Over the past two years, PropTech has dominated the conversation about the future of real estate, especially as the world moved to digital-first operations as a result of the global pandemic. Growth in the PropTech industry shows no signs of slowing down and the technology supporting the field continues to become more advanced. As 2021 comes to a close, we reflected on the past year and determined the top trends likely to shape the industry in 2022.
One of the biggest PropTech headlines of 2021 was Zillow’s decision to close its’ ibuying division known as Zillow Offers. Zillow Offers, established in 2018, was the second-most active ibuyer in the United States. Through the program, Zillow purchased homes for cash, simplifying the selling process for the homeowner. Zillow repaired the homes and then sold them via their online platform. Central to Zillow Offers was its use of machine learning to estimate the offer price to homeowners. The program represented 68% of the company’s $1.7 billion quarter three revenues, a large portion of Zillow’s business. It was set to be the dominant division within the company. Yet, by the end of September, Zillow laid off 2,000 Zillow Offers employees and, in November, Zillow announced that Zillow Offers would close.
So what went wrong? According to CEO Rich Barton, “Fundamentally, we have been unable to predict future pricing of homes to a level of accuracy that makes this a safe business to be in.”
Zillow’s failure to use artificial intelligence to value real estate shows that there is still a long way to go in building algorithms that will accurately predict home values three to six months into the future. In 2022, we expect firms, large and small, to develop more accurate algorithms to become the market leader in real estate valuation technology as more and more consumers turn to ibuying.
Appetite for Real Estate Investing Grows
It is no secret that more Americans took up an interest in alternative forms of investment this past year. Typically considered a traditional, highly valuable form of investment, real estate investing has been limited to single-family homeowners or wealthy property developers.
This is starting to change.
In the past few years, fractional real estate investing took off as a way for younger investors and those without the resources to purchase commercial properties to take advantage of this lucrative form of investment. In the market today, there are a plethora of fractional real estate investment platforms making real estate investing more accessible. From a smartphone, investors can review commercial real estate investments through a company such as Cadre, purchase a share of a rental property using a company like Arrived, or, even, invest in parcels of farmland. The opportunities in this space are endless and we anticipate working on many new projects related to real estate investing in 2022.
The New Normal: More Opportunity Beyond Residential
By the end of 2020, while residential and industrial property sales soared, other sectors of the industry, including commercial and office properties faced steep declines. However, as the economy recovered in 2021 and the post-pandemic lifestyle started to take shape, new opportunities in real estate emerged.
A good example of this is the repurposing of shopping malls.
According to the National Association of Realtors, commercial real estate investors are planning to repurpose shopping malls into mixed-use properties and fulfillment centers as e-commerce continues to boom.
Other areas of change could be seen in office properties. Shuttered for most of 2020, offices are reopening and workers are returning with new expectations. In September, Google announced the purchase of St. John’s Terminal in Manhattan. The building boasts 1.3 million square feet of office space and cost the tech giant $2.1 billion, making it the largest American office deal in four years. Central to these new office spaces will be health and safety improvements in addition to offices designed for hybrid work. This trend is likely to continue in 2022 as office demand rebounds.
Just like residential real estate, new technology will be needed for the specific needs of commercial and industrial real estate firms. Investors will specifically look for artificial intelligence to pinpoint the best investment opportunities. We expect to continue to see the emergence of development and construction technologies as new projects get underway.
The Homebuying Process Turns to Mobile Apps
A hugely popular trend in modern real estate is using mobile apps to find rental properties and purchase homes. Some mobile apps allow homebuyers to go on a virtual tour of the property, while others put prospective buyers in touch with a local real estate agent. We see the emergence of apps tailored to the different stages of the home buying process every day.
At Solwey, we’ve worked with several PropTech companies to develop mobile apps for their businesses. Our team worked with LetsTriangle to develop an app that coordinates self-tours for prospective tenants and allows property owners and managers to list residential and commercial properties for rent and sale. Recently, we also worked with True Footage to produce their web app which allows users to scan the interior of their property and fill out a questionnaire that is immediately transmitted to the lender, so the bank has the most up-to-date property data. In the new year, we anticipate seeing mobile apps take on more importance in the homebuying process.
2022 is the Year to Invest in PropTech
It is clear that to stay competitive in 2022, firms will need to make investments in new technology. Based on 2021 trends, the opportunities in PropTech moving forward are seemingly endless. In the coming year, we look forward to contributing to the evolution of the industry.
Have a PropTech project you’re looking to launch in 2022? Schedule a call with us today.