Over half of China’s property firms increase proptech budgets
JLL publishes its first whitepaper on China proptech
Hong Kong, 25 August 2020 – About 55% of Chinese real estate firms surveyed plan to increase their proptech budget by 10 to 30% in the next two years, according to JLL’s latest Reimagine the Future of Real Estate report. An increasing number of companies believe that the implementation of proptech could mitigate potential market risks and maximise long-term asset value.
In 2018, only 37% of Chinese real estate firms surveyed planned to increase their proptech budgets by over 10% in 2019 and 2020. This reflects a considerable pick up in momentum for proptech over the past two years in China, as the number of market participants who recognise the value of such products and solutions has increased.
Gavin Morgan, Chief Operating Officer at JLL in Greater China, said: “China’s commercial real estate market faces internal pressures from intensifying competition as well as rising uncertainties from the global economy. By enhancing the resilience of commercial property, proptech can mitigate potential market risks and maximize long-term asset value with respect to four key areas: human experience, health and safety, operational excellence, and digital drive. The power of proptech has been further reaffirmed during the COVID-19 outbreak, encouraging more real estate firms to increase their investments in proptech.”
Demand for emerging technologies in real estate industry expands further
After surveying over 200 proptech companies and key stakeholders in China’s real estate industry, the report summarises 12 key property technologies and categorises them into four types: “Ubiquitous” (e.g. Cloud Computing, Big Data and Artificial Intelligence); “Catalyser” (e.g. Internet of Things and Building Information Management); “Contextual” (e.g. Virtual Reality/Augmented Reality and Indoor Navigation, Robotics); and “Frontier” (e.g. 5G, Blockchain, Unmanned Aerial Vehicles and Autonomous Vehicles).
In China, key proptech players consist of equipment manufacturing, software development, Internet and start-up companies. They vary significantly in terms of technological capability, business development, clientele and scale. Therefore, when choosing which partners to work with, real estate companies need to maintain a clear vision and redefine purposes for proptech innovation or digital transformation.
Notably, China is expected to become one of the first countries to roll out 5G, which is known for faster data transmission and a much greater degree of connectivity. It is, thus, foreseeable that the development of cutting edge IoT and AI applications will accelerate, and the marginal cost of adoption will decrease rapidly. The survey also shows that inquiries for IoT, 5G and AI among Chinese real estate companies will increase significantly over the next two years (see Figure 2). As China continues to invest in its digital infrastructure, shores up its regulatory framework, and strengthens data security and privacy, demand for new technologies from the real estate industry is expected to expand further.
Figure 2: Demand for new technologies from real estate companies in China is expected to change significantly.
Future proptech solutions
Based on existing and future trends in the office, retail and logistics markets, the report summarises a series of proptech solutions that address specific “pain points” in each of the sectors.
Office: Key solutions include smart property management, digital asset management and smart workplaces. Looking forward, operating costs are expected to continue to rise. The pandemic has led to many corporate tenants reviewing their workplace strategies and diversifying their office portfolios. Office property owners are paying more attention to proptech solutions that can either save costs in property management or asset operations, or otherwise, offer differentiating tenant services.
Retail: There has been growing interest in omnichannel marketing, digital operations and seamless shopping experiences. Retail property owners and operators are expected to not only lease and manage the space, but also provide services for tenants and shoppers. As a result, shopping mall developers and operators have become early adopters of proptech solutions and digital transformation.
Logistics: Proptech applications, such as location intelligence, green technology and automated warehouses, have attracted increasing attention. Technology will play a decisive role as users maximise efficiency by making best use of the highest-quality warehouse space available. There will be further requirements in terms of equipping warehouses for automation, cold chain and other high-tech uses. In turn, operators must future-proof their assets to cater to these needs.
Building the proptech ecosystem in China and driving innovation
The proptech ecosystem in China is unique, mainly for two reasons. First, China has a relatively separate digital ecosystem, which differs from the global landscape. Second, government priorities and digital culture have a big influence on the commercialisation of proptech in China. For instance, solutions that contribute to smart city development, new infrastructure initiatives, sustainability or urban resilience are likely to enjoy earlier success than others are.
Figure 3: An innovation-driven proptech ecosystem consists of a variety of diverse players.
“China’s proptech ecosystem will continue to play an important role in optimising and integrating resources, improving industry standards, stimulating innovation, cultivating talent, and accelerating transformation,” noted Chen Lou, Senior Director for JLL Research in China. “In the proptech sector, we are likely to see more partnerships in the form of joint ventures or revenue sharing rather than simple cash investments. Large enterprises, SMEs and start-ups each have their own strengths and weaknesses when it comes to technology innovation. Those who are quick to embrace new technologies will benefit the most in the digital era.”
To download the Reimagine the Future of Real Estate, please click here.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion in 2019, operations in over 80 countries and a global workforce of nearly 93,000 as of June 30, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.