9,000 proptech companies around the world. With over £24bn invested in proptech companies, £10.7 of which comes from the first half of 2022, the interest towards digital transformation in real estate has been only enlarging.
But this comes with pros and cons simultaneously.
The good thing with the proptech market boom is that high competition has become the driving force for products to improve at a fast speed and offer higher quality of services, which accelerates the much-needed transformation in the real estate market.
On the other side of the coin, many of the competitive tech products address the same problems with similar solutions and features, which makes real estate companies get lost in choosing the right solution.
While owners and managers of all asset types carry both sides of the coin, properties that host Gen-Z occupiers such as co-living and student housing are and need to be in a hastier path to digital transformation.
“It is inevitable for organisations to find ways to devote the time and effort to equipping their leaders with the tools to overcome the challenges of successful technology adoption, as from now on, technology will never stop being a priority for student housing operations.”Brian Welsh, Managing Director and Head of Student, Round Hill Capital
In this article, Brian elaborates on the ways to start with digital transformation in purpose-built student accommodation (PBSA), the trials, pitfalls and opportunities, and letting the digital minds lead the way.
What are the pain points of today’s PBSA owners and operators? Where do the problems lie in attracting loyal tenants?
The student housing rental market is witnessing huge growth. Yet, such is the nature of these residents, who value short-term flexibility in their contracts, that there are pain-points for landlords who ordinarily prefer long-term leases to protect their bottom lines.
Whilst more flexible contracts and offerings may attract tenants, there is no guarantee of increased loyalty. This does not stand in the way of creating more services and activities for students in the summer down time that’s worthy of their time to stay longer.
The age-old problem of reporting and actioning repairs in shared accommodation assets has certainly not gone away. Yet by adopting digital technologies, tenants can fast track the process of reporting issues easily, and landlords can efficiently begin the resolution process.
As a solution, customer service and satisfaction remain at the heart of attracting loyal tenants. While digital solutions can go a long way in improving this, the fundamental principles of creating positive relationships cannot be overlooked.
What is the biggest barrier in digital transformation in PBSA, and what is the solution to it?
I believe that the biggest barrier is perspective. Digital transformation must be seen as essential, not just a nice-to-have.
While some digital solutions were forced upon us in early 2020, the move towards transformation for some asset managers has been slower and more challenging. Embracing digital solutions has never been easier, as the technologies of today allow for fairly easy adaptation, and being slow to take action runs the risk of letting your competition get ahead.
What are the common mistakes that PBSA operators make in digital transformation and ESG adaptation? How can they overcome these mistakes?
PBSA is now far more than just a room with a bed and desk – it’s at the centre of a student’s quality of life. Again, the way of thinking is the key enabler or the deal breaker here. This journey starts even before they take possession of a building.
Very often, operators predict a market need in an area where there is an undersupply of PBSA assets but fail to properly consider the longevity of the infrastructure with regards to attracting and retaining tenants. Usually in this situation, an investor will have to put in significant capital to bring the asset up to standards and create the digital infrastructure to meet core needs of tenants.
Another common mistake we regularly see is an investor disregarding their audience and not understanding their core needs at a deep level. It’s incredibly important to have people on the ground understanding the individual market nuances and their audience to ensure digital transformation delivers exactly what they need.
Providing progressive, forward-thinking accommodation requires operators to be ready and committed to invest in digital solutions and community activities if they want to see tangible results.
For example, our assets are equipped with a range of smart technologies to enhance their ESG credentials. Sensors no longer just turn lights on and off – they can track data on air quality, temperature and humidity to help improve occupants’ wellbeing and productivity. Such sensors can be monitored and controlled remotely, removing the need for site visits.
Alongside residents’ wellbeing, smart technologies can also be used to monitor the building’s health. The implementation of technologies and sensors can help asset managers track data on carbon footprint, energy efficiency, water quality and usage, as well as waste management – giving a rounded view of how a building is performing and areas where improvements can be made.
What are the common mistakes that proptech’s make in helping real estate owners transform digitally?
From our experience with Round Hill Ventures, we have been able to identify the most (and least) effective ways of helping real estate owners transform their digital offerings. We have clear investment themes for companies addressing three broad trends, which forms a great framework for proptech’s working with real estate owners.
Changing market landscape:
- Themes and trends come and go before you even know it. In response, industries must become more agile and be able to adapt quickly.
- Tenant needs are changing and becoming more complex. It’s increasingly important to understand and respond to these.
- Companies need to develop clear user-centric solutions that reflect changing market trends.
Opaque and outdated information:
- Information in the real estate industry is historically siloed and difficult to access. Using digital technologies, owners should invest in gathering good data, proactively seeking feedback on the products and services they offer.
- In response, companies shouldn’t be afraid of applying new insights to improve the information quality and depth they can access from an asset.
Optimisation of space:
- All space comes with a price tag, and in such a competitive marketplace, all physical assets should be utilised efficiently and effectively.
- Demand for property continues to rise and we need to think ‘out of the box’, as residents are looking for new and innovative uses of space.
- In response, investors should be challenging operators to generate efficiency that helps unlock maximum value.
What topics are not being discussed enough and need more highlighting, considering the sector trends of this year?
The sharing economy is an innovative and interesting theme which has yet to be explored to its full potential. Consumer habits are changing, driven in the main by a combination of a rising cost of living and a growing demand for more sustainable living, meaning that more and more people are increasingly willing to sacrifice space for access to collaborative solutions for their everyday needs.
Round Hill Ventures recently invested in Tulu, which provides 24/7 smart rental units fitted with on-demand access to day-to-day items. This kind of model is taking the sharing economy to the next level. Urban dwellers, living in co-working spaces, no longer need to fill their limited space with items such as printers, home projectors and vacuums that will be used infrequently.
Given that surviving the economic downturn is at the front of many people’s minds, landlords must think smarter about how they can adapt their offering to make life simpler and better value for tenants. The sharing economy unlocks great opportunities for this, opening up access to products or services that people may not ordinarily be able to afford themselves (or have the space to keep in their homes), at an affordable cost that helps them live not only more efficiently, but more sustainably too.
As prices continue to rise, we need to think more about how we are supporting tenants in difficult operating circumstances to continue to deliver value for money.