When you think about technological advances like APIs disrupting sectors, real estate and its associated banking processes might not immediately spring to mind. Ivan Nokhrin of BuiltAPI joined us at our 2019 Platform Summit to talk about some of the potential applications of APIs and PropTech (property tech) as they relate to the world of real estate.
“Historically, banks have had a very specific impact on the real estate industry,” says Nokhrin. “The industry is very conservative, to say the least, and the interoperability of solutions and data streaming have just [recently] become major topics of discussion at property fairs and conferences.”
Even a quick glance at ProgrammableWeb’s API directory reveals that there are hundreds of real estate APIs out there, so why does the sector have the reputation that it does? Well, it may be set to change in the coming years.
The burgeoning PropTech movement, in tandem with the rapid growth of the API sector, offers a compelling enough proposition – greater transparency and cooperation between property financiers, managers, owners, and renters – to break down real estate processes that have been in place for decades.
Real Estate and Tokenization
With more than 195 million commercial buildings out there, real estate is the world’s largest asset class, with a total value of around $230 trillion. Currently, according to the analysis conducted by Nokhrin’s team, “less than 1% of commercial buildings in the world are digitalized to any extent.”
That might not sound like a great start, but the fact remains that there has been more than $34 billion invested in PropTech startups since 2012. That amounts to in excess of 7,000 applicable solutions. A potential result of that? A gradual shift from the traditional structure of real estate.
Typically, a holding company owns an SPV (Special Purpose Vehicle) which owns a real estate asset. Income streams, like leasing to tenants, generate a financial return as an operational platform. However, a real estate asset can be decentralized through a tokenization platform. In other words, many different people can have a stake in an asset through ownership of different “tokens.”
The terms used above are exciting because they suggest the possibility of owners, tenants, financiers, service providers, etc. all contributing to the valuation, acquisition, and maintenance of a building in perfect harmony. Clearly, as any renter can tell you, we’re not quite there yet.
It might make sense to think on a smaller scale. APIs can be used, for example, to compile data that analyses rents in the area, the cost of electricity/water/broadband, property taxes, and so on to determine the monthly operational costs of a building more quickly. A clear benefit of this is that, in turn, it allows companies to make decisions regarding that building at greater speed.
APIs, Ontology and Real Estate
In real estate, data standardization is a real concern. “How do we make these data solutions talk to each other in the same language?” asks Nokhrin. “There is no simple answer. Our industry has seen a lot of attempts to standardize the space.” These standards include IFRS, IPD, GIPS, InRev, RICS, IVSC, and ESG.
Nokhrin suggests that ontology is the answer: “as the industry is still struggling with formats and standards…we at BuiltAPI support knowledge-based data discovery.” In other words, looking for APIs and services that naturally group together.
He uses Tetris blocks, officially known as Tetriminos, to illustrate how different PropTech APIs might complement each other. For example, an Automatic Valuation API bundle might be made up of the following services:
- Property Data API
- Cash Flow Model API
- Valuation Report API
- Rent Roll Recognition API
In this way, Nokhrin says, “We can create API bundles that eventually become reusable solution sets.” These solutions serve to help firm up standards in the industry, but they offer another significant advantage: they lower the barrier to entry for adoption.
Services like those listed above available via BuiltAPI function like fully-fledged apps, which require less fiddly integrating on the part of consumers. Meanwhile, expansive APIs like those in the BuiltAPI marketplace offers a simpler way to create smart spaces.
Sensorberg, for example, aims to create a “transparent platform [that] also serves for an uncomplicated exchange between neighbors. At the same time, it stands for fast and direct communication with the administration as well as better access to problem-solving channels.”
It covers everything from room bookings and invitations through to locker access and heating control, and the focus on “plug and play” APIs consumers don’t need to search high and low for compatible services that will get along with each other.
Changing the Face of Real Estate Processes
One of the hurdles of disrupting the real estate space is that it’s comprised of so many different elements. As Nokhrin outlines, it’s possible to group many of these into a few different categories:
- WHAT – elements, floor plan, equipment
- WHERE – jurisdiction, location, geography
- HOW – develop, make money, management
- WHO – occupier, owner/financier, manager
It’s interesting to note that, in all of these cases, it’s possible to identify ways in which APIs and PropTech offer opportunities to streamline or amalgamate different aspects of these categories:
- WHAT – Building Information Modelling
- WHERE – Geospatial and market data streams
- HOW – Investment, asset, property, facility management automation
- WHO – Social media, digital identity etc.
The long term impact of this on the space shouldn’t be underestimated: “it’s all relevant for real estate,” says Nokhrin. “Because, when we connect all these things through APIs, we are moving towards the era of smart buildings and smart cities.”
We’ve previously written about some of the exciting possibilities offered by smart cities. But other scenarios demonstrate how smart cities could be game-changers too. For example, the COVID–19 crisis, a time of self-isolation and obligatory lockdowns, offers one example of how smart power, security, and building management services could be operated remotely and safely to protect lives.
Breaking Down the Monolith
A big concern here is that real estate has traditionally had very close ties with the banking space. Nokhrin notes that this is, in part, due to banks acquiring large numbers of real estate assets during times like the Great Depression.
Arrangements like escrow and mortgages are so deeply embedded in the world of real estate that they can’t easily be untied. No matter how exciting the possibilities offered by the likes of APIs and FinTech might be for those in the real estate space, that represents a significant limitation.
That said, services such as Rocket Mortgage (with its bold “Push Button, Get Mortgage” campaign) and the use of APIs have already changed the way the residential real estate space functions. There’s no reason to think that the commercial sector is immune to this type of innovation.
Unfortunately, despite the high investment in and large number of apps in the PropTech space, the cautious and conservative nature of commercial real estate means that this process would likely be a slow one.