- The IT market in real estate was valued at USD 6.75 billion in 2020 and is expected to reach a value of USD 13.46 billion, by 2026, at a CAGR of 12.2%, over the forecast period (2021-2026). IT is becoming a driving force necessitating a change in the way real estate companies market products to their clients. The shift from physical records to digital-based records and documents has been the initial stepping stone for the adoption of technology in the real estate sector. According to the Profile of Real Estate Firms 2016, by the National Association of Realtors, commercial real estate managers are lagging behind their residential peers, in terms of technology adoption.
- Blockchain technology is likely to have a bigger impact on platforms, such as I-house Token, becoming widespread. The blockchain technology jointly manages the database that records Bitcoin transactions. It is expected to change the way of doing business, and real estate transactions may most definitely fall into this category.
- As software in real estate aids in increasing visibility and efficiencies within an enterprise, real estate solutions can effectively support the realities of a business and propose effective solutions to any issues encountered by a company.
- Increased funding has been fueling the growth and bringing start-ups and small-sized organizations to scale. The market studied is expected to be consolidated with acquisitions and mergers of new market entrants by market incumbents, in order to remain competitive. This is expected to drive the formation and growth of the real estate technology landscape.
Key Market Trends
Cloud Type of Deployment is Expected to Account for a Significant Share
- Digital transformation has created an increasing demand for connectivity. The explosion of Big Data with the Internet of Things (IoT) and constant technological innovations to efficiently manage the complex real estate portfolio require simply connected IT solutions. The deployment of these solutions on-premise requires different servers to be purchased for different solutions, which not only add to the redundancy but also lead to the requirement for additional employment, which further increases the cost-to-completion of the project.
- Thus, with a cloud-based solution, such as SAP Cloud for Real Estate, facility managers and lease administrators can manage real estate lease agreements, with all payment and valuation postings being recorded in real time within SAP S/4HANA, providing real estate vendors with a holistic solution to manage operations without additional infrastructure and employment costs.
- The stakeholders in the real estate industry are highly reliant on physical paperwork and are required to carry the documentation on-the-go. While employees can access their digital library of files while on premises (unless the company has not digitized its records), realtors are weighed down by this problem when away from the office.
- A further development in the market is platforms for smart contracts and issuing and transferring assets through a blockchain. For instance, ChromaWay has partnered with LHV Bank to develop such systems. Thus, leaders in the documentation market, like DocuSign, are expected to soon invest actively in the aforementioned technology.
North American Region is Expected to Account for the Largest Share
- The real estate industry in North America seems to be on an accelerating disruption curve, highlighted by rapid changes in tenant dynamics, customer demographic shifts, and ever-increasing needs for better and faster data access to allow improved service and amenities.
- In the United States, investor sentiment related to real estate remains positive but has weakened over the past year, owing to uncertainty over economic policy and rising interest rates.
- Demand for the multi-family sector remains steady with demographic pressures from millennials and a strong labor market. Moreover, with vacancy rates in the US industrial market at 4.6% as of Q3, 2017, rents have increased significantly across core markets. Also, as per Q2, 2017, CBRE Economic Advisors reported an average net asking rent of USD 6.8 per square foot, which was the highest level on record.
- Apart from that, investment volumes decreased year-over-year by 8%, due to tightening monetary policy and uncertainty over economic policies.
- The world’s most innovative real estate companies, such as Bowery, Buildium, and Enertiv, among others, are headquartered in this region. In cities, such as San Francisco, New York, and Boston, 60% of the residents were tenants in 2017. The rise in rental demand has resulted in a strong demand for property management services.
- Automated interiors also play a key role in real estate. A few companies have started catering to this market and have also sought funding. For instance, Hutch, the virtual interior designer app, raised USD 10 million funding from Zillow in 2017.
- Some of the key companies in the market studied include SAP SE, IBM Corporation, Oracle Corporation, etc. These players have significant expertise in the market and are complemented by their robust geographical reach. They have established their platform offerings through innovative real estate management solutions.
- With the presence of a large number of international conglomerates and newly emerging PropTech startups, the competitive rivalry in the market is expected to intensify further over the forecast period, and beyond.
- Hence, the competitive rivalry in the market studied is high, over the forecast period. Some of the key players in the market studied are SAP SE, Sage Group PLC, and Yardi Systems Inc. Some of the key developments in the market are as follows:
- SAP SE collaborated with Accenture, Capgemini, and Deloitte, to accelerate customer adoption of SAP S/4HANA cloud (one of the most deployed ERPs), in the process manufacturing, discrete manufacturing, and service industries.
- Sage launched an independent study that revealed the significant savings made by businesses in three major industries, after the implementation of Sage Business Cloud Enterprise Management. The study objectively examined the potential return on investment (ROI) that organizations may realize, by deploying Sage Business Cloud Enterprise Management (formerly Sage X3).
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1.1 Study Deliverables
1.2 Study Assumptions
1.3 Scope of the Study
2 RESEARCH METHODOLOGY
3 EXECUTIVE SUMMARY
4 MARKET DYNAMICS
4.1 Market Overview
4.2 Introduction to Market Drivers and Restraints
4.3 Market Drivers
4.3.1 Technologically Transforming the Real Estate Sector
4.4 Market Restraints
4.4.1 High Costs Associated with IT Solutions
4.5 Value Chain Analysis
4.6 Industry Attractiveness - Porter's Five Forces Analysis
4.6.1 Threat of New Entrants
4.6.2 Bargaining Power of Buyers/Consumers
4.6.3 Bargaining Power of Suppliers
4.6.4 Threat of Substitute Products
4.6.5 Intensity of Competitive Rivalry
5 MARKET SEGMENTATION
5.1 By Deployment
5.2 By End User
5.3 By Solution
5.3.4 Business Intelligence
5.3.5 Enterprise Resource Planning
5.3.6 Customer Relationship Management
5.3.7 Asset Management
5.3.8 Other Solutions
5.4.1 North America
5.4.4 Latin America
5.4.5 Middle East & Africa
6 COMPETITIVE LANDSCAPE
6.1 Company Profiles
6.1.1 SAP SE
6.1.2 The Sage Group PLC
6.1.3 Yardi Systems Inc.
6.1.4 Buildium LLC
6.1.5 MRI Software LLC
6.1.6 RealPage Inc.
6.1.7 AppFolio Inc
6.1.8 IBM Corporation
6.1.9 Oracle Corporation
7 INVESTMENT ANALYSIS
8 MARKET OPPORTUNITIES AND FUTURE TRENDS
Secondary Research Information is collected from a number of publicly available as well as paid databases. Public sources involve publications by different associations and governments, annual reports and statements of companies, white papers and research publications by recognized industry experts and renowned academia etc. Paid data sources include third party authentic industry databases.
Once data collection is done through secondary research, primary interviews are conducted with different stakeholders across the value chain like manufacturers, distributors, ingredient/input suppliers, end customers and other key opinion leaders of the industry. Primary research is used both to validate the data points obtained from secondary research and to fill in the data gaps after secondary research.
The market engineering phase involves analyzing the data collected, market breakdown and forecasting. Macroeconomic indicators and bottom-up and top-down approaches are used to arrive at a complete set of data points that give way to valuable qualitative and quantitative insights. Each data point is verified by the process of data triangulation to validate the numbers and arrive at close estimates.
The market engineered data is verified and validated by a number of experts, both in-house and external.
REPORT WRITING/ PRESENTATION
After the data is curated by the mentioned highly sophisticated process, the analysts begin to write the report. Garnering insights from data and forecasts, insights are drawn to visualize the entire ecosystem in a single report.