PropTech during Corona Q&A | Challenges & Opportunities
An invisible enemy has suddenly turned vibrant cities into ghost towns, toilet paper into the most valuable commodity and all of us into virologists. While we are still trying to figure out how this crisis is going to affect us, the important thing is to stick together and help each other out. With that in mind we’ve started organizing weekly Q&A sessions with our Global PropTech community to discuss developments and offer each other support. Read on for last week’s recap.
Not a short-term thing
“I don’t think this crisis will be resolved in a month or two, it’s going to take much longer than that”, says Chungha Cha (Susterra Partners & Re-imagiging Cities Foundation). “But I’m an ultra-conservative, risk-averse, old, semi-retired man.” Chungha continues: “The wicked thing about this virus is that we simply don’t know what it is. Until we find something close to a cure, and that is going to take months, a lot of people will be uncertain and scared. In the meantime we will have bankruptcies and, in my conservative view, we’ll see pockets of violence.” Not too uplifting.
Current impact on PropTechs
For PropTechs the main challenge is – now more than ever – to figure out how to keep productive and still make revenue. The many empty buildings, the shifting priorities of clients and the challenging investment landscape all pose serious obstacles to this. Wouter Truffino (Global PropTech & Holland ConTech & PropTech): “We see businesses lose big chunks of their income in just a matter of days.”
Luckily, Noah Maatoke (Smartvatten) says their situation is still stable as their smart water monitoring system allows for remote installation. “Our work continues as we don’t have to do the installation ourselves. Customers can easily plug it into a wall themselves.” However, setting up appointments with clients has – also for them – become trickier.
Challenging investment landscape
“The funding landscape is challenging. A lot of Angel Investors will worry about spending more money on investments when they’ve just seen their net worth go down quite a bit”, sighs Brian Hirsh (Brightwood). “VC’s are letting me know that next year probably won’t be great either. Angel investments are very difficult right now.”
Paul Chen (RealFoundations): “I’m finding that on the Angel investing side, money isn’t flowing as generously as before. Because of the virus and the downturn of business, people are looking a lot more at ‘when you are going to make money’ and ‘whether you really have a sound business plan’. I feel that its more grounded in the fundamentals now than it was maybe six months ago.”
Chungha: “I think the investors’ focus of attention is on putting out fires in their existing portfolios to make sure that they cut the loss. They’re probably thinking about ‘Should I just sell it now and make little money or wait and risk everything sliding down further?’ There are a lot of considerations with regard to existing portfolios… and that’s why I believe that the appetite to do due diligence and explore new companies to invest in, will be slower.”
How are landlords affected?
Paul: “The landlords In Hong-Kong are pretty well capitalized. They can survive quite a while without rent. It is the smaller landlords that own quite a lot of retail that could be in trouble. Speculators that bought a lot of residential are going to be in trouble as well. In term of capital transactions, they slowed down because of Chinese New Year. But last week there started to be some big transactions again and right now they are starting to get into the central areas as well. So capital transactions – buying and selling buildings – are happening.”
But people buying and selling buildings is not an indicator of the economy going up. They could be very active because the economy is so bad and for the taking. “There is a lot of money out there waiting for it to further decline and go into bankruptcy”, as Chungha points out.
Some of the tips and opportunities to succeed in these turmoil times that were voiced during the Q&A include:
- PropTechs should provide developers with a more integrated, or holistic, type of solution. “What would work for PropTechs is to finally start working together and offer more integrated solutions.” Chungha proposes a ‘digital twins 101’ or ‘digital twins beta version’ product. “The beta version should include solutions for energy efficiency, health and wellbeing, space optimization and maybe people mapping which could help with safety and security.”
- Also, they should focus on making PropTech easier to understand. Chungha: “The old people don’t understand tech and don’t have the time to decipher all that. You have to make it easy for the big money to understand what needs to be done. Real-estate guys ‘just make money’. We don’t know anything about tech and if it takes too much brainwave length to understand we say ‘forget it’.”
- Jump in make use of the immense opportunities that are out there to come up with new online meeting technologies. Nicholas White (Smart Building Certification & Learn Adapt Build): “We are all going to get used to this way of working. I think we’ll move towards ‘The Sims’-like conferences, where our avatars can access digitally set-up shops, information spots, hang-out spots etc. That stuff is coming and we should start experimenting with it.” Apart from the economic benefits, virtual events also make networking nearly effortless. Aside from taking away the awkwardness, it is easier to see with whom to connect as you can see in one glance what company others work for and what their position is.
- As to landlords: real-estate ought to move towards a more As-A-Service product. Landlords will be confronted with tenants unable to pay their leases or not even needing the space anymore. This concern could have the positive side-effect of forcing them to finally go further into the value chain and start helping their tenants’ business instead of only collecting rent. Ghost kitchens are a perfect example of an As-A-Service type product and show that considering the needs of future tenants creates win-win situations. In such cases it’s not just about the building, or the PropTech solutions used to upgrade that building, but about helping companies function and do more. This is especially valuable in tough times.
“Real-estate in the past years has done extremely well for itself, so few saw a reason to change anything. But now something like this comes along and shows us the perfect example of having to be prepared for things you can’t expect”, says Nadim Stub (PropTech Denmark). And indeed.. If there is something we have already learned from this situation is that things can turn overnight and that we should always be able to adapt immediately.
It will be a slow process of trying to get back to something normal. But when everything finally settles, the right business models will stand tall and real-estate as a sector will be more mature. Till then all we can do is sit tight, socially distance, wash our hands and use our stress as fuel for growth.