Real estate on the verge of revolution: key industry insights in Israel

One of the biggest technological revolutions known to mankind is underway and it is all about real estate. In the past few years, property technology has become one of the hottest technological areas, with a constant increase in the amount of investments in the real estate sector and the number of new start-up companies developing technological solutions for this field. As real estate is considered to be a traditional industry, this is a very interesting phenomenon. Over the past few years the old and traditional real estate players have realised the need to join the tech club and are teaming up with young companies and entrepreneurs in order to solve the many challenges that the real estate industry faces today.

This massive growth in property technology is largely attributed to the Israeli market, a world leader with regard to the property technology sector. Over the past few years there has been a sharp 250% increase in the number of new Israeli start-ups in this area. In terms of investments, there has been an astonishing 1000% increase – from $30 million invested in Israeli property technology companies before 2015 to more than $1 billion over the past five years. After mapping the start-ups currently operating in Israel, it appears that the Israeli property technology sector is determined to offer a technological solution to each and every stage of real estate transactions and smart building of digital, energy-efficient, sustainable and safe buildings.

What characterises the Israeli system in particular is companies’ ability to bring advanced technologies from other areas, such as blockchain technology, cyber and production optimisation, and adapt them to the real estate and construction sectors. Two key Israeli property technology companies include WeWork and Compass. WeWork recently raised another $3 billion in investment from Vision Fund, owned by Japanese SoftBank, raising its valuation to $42 billion. SoftBank invested in other Israeli start-ups, including Compass, which raised $400 million from SoftBank this year, after already raising a similar amount at the end of 2017. Further, there has been investment in Deutsche Bank's investment arm DWS, after the announcement that it would adopt Israeli start-up SkyLine AI’s AI technology to manage its real estate investments.

The kinds of technology being developed varies significantly. For example, one area of innovation is the long bureaucratic process involved in real estate – that of obtaining buildings permits, monitoring construction on the ground and the maintenance of the building. Another area is hardware (eg, the materials and methods of building). Some of the technological solutions available today are the 3D printer and different types of robots that can perform routine building work. One of the most interesting patents in this area is that of Ervin Schillinger of the Israeli company Indan. Schillinger invented a technology through which steel moulds and walls capable of handling high loads and industrial use can be manufactured. This technology could potentially cut average construction time by half. Another area of development is systems that record information (eg, employee productivity, and materials and shelf life). Gathering all this information is a major task.

One of the greatest challenges in the construction industry today is manpower. Almost every start-up in the sector aims to reduce site manpower, as this is a heavy, painful expense that also involves safety concerns. In this regard, one interesting technology that has been developed in Israel is Exoskeleton – an external skeleton hat that translates explicit commands into movement and which helps to hold and operate heavy machinery.

Clearly, the Israeli property technology sector is constantly evolving and growing, but there are many more opportunities to come. This is a tale of an old and traditional industry (brick and mortar, literally) that is slowly realising that technology and innovation has the potential to change business from end to end. Those who decide not to act in the meantime, or at all, risk the future of their company. IP experts at Ehrlich Group expect that within about 10 years, technology will be fully integrated into every aspect of the real estate sector.

The shared workspace phenomenon has also reached Israel's legal sector. Now for the first time in Israel, a workspace is being set up and designed to offer all the space, tools and services required by elite legal professionals under one shared roof. Behind this interesting initiative which operates under the Partners & Co brand are capital market players, social investors and strategic consultants from the legal sector who have joined together to invest in setting up Israel's first chain of work areas specially designed for lawyers.

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

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