The growth of PropTech is changing real estate investing. Are you prepared for the shift in fund management brand positioning?
Experts have predicted that the global investable real estate universe in 2020 will have grown by 55% compared to 2012. (Source: PWC Real Estate 2020)
With a flood of capital into the sector, and a sea of new competitors, differentiation is crucial for fund managers to maintain a competitive edge.
Real estate fund managers tend to focus their brand positioning on two numbers: their size, and their years of experience. But for real estate investors who have more options than ever, this might not be a strong enough message.
Today’s investors are looking for fund managers at the forefront of real estate technology, or PropTech. Leading the industry in this regard, and communicating this effectively, could be a key differentiation from competitors still focused on size and experience.
There are several areas of opportunity for real estate fund managers looking to incorporate this into their value proposition.
From smart meters to solar panels, there is an abundance of technological tools that can make properties more energy-efficient, time-efficient and cost-efficient. Not only can this improve value by keeping costs down, but for now, tenants are willing to pay a premium for these features.
Smart buildings and the data they can collect can help to improve tenant satisfaction (and therefore drive more value) by improving their experience in any number of ways – for example, to learn at what point wear and tear to the property might require repair and offering this pre-emptively. Data can also be used to identifying underused spaces in a property and drive more value from them.
With digital giants like Amazon and Google entering the real estate market, we can assume that this will be an important part of their offering. Asset managers will need to counter this by showcasing their experience in this area.
The real estate customer has transformed since becoming equipped with mobile technology, and real estate managers have been quick to adapt. If retail has moved online, less stores and more warehouses are required. With the digital disruption of hospitality, less restaurants and more delivery-only kitchens are needed.
But it would be blinkered to think that this approach is sufficient to anticipate the further changes that are inevitably going to come.
Today’s end customer doesn’t see real estate as a physical space. They see the experience a physical space can facilitate, whether that's community (housing), convenience (retail), flexibility (commercial), or personalisation (hospitality).
So investors too are needing to look beyond the asset itself, and are increasingly becoming involved in operations, where they can offer solutions for growing trends, like telecommuting or co-living.
Properties need to be more versatile, so they can adapt over time to the customer’s changing needs, like community, or to the adoption of new technologies, like autonomous vehicles. And as properties develop shifting functions, real estate managers will likely take on a broader scope of activities.
In terms of messaging, it’s important to convey the spectrum of activities a fund manager can offer its investors, and how experience in one niche can be applied more widely.
Big data is not just useful to drive value from properties, it has multiple applications within the business. Innovating in terms of ways of collecting and using data to drive investment decision will give real estate fund managers a competitive edge – and help them to stand out to potential investors.
We’re also seeing more real estate asset managers collaborating with technology partners - a notable example being Brookfield’s joint venture with Niido, part of Airbnb. Embracing potential competitors as partners is not just a way to adapt to the change they bring to the market, it’s a positive brand story that demonstrates PropTech prowess.
Another opportunity is with blockchain, which is increasingly seen as a credible solution for faster and cheaper transactions in the real estate industry. Fund managers who are looking to drive forward the use of blockchain can capitalise on this message in their branding.
It’s clear then that PropTech offers a dual opportunity to real estate fund managers. On one level, it offers opportunities to drive more value from real estate, understand and satisfy the customer, and streamline business operations. But on another, it’s a compelling brand story that can be leveraged for a competitive edge in a fiercely competitive space.
It’s time to move on from the current dominant messages in asset management branding – size and experience – and communicate the expertise that is more relevant to today’s clients.
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