PROPTECH FOR THE PLANET

from MIPIM 2022 Preview Magazine

LOGISTICS

Proptech for the

planet Faisal Butt of VC Pi Labs says ESG is of upmost importance to the future of real estate

As technology applications evolve beyond the digital urgency created by the pandemic, Isobel Lee finds that industry startups are being asked to help real estate become great and green

How can property developers track the construction process, with a view to making it more efficient? What tools are available for residential landlords to manage vacant units? And, perhaps most importantly, how can existing buildings cut their carbon footprint? Increasingly, the real estate industry will look to technology to solve some of its most pressing problems in 2022, after two seminal years in which proptech made itself indispensable.

While the burgeoning property technology scene witnessed many important breakthroughs prior to the pandemic, the global health crisis introduced a unique set of parameters which accelerated its adoption. From travel bans to social distancing mandates, remote working (and remote viewing) requirements forced many firms to go digital — and fast. Although applications including portfolio management software and air quality sensors tackled immediate issues at the pandemic’s height, most tools were designed for much broader application, and their use is likely to stick. “One of the challenges pre-COVID was demonstrating the viability of scaling tech applications,” says Mike Gedye, head of the technology sector vertical at CBRE. “Previously, we were running lots of small pilots on a single floor. What happened during global lockdowns was the global piloting of new applications, triggering an accelerated adoption which has propelled the industry forward by some five to 10 years.” A 2021 study by JLL identified some 8,000 proptech firms now in existence around the world involved in upgrading the real estate industry’s efficiency and even accountability. The pain points these startups are being asked to solve today involve every aspect of the real estate lifecycle, and the tools themselves are being applied across all kinds of asset classes and for all kinds of problems. “There are incredible opportunities for technology to revolutionize the commercial real estate (CRE) industry,” says Raj Singh, managing partner of JLL Spark. “Specifically, we’ve noted a significant surge in new startups at the intersection of proptech and AI, robotics or 5G seeking to solve challenges in CRE. These trends will only continue to accelerate this year as organisations seek innovative solutions supporting flex or hybrid working and sustainability protocols.” Yet it is the real estate industry’s greatest challenge — decarbonisation — that is likely to become proptech’s biggest battle as well. Etienne Prongué, UK CEO, BNP Paribas Real Estate, says: “Corporates are adopting tech at scale and ESG is driving the market. The focus for 2022 and beyond will be on the proptechs which can demonstrate they have the potential to be forces for good in areas such as workplace wellbeing, and, in particular, climate risk. There is significant untapped tech potential for the built environment in reaching net-zero targets, and in turn, future proofing assets. Any technology that supports the decarbonisation of real estate will continue to attract a great deal of attention.”

At the recent Propel by MIPIM summit in New York, Brendan Wallace, co-founder & managing partner of proptech venture capital firm Fifth Wall, said that his firm launched its climate tech fund two years ago “because fund LPs started coming to us with sustainability problems to solve, and I realised we needed a different vehicle to articulate that, which invests in hardware and services to close the gap”. The centrality of environmental matters is a view shared by other VCs. Faisal Butt, CEO, chairman and founder of European VC Pi Lab, says: “ESG is of upmost importance to us, and to the future of real estate. This is an area we are actively researching and actively investing into. “We conduct ESG due diligence on startups prior to investing, and then help them build on their ESG offering after we invest. We’re proud that over 50% of our portfolio companies already work directly to address ESG issues, but this is just the start for us.” BuildingMinds, a real estate technology firm based in Berlin, is a good example of how proptech can drive ESG solutions. “Our mission is to empower our customers to build a resilient, sustainable and data-driven future for their real estate businesses with our real estate data platform,” says Jens Hirsch, do-

main expert sustainability. “Being a first mover or anticipating carbon legislation isn’t just about avoiding future penalties,” Hirsch says. “You can also create a competitive advantage, both in terms of attracting future tenants and even improving the productivity of the individuals that work in the building.” He adds: “Future-proofing real estate requires a radical move — managing buildings no longer as static objects but as information ecosystems that build their value on data.” Hirsch notes that building owners can’t always anticipate future legislation or taxonomy aspects; but if they have the most up-to-date information about their building’s performance and energy consumption, for example, they are best placed to make swift and accurate improvements. “We have included a carbon pricing simulator in our data tool, so landlords can be prepared for whatever comes,” he says. “At the end of the day, you can only manage what you can measure. By combining insights and analytics, your current and your past energy consumption data, landlords can compare and benchmark against a potential target, and ultimately, plan a decarbonisation road map for the future.” Johannes Fütterer is CEO of could-based platform Aedifion, which helps transform properties into sustainable smart buildings by addressing matters of digitiation, sustainability and efficiency, thus supporting the networking of assets. “A smart building not only saves energy resources and CO2 emissions, but also reduces the human resources required for operation,” he says. Yet for Fütterer, the issue goes far beyond single properties. “ESG is much more than sustainability, it is a harmony of future-oriented resource utilisation and social responsibility,” he says. “In our opinion, buildings are the most important lever for achieving this harmony, and there are numerous best practices that show which measures can be taken to adequately address the issue of ESG. These include, in addition to the carbon footprint of real estate, the wellbeing of the people, affordable housing, and the impact on cities and communities.” Prongué concludes: “Looking forward, there will likely be more investment in real estate software surrounding the construction and development of spaces, and we expect to see fintech and proptech starting to collide. “It’s fair to say, we have entered the golden age of proptech and this year will only underscore its importance in the real estate industry.”