Proptech Unlocks Real Estate Potential
Among Canadian industries, real estate has consistently been one of the most lucrative, and as the world’s population continues to grow, this industry will no doubt continue to develop. Real estate is a huge contributor to the Canadian economy, as its services comprised 13.5% of the country’s GDP in 2021. As technology continues to drive our world into the future, technology and real estate have inevitably begun to converge. Similar to fintech (i.e., financial technology), which seeks to improve and automate the delivery and use of financial services, proptech (i.e., property technology) is an end-to-end technology that real estate professionals, underwriters, developers, property managers, title companies, banks, and others, use to manage and improve real estate transactions. Proptech develops and refines innovative technology platforms which are then integrated into the real estate market for various purposes. These new platforms are seeking to make the real estate sector both simpler to navigate and more profitable.
Micro Data Centres
We are living in the age of Big Data. Hence, the demand for data to make more informed and accurate decisions is increasing. Businesses make use of data to survive, and offer better services and products to meet consumers’ growing needs, particularly in commercial real estate.
Edge computing is a paradigm shift in the way businesses process data; it was first introduced in the 1990s when Akamai, an American content delivery network, cybersecurity, and cloud service company, launched its content delivery network (CDN). The early goal of edge computing was to reduce the bandwidth costs associated with moving raw data from where it was created to either an enterprise data center or cloud system. Edge computing is about processing data closer to where it is being generated, enabling processing to occur at greater speeds and volumes, leading to more action-led results. It offers unique advantages over traditional models, by centralizing computing power at an on-premise data center. Edge devices are not foreign to most digital consumers; rather, they are known as smart speakers, watches and phones – all devices with the capacity to locally collect and process data while being in touch with the physical world. The rise in the edge computing could leads to the formation of micro data centers, potentially compacted into the size of a few parking stalls, located adjacent to the business they are serving, instead of traditional large-scale offshore data centers.
Moving forward, edge computing could gather and process data generated by smart devices or the Internet of Things (IoT) on-site, therefore forming ‘micro data centers’. They would be located in spaces such as shopping malls, airports, or stadiums, where data transmission requirements are considerable. Rather than sending data to a distant location for processing, the proximity that edge computing offers results in more instant and localized data, enabling users to store content, and process applications on-site. In commercial real estate, these micro data centers offer a unique opportunity for landlords that own portfolios of large-scale commercial real estate such as shopping malls and office towers to improve their property management and security measures. The precise way edge computing will be implemented in real estate is all dependent on the needs of the property manager. With a gradual increase in the integration of the Internet of Things (IoT) in property management, edge computing will be more equipped to handle data from billions of devices and sensors. This could reduce costs and potential mishaps during data transmission processes.
With respect to building security, edge computing can improve efficiency and lower bandwidth use for infrastructures with large and complex security systems. For instance, video streaming, which helps to identify criminals in commercial spaces, employs significant amounts of bits and bytes which can clog cloud and web services. But with edge computing, each motion-detection camera would have an internal computer to run the application and then send footage to the cloud server on an as-needed basis, reducing the data traffic that slows down processing.
VR Reality
Virtual Reality (VR), which was once exclusively used for 3D interactive video gaming, is now being integrated into the real estate industry. Its purpose is to help potential tenants explore property from every angle and visualize spaces that do not yet exist or are being repositioned for specific needs. With an increasingly globalized real estate economy, VR is a handy tool. For instance, international real estate investors can view properties without being physically present, providing convenience and speeding up the transaction process.
The Metaverse
With the fine-tuning of technological developments, the Metaverse is building the bridge between the physical and digital worlds, encapsulating technologies including Virtual Reality (VR), Augmented Reality (AR), and Extended Reality (XR). It provides a virtual environment where users can participate and experience the potentials of the “space” as if they were physically present. The Metaverse is revolutionizing the real estate industry as an innovative option for surveying spaces. The virtual platform will create the opportunity for demo spaces to be showcased more conveniently, thus increasing visibility and accessibility for both local and global prospective buyers while preserving the element of a spatial presence and physical experience. Furthermore, the dual nature of the Metaverse acts as a means for real life properties to have a ‘digital twin’ that exist on the blockchain. For instance, if a beautiful estate in Italy was previously purchased in the physical world, one would be able to buy its ‘virtual twin’ in the Metaverse, keeping the virtual property as a collectible and creating virtual experiences like events, concerts, parties, arts shows, and so forth.
Tokenization
Traditionally, real estate was not easily bought or sold in the market as real estate is a high value asset. For instance, selling a 100 million USD building takes more time because the pool of investors able to afford such an asset can be limited and the bidding process can be lengthy. This makes turning an asset into cash time consuming. However, with the advent of security tokens, real estate could soon be perceived as a liquid asset.
Backing an asset to a token is known as “tokenization”. A security token is intended to represent ownership of an asset such as an equity stake, a debt, a venture fund, or even a real estate property. Security tokens are fungible, meaning they are divisible, interchangeable, and not unique. As a divisible token, real estate can be fractionalized, meaning investors can buy parts of real estate rather than the entirety. This feature of security tokens reduces the barriers to entry for investors with less capital. Notably, blockchain structures are required to facilitate the transactions of security tokens in a transparent, affordable, and immutable manner.
Buying and selling security tokens on the blockchain enables these assets to be sold across the globe, thereby increasing the investor pool for the seller. Furthermore, blockchain can speed up transactions by eliminating a third party intermediary who would have tracked and verified the transactions. This means investors do not need to incur high transaction fees, thereby maximizing their investment and overall capital gains. The potential to streamline real estate transactions, once convoluted and tedious, could drive the demand for security tokens, thereby resulting in an influx of liquid assets that could significantly change global markets.
Micro data centers, Virtual Reality, the Metaverse, and security tokens backed by real estate are just a few notable proptech platforms and tools that are in the works. What was once known as a ‘traditional’ industry could very soon be heavily technologized. Having one of the largest and most valuable asset classes integrated with technology will generate significant opportunities that could drastically impact global markets. However, only time will tell how quickly companies in the industry will adapt and how well companies in the industry will perform in unprecedented market conditions of which the global economy is up against.