The real estate industry has often been described as ‘archaic’ when adopting new technology. Helen Mutucumarana, Partner, Real Estate, HCR Hewitsons, speaks to us about the status of this sector in the UK and how innovation – particularly PropTech – can revolutionise this sector.
Technology continues to revolutionise our day-to-day lives but how much is it transforming the real estate industry and the way property lawyers transact?
Conservative, archaic safe asst and stable investment are all terms still used to describe the UK real estate market. Property professionals often consider these to be positives of the industry but none of them particularly inspire thoughts of innovation and willingness to engage with technology.
The lack of incentive for change when the economy is buoyant and various restrictions on property owners – such as Real Estate Investment Trusts (REITS), pension funds and private equity – can hinder the integration and capital spending on technology in the market.
That said, PropTech (technology and innovations that provide solutions to inefficiencies in real estate) has certainly begun to disrupt the market over the course of the last generation.
PropTech – connecting the market internationally
Technology that accelerates the processes of renting, buying and selling has flooded the market and connects renters and buyers directly to the seller or landlord.
Virtual Reality property tours, drones being used for multi-perspective site visits and internal tours of large commercial buildings are becoming commonplace, making the viewing process much more efficient and accessible to the international buyer or tenant. Additionally, geothinQ is a GIS mapping software that provides on-demand real estate mapping, it does this by visualising property data, such as county maps, topography, flood zone maps and soils. Software like this helps makes for smarter decision-making when considering the acquisition of land for building sites.
Smart buildings
Innovations in the operation and management of buildings have been transformed by ‘smart’ devices and appliances – many of which are connected to the cloud. Purchasers may also access a complete history of the property’s maintenance and upkeep from smart devices connected to electrical systems, heating, ventilation and air conditioning and plumbing.
Software is key here. PHYSEE – a company that has developed tech to help reduce energy consumption – sensing the environment and converting sunlight into electricity simultaneously by allowing transparent windows to generate data; making living spaces more energy efficient and sustainable.
Blockchain
Blockchain technology is another form of PropTech which enables for secure and permanent storage of a digital ledger of transactions, contracts and agreements by a network of users. Through a secure, shared database, owners, tenants and service providers can interact openly. Purchase or finance agreements, title deed surveys and property valuations can be shared and processed by all the different stakeholders. As a result, processes become more cost-effective and decision-making is improved. An example of this is Silicon Valley-based, Propy which automates real estate sales processes. That said, the use of blockchain technology is still very much in its infancy in transactions in the UK.
Bringing real estate into the 21st Century
The Saïd Business School’s report PropTech 2020: The Future of Real Estate categorised PropTech into five key areas:
- Smart buildings
- Shared economy
- ConTech
- Real estate FinTech
- Legal Tech
Many of the above-mentioned examples of PropTech fall into the first four categories. Legal Tech is of particular interest though when considering the impact of technology in the legal real estate sector.
Like the real estate industry as a whole, the legal real estate sector is certainly not described as fast-paced or innovative. Indeed, property lawyers are still implementing legislation from decades ago (or even nearly a century ago concerning the Law of Property Act 1925). That does not mean, however, that technology cannot be used to change these legacy tags and vastly improve the efficiency of property transactions – not only for the client but also for the lawyer.
PropTech in the legal sector
There are data manipulation tools which extract data from public sources – such as the Land Registry and Companies House. Orbital Witness streamlines due diligence, allowing lawyers to visualise titles, analyse Land Registry documents in bulk and create reports from the data available.
When acting for clients who own multi-let buildings or other large portfolios of properties, lease information extraction technology is available and effectively summarises the key terms of the client’s portfolio and various leases in an accessible report for them. They can then upload this to their property management systems. If it weren’t for streamlining automation, this work could take hours.
Data rooms are becoming more and more popular in real estate deals. These used to be actual rooms filled with boxes of all the relevant deeds and documents for lawyers to review. Nowadays, products, such as HighQ, enable lawyers and their clients to review all this paperwork online wherever they are, at whatever time.
To effectively innovate real estate practices, it’s important that the lawyers understand pain points and where these inefficiencies can be improved by technology. There is, of course, little point in investing in technology you don’t understand. And while software licensing can seem expensive, it’s important to understand what time and cost are being spent on labour-intensive activities, which could be carried out by AI and free up a lawyer’s time.
Change is key!
Don’t be fooled into thinking you can stand still if you’ve invested in PropTech – if your business undergoes innovation, the tech will need to as well. If you don’t make allowances for that to happen, everything that follows won’t be an accurate depiction of where your company currently stands.
The legal real estate market is beginning to embrace technology but there is still a way to go. While property lawyers are very unlikely to become redundant as a result of advancements in technology and AI, those who do not use technology are likely to fall behind.
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