Proptech: The Next Emerging Market

Oct. 19, 2021
The digital transformation of building environments in the post-COVID world will be built on security technologies.

This article first appeared in Security Business magazine.

Broadly defined, “Proptech” is a collection of technologies designed to bring about the digital transformation of properties. Digital transformation, in turn, refers to the process of reinventing business models, workflows, supply chains, customer interactions and even the underlying products and services themselves as fundamentally digital.

For commercial, multifamily and enterprise properties, this means applying technology to every aspect of the business, including leasing, finance, tenant acquisition, property management, amenities, digital infrastructure, security, access management, loss prevention and collaboration among all the participants.

Proptech is rapidly changing the way people buy, rent, sell and manage properties. As a result, they also are changing the economics and power dynamics across the entire business ecosystem for the property asset class. This same asset class and ecosystem are the primary domains of physical security systems, which makes it impossible to think that the security industry won’t be challenged by this new environment. Evolutionarily speaking, it’s our “adapt or die” moment.

Luckily for us, the security industry has gained momentum with our own digital transformation over the past decade. We got over our early IP hesitancy, ditched our cloud denialism and replaced prox cards with mobile credentials. We learned that user experience is as important a design principle for security applications as it is for any other consumer application.

In the process, Proptech and security become entangled completely. Access control isn’t just a security system; it’s an employee experience differentiator. Visitor-management systems don’t just displace the clumsy logbook in the lobby; they now are a vital defense around spaces and a signal to a customer’s guests that they care enough to go digital.

I would go a step further and say security isn’t just a part of Proptech; it also is foundational to Proptech. I start with the adage, “you cannot manage what you cannot measure.” If you can’t measure (and manage) the flow of people in a space, you can’t measure (or manage) anything else related to the property.

Security Is Foundational

There are two different dimensions to the foundational importance of security when it comes to Proptech. The first, security systems, and access control in particular, serve as a technological foundation to all other building-related Proptech systems. The second is more subtle but equally important from a customer-experience perspective: Having a sense of safety and privacy is a prerequisite to enjoying a physical space.

I use Maslow’s hierarchy of human needs theory to think about this relationship between security and Proptech. In the hierarchy, the bottom tiers of the pyramid are basic needs —physical necessities and safety, food or water, and shelter. These must be met before moving up the pyramid to more-complicated needs — love and belonging — then finally to the tip of self-actualization. In this analogy of Proptech as the pyramid, security is the foundation. It’s the basic need on which all others depend.

In practice, it can look like this: When people move into a house or office, one of the first systems they install is security. For vendors, after a security platform has been installed to meet that customer’s basic need comes the opportunity to “land and expand.” The platform is foundational to everything else that’s added on.

For example, after an access control technology is implemented for an apartment building’s lobby doors, a vendor could add additional tenant amenities, such as intercoms, elevator access and smart locks for the individual apartment doors. The entire Proptech system rests on one security platform.

Market Segments

The Proptech ecosystem is diverse. This diversity is a product of investment over the past five years, including $23.5 billion in 2020 alone. As interesting as the whole space has become, some Proptech categories stand out as being much more interesting to security pros than others. Unsurprisingly, these are market segments that are related directly to the physical aspects of property management and security.

Proptech applications can be divided into categories:

  • Smart building, security, tenant experience and property management technologies, including sensors, access control, visitor management, health and safety, occupancy, analytics, coworking, hybrid office, digital amenities, property management and a grab bag of applications that improve customer service.
  • Transactional technologies that facilitate buying, selling, portfolio management, leasing, renting and sharing in commercial or multifamily markets, plus all the data collection and analytics that help these markets to function efficiently.
  • Fintech-related applications that support financing, payments, insurance, security deposits, application processing and any other aspects of the finance side of the industry.
  • Construction technology (aka Contech) might be relevant to how security is specified into new buildings, but it doesn’t change what we actually do, just how it’s managed. This means that the “user” is typically a general contractor or developer, not a security pro.

The Post-COVID World

The COVID-19 pandemic will have a long-lasting effect on many industries and has brought new attention to areas of business that previously didn’t have any. In Brivo’s 2021 Smart Security Trends Report, 75% of respondents say the pandemic increased the importance of physical security in their organization.

A question on the minds of many business leaders has been, “When and how will we go back to the office, if we ever fully go back at all?” Some companies might not return fully to an office and instead rely on a hybrid work model, where only a portion of the company’s population is in an office at one time, while the rest work remotely.

We see the preference change in our own research data. According to a recent Brivo Return to the Office study, for every two workers itching to return to a pre-2020 on-site work routine (24%), another three prefer to remain working at home (40%) or adopt a hybrid home-office approach (35%).

The reason for the increased preference for at-home work is concern about health and safety protocols. In the same survey, 59% of workers have health-safety concerns about returning. Among protective measures that would make staff feel more comfortable, the most desired are limiting the number of people on-site, touchless door entry, mask-detection technology and digital proof of vaccination. Note that all of these measures can be managed by digital technology or aren’t possible without digital technology.

New Business Opportunities

There are many ways for security pros to play in the Proptech market, because many of the “smart building” technologies are familiar. Even newer devices have similar technical profiles and installation requirements. That’s all good news for those who want to expand their business footprint.

Older market sizing estimates from Omdia placed the traditional access control business at about $5 billion in North America. With market expansion driven by cloud-based Proptech systems and services, the U.S. market now is projected to be in excess of $20 billion by 2027, which implies that existing installer businesses will expand by four times (great news!) or that new competitive businesses will meet that increasing demand (probably not what you want).

Which Proptech categories relevant to security pros will thrive?

1. Access control is surging with a vengeance. It’s used by every new building-related Proptech service as either a third-party integration or as a native capability within the product itself. You can’t enable amenities or access to rental or leased spaces without it.

A report from CBRE found that 86% of companies surveyed say flexible office space will play a role in their real-estate strategy. The shift toward shared or coworking spaces is a big access control driver, because coworking arrangements divide spaces into smaller managed parcels and, thus, drive up the density of access control requirements. Every conference room, office, studio and boardroom now is managed by a scheduling system connected to an access control system.

2. Energy management is also one of the top drivers of new low-voltage wiring and sensor installations. Large corporate and Class A commercial spaces historically have been managed by big manufacturer-supplied building management systems that are designed to handle 1 million square feet or more. But this leaves the majority of older buildings and tenant-controlled spaces open to new technologies that help them to take control of their own energy future. This is true even in smaller spaces.

3. Sensors of all kinds, which install just like most security equipment, also are on the rise for everything from occupancy management to traffic control and temperature-sensing. Occupancy management has become a higher priority because of COVID concerns, but it’s likely to remain important as everyone tries to sort out what employee populations will look like for years to come. Air-quality sensors also have been driven by COVID demands but probably are here to stay, given that indoor air quality was already a concern.

The rise of these new Proptech priorities and the expanding market for familiar technologies mean that security pros have to ask themselves whether they want to participate in this growth or just keep doing what they always have done. The market is changing; the suppliers are changing; and, in some cases, the business models are changing. This makes participation in Proptech a question of either growing with the new technologies or being cannibalized by newer, more-agile firms that will.

Steve Van Till is founder and CEO of Brivo, serves as chairman of the Standards Committee for the Security Industry Association (SIA) and holds numerous patents in the field of physical security.