This year, Devin Tu helped his real estate client avoid a multi-million dollar mistake.
“We had a client looking at a site in North York that they thought was ideal. But then, they used our tool, which scanned 25 different regulations and checked developments in the area in real time,” said Tu. “It turns out they had missed a key floodplain regulation.”
Had they bought the more-than-$10-million property, the client would have been stuck with land on which development would have been impossible. The area remains a parking lot today.
Tu is the founder and CEO of MapYourProperty, whose digital tool gives real estate developers a digital interface to access layers of important information about a property, including zoning bylaws and nearby proposals.
His company is just one of a wave of proptech, or property technology, startups flooding the Canadian real estate sector, and developing a wide net of technologies, including artificial intelligence, machine learning and virtual reality applications.
“Real estate is one of the oldest and one of our biggest industries,” said Tu. “It has a huge gap where technology can completely disrupt it.”
The industry has ballooned in the past few years, largely funded by venture capital. Now it’s gaining recognition in the markets.
“Up until this year, there hadn’t been a ton of spotlight on proptech,” said Frank Magliocco, Canadian real estate leader at PricewaterhouseCoopers. But recently investments in proptech has spiked, “almost like a hockey stick,” he said.
In 2012, $221 million was funneled into the global proptech market, according to startup data provider CB Insights. That number shot up to $4.2 billion in global venture capital in 2016, with 2017 seeing a total investment of $12.6 billion, according to market research agency Re:Tech.
Earlier this year, Brookfield Asset Management, the Toronto-based real estate firm, committed $300 million under Brookfield Ventures to support real estate tech, while Jones Lang LaSalle launched an international venture fund to invest $100 million into the industry.
“If there’s that kind of money going into proptech, that means (it’s) going to have a pretty profound effect going forward,” said Magliocco.
Tu attributes the industry’s recent growth to necessity. Recently, the shortage of land supply and increased competition have forced real estate companies and their customers to make faster and better decisions.
From the perspective of data and transparency, the inefficiency in the commercial real estate market has been a difficult issue to tackle, according to Ben Liao, managing director at Techstars, a startup accelerator company based in Boulder, Colo. Earlier this year, the company chose Toronto to host its first international proptech accelerator program, featuring two Canadian proptech companies, including MapYourProperty.
“Creating client value through digital services in a space that is defined by a ‘real’ and physical experience in the ‘built world’ is difficult,” said Liao in an email. “Traditional industry leaders have been reticent to make significant investments in or adopt technology.”
Creating client value through digital services in a space that is defined by a real and physical experience in the built world is difficult
- Ben Liao, managing director, Techstars
The growth of the Canadian proptech market hit its stride after an important court ruling put valuable data in the hands of Toronto startups.
In August of 2017, the Supreme Court declined to hear an appeal from the Toronto Real Estate Board over the restriction of home-sale data. The case began in 2012 when the Competition Bureau alleged that by restricting virtual office websites from accessing certain data, TREB was stunting industry growth and innovation.
The seven-year-long trial, ended with a federal Competition Bureau order that meant brokers could package transaction and property records. This increased access to important historical data and trends put non-traditional real estate brokerage offices in a position to develop and grow.
“It was a major ruling for Canada, because it’s going to help us transform to what the U.S. did five or 10 years ago,” said Tu.
Currently, aside from the Maritimes, few other Canadian real estate boards have updated their data-sharing rules to match those of Canada’s largest real estate board. In September, TREB made its first alliance with the Oakville, Milton and District Real Estate Board, in order to give both boards a more comprehensive market view.
Now, some are calling Toronto the “Silicon Valley North” of proptech.
The city is home to a diverse set of global leaders who participate in the real estate market, with major property investors such as Colliers International, Brookfield and Oxford Properties all headquartered in Toronto.
“Toronto is North America’s fastest-growing tech market, creating more technology than the San Francisco Bay area, Seattle and Washington, D.C., combined last year,” said Liao.
And, according to Tu, the technology talent is here, and accessible. In Silicon Valley, hiring experts is expensive, while elsewhere “there just aren’t enough.”
Toronto is North America’s fastest-growing tech market, creating more technology than the San Francisco Bay area, Seattle and Washington, D.C., combined last year
- Ben Liao, managing director, Techstars
However, not everyone believes that proptech’s big moment has arrived.
Christopher Alexander, Re/Max executive vice-president and regional director of Ontario-Atlantic Canada, says the industry’s embrace of blockchain, AI and machine learning are still a few years out.
“I think next year is a bit too early, but if I was to bet on any of those things, I would say blockchain,” said Alexander. He believes blockchain has the potential to create change in the industry because of the way it’s structured to “give consumers security with their money.”
According to Royal LePage president Phil Soper, proptech will change the way people buy homes, but that won’t eliminate the role of advisors.
“Our AI talks people through their search process, and when they’re comfortable, the AI directs them to an advisor so they can dive deeper into the transaction,” said Soper. “We think we can reduce cycle time, we think we can make the process more enriching. But we don’t see it replacing humans in the transaction.”
Magliocco says that while he sees pockets of proptech development happening in 2019, “the big stuff won’t be happening next year, but we’ll be seeing it soon.”
Nonetheless, with new policies, investment and talent to back him and other proptech entrepreneurs, Tu says he’s excited for what’s to come.
“Fintech was 2018,” said Tu. “I think proptech is going to be 2019.”
This article originally appeared in The Financial Post