Editor’s note: This article is part of our JLL proptech series, produced in cooperation with JLL, a leading professional services firm that specializes in real estate and investment management. We believe in transparency in our publishing and monetization model. Read more here.
China is a crowded country and finding a place to call home can be daunting. With locals pouring into cities in the largest urbanization in history, China will need 300 million square meters of new housing every year, according to McKinsey estimates. And it’s not just the residential market. As China moves its economy further towards service industries, demand for office buildings and retail space is burgeoning too.
But where there is demand there is also innovation. As China has demonstrated in fields like retail and mobile payments, tech companies are ready to leapfrog to new solutions. The convergence between property and technology is called proptech and it promises to solve many of the headaches associated with real estate in China.
Technology, of course, has always been a part of the industry. Construction workers are now being helped by drones, lasers and robots are determining the best position for apartment complexes, engineers are digitally building houses through BIM (Building Information Modelling) to test construction ideas, and 3D printing has given China a 17th-century style mansion in just one day. Proptech embraces these technologies and also brings new business models and new platforms that change how we live and work.
“Property globally is known as quite a conservative industry that moves cautiously. It has been relatively slow in adopting technology, but now things are changing fast,” said James Hawkey, a member of a JLL team focused on innovation and proptech. “Given the active development market, and the fast adoption of tech solutions, proptech is a great opportunity in China.”
Although proptech is categorized in different ways, its development has come in waves.
The first wave appeared 10 years ago with the rise of property-focused online portals and apps. The second wave drew from the wealth of data on real estate that has become available to offer companies more insight. It also offered consumers new ways to understand property through virtual and augmented reality. The third wave, proptech 3.0, is the next chapter and includes IoT, big data, smart buildings, and blockchain.
Enter your virtual home
Many proptech solutions are already well established: brokerage and property listing aggregator apps such as Lianjia (Homelink)—Chinas largest property unicorn—and Anjuke have fueled the rise of proptech 1.0.
More recently, real estate agencies are starting to draw users with VR and AR features—proptech 2.0. Companies such as Kujiale have enabled buyers not only to visualize their homes but also transport themselves miles away. 51VR provides large-scale interactive visualizations for property developers.
Savvy buyers are turning to even more specialized tools to seal their purchase: platforms such as Property Passbook leverage data to calculate the return on their investments.
In the commercial market, Haozu covers offices while Lepu covers retail property. There are many others, but market experts say there is still a long way to go. There is nothing yet approaching the market power of the US commercial property information company CoStar.
McKinsey calculates that up to 40% of the services sector in real estate is susceptible to automation. Real estate platforms are the first step towards automation, a huge help to those searching for property. Ultimately there is potential for more of the transaction process to happen online. While we are comfortable booking a hotel online now, how long will it be before we can lease an office or a shop through a similar process?
Ownership is overrated
Although owning your own house is still an essential rite of passage in China, the rise of the sharing economy has made people reevaluate the idea of ownership. China’s answer to Airbnb—Tujia— started by utilizing a resource that China has in abundance—empty apartments—to rent out to travelers.
Ziroom, backed by China’s tech conglomerate Tencent, offers renters entire or shared apartments on flexible lets—one month or one year.
“You can move house, you can choose how to pay the rent, you can order cleaning, repair, and get your invoices all through the app,” said Cherry Zeng, a customer of the platform.
The commercial market has also embraced the sharing economy. Coworking in China has experienced massive growth over the years. Local coworking companies like UCOMMUNE, KrSpace, and MyDreamPlus are no longer just for tech startups. Corporations are now keen to use coworking for greater flexibility and to connect with the startups that might disrupt them in the future.
Data is the key
Sharing spaces has also prompted companies to utilize spaces more effectively. To accomplish that, property management is relying on big data. Coworking spaces have some of the biggest incentives to apply these technologies.
WeWork China uses its tech platform to receive input from their members: which conference room they want to book, what kind of issues are they encountering in the building, which events are they interested in.
“Even before we speak about sensors and technology, these interactions in the software among the community already bring a lot of data,” WeWork’s Product Tech Manager Julian Leung told TechNode.
Data actively produced by the tenants is added to data gathered passively by proximity and environmental sensors. The software reveals which areas are used more often and combines it with noise levels, light levels, temperature, and humidity data from sensors to reach conclusions and recommendations.
Big data is much bigger than managing offices, however. Data-based applications have begun to run through the entire real estate industry chain. They can be used for forecasting demand, for preventative maintenance of building systems, and for making property valuation more accurate and quicker. It is fueling the development of new business models centered around platforms.
Data is also the key unlocking the rising trend of smart homes. Thanks to rising living standards, favorable government policies for IoT, a high number of internet users, and healthy competition in the market, China’s smart home market is expected to grow at an annual rate of 44% between 2017 and 2024.
Even garages are going through an informational revolution. Number plate recognition is now used to speed the payment process while sensors tell visitors how many parking lots are available. Smart garages can even employ robots. Jimu Tech’s parking robot uses autonomous driving technology to precisely place a vehicle with mechanical wheel gripper.
Robots and hardware are another component of the data revolution in property. Drones like the one made by the biggest UAV manufacturer in the world DJI do not just take pretty pictures for marketers, survey property and oversee construction, they can also be used in security and monitoring large warehouses and factories. Elsewhere robots are now being used to check inventory in large stores.
Smart buildings will eventually be connected to smart cities with machines exchanging all kinds of information between them. But all this data flying around the invisible cloud is at risk of being intercepted and used by hackers. To solve this, many are looking at blockchain. Taipei has become one of the first cities in the world to test out IOTA, a distributed ledger technology for IoT devices.
Blockchain and proptech 3.0
Blockchain has been making headlines since the explosion of cryptocurrency trading. However, we are only beginning to realize how multifaceted the technology really is. One of its greatest strengths is transparency. Its potential role in logging property rights is a great example. Sweden is already trialing blockchain for this purpose.
Blockchain may also completely upend how we process transactions and how we handle our contracts. No need for the countless paperwork and stamps typical in China.
“Blockchain makes payments safer, faster, and easier, it makes contracts unchangeable and reliable – you don’t have to fly overseas to sign it. It makes crypto land certificates acceptable and makes buying and selling easier,” said Michael Su from Put Link, a platform for real estate transactions, investment, and property rights transactions.
The first blockchain real estate projects are already becoming a reality in China. In March, Xiong An New Area, a newly built city not far from Beijing, created a housing lease management platform in cooperation between with Lianjia and Alibaba’s financial arm Ant Financial.
The road to proptech future may be driven with autonomous cars
We are still in the age of big data platforms, IoT, and the shared economy. Blockchain, autonomous driving, and the use of artificial intelligence for analyzing market data and building performance or replacing real estate agents is still in its infancy. Currently, we are still in the age of big data platforms, IoT, and the sharing economy.
“Proptech is just beginning. Now we are picking the low hanging fruit, using established technologies and data to create efficiencies and improve services,” said Hawkey.
Investments have been following the new proptech trends in China. According to data from JLL’s report Clicks and Mortar: The Growing Influence of Proptech, Mainland China has received the nearly 60% of Asia Pacifics proptech funding since 2012, a total of $ 6.6 billion since 2013. Most of the funding went to brokerage and leasing building powerhouses like Lianjia, Mofang Gongyu, Fangdd, and Aiwujiwu.
However, what we are seeing is not even close to what we can imagine. According to Hawkey the biggest changes to how we live are still in the making and some of them are not even in the proptech sphere.
“Our relationship with property is beginning to change, and companies are beginning to see property as a service. In the longer term, there is potential for buildings to be part of a truly smart city environment. Imagine for example that your autonomous vehicle suggests which office location you should go to, based on your schedule and where your team is.”
With the rise of autonomous vehicles, could the real estate mantra location, location, location cease to be relevant? The arrival of driverless cars promises a faster transportation that we could ever dream of. The way we think about our cities, our homes and workspaces could be transformed in the not so distant future.