As a founding member of the UKPA, PropTech is clearly of great importance to Clifford Chance, why is it such a key focus?
Firstly, it’s of interest to our clients. PropTech has already moved from the new thing on the horizon that a couple of people are talking about, to an integral part of the property market that everyone is engaging with. For Clifford Chance, we aim to stay ahead of the game with a constant focus on what is important to our clients in both the immediate and longer term.
Secondly, it’s about identifying new clients. The adoption of PropTech will inevitably create winners and losers, and some of those winners will be new entrants to the market, so being able to engage with them at an early stage is critical.
Finally, we seek to lead conversations around how the real estate industry of tomorrow will work. If we can help the industry by bringing different participants together and assist in working through some of the novel legal challenges that technology throws up, then that’s an area where we add significant value.
How have the learnings that you have gathered so far impacted your conversations with existing real estate clients?
It means we are better able to understand our clients’ business and how they are going to change. I spoke with a client recently and they phrased it very well – they are today underwriting business plans for assets that look 10, 15, 20 years in the future, so they need to think about the impact that technology will have – it can be anything from cyber security, to smart buildings, to the impact of driverless cars. Although some of these changes won’t happen for a while, they are already impacting investment decisions today.
You’re in quite a unique position as a law firm as you are advising clients at all stages of the property lifecycle. What innovative solutions do you think are impacting the industry the most?
Currently, we see lots of focus on big data and machine learning, and this is already driving conversations that are going to change the industry. As the value of data analysis becomes more and more understood, there will be an increased need to systematically collect, manage and analyse high quality data. This means, when you are doing transactions, there is more upside towards standardised documentation and transaction and property management platforms, so that data is not inconsistent or locked away in PDFs or spreadsheets.
That leads me on to my next question on Blockchain. I’ve heard mixed opinions on whether it can truly be adopted for property transactions, despite there being examples of this happen, what are your thoughts on this?
Blockchain is just a tool. Like any tool, whether it’s useful depends on what you use it for and how you use it. There are absolutely cases where it can have significant benefits, and they are not always the glamorous ones – for instance, providing an immutable audit trail for supply chains for construction projects. It’s not usually what people talk about when they talk about blockchain in real estate, but some of these more mundane applications will have a significant impact.
The current hot topic is the tokenisation of real estate. There is significant potential in this area, but in my view this is not inherent to distributed ledger but instead the digitisation of previously inefficient, often paper-based processes.
You recently announced a partnership with Concrete VC. Can you give us an insight into what this partnership involves?
It’s another way for us to keep an eye on the market, whilst also working with the other strategic partners who are on that board. Although we all work in different asset classes, a lot of the challenges that we face are often similar for example; change management, encouraging uptake of new technologies and new processes, and identifying who the right people are to drive this through the business.
It’s also a useful forum to have conversations with investors, advisors, and other real estate players around the challenges preventing wider adoption of technology and identify possible solutions such as standardisation, and collaboration between PropTech companies in the same areas.
Are there any interesting tech solutions that you’ve seen aimed at the legal industry? Is this filtering down to Clifford Chance?
One of my responsibilities is looking at what we call ‘best delivery’ which is about constantly delivering a better and more efficient service to our clients. A key part of this is looking at and integrating “LegalTech” and there are areas where this crosses over with PropTech. We already routinely use tech solutions such as machine learning, data analysis tools as well as transaction management platforms to make our work more efficient and to provide a better and more accessible product for clients.
We are always looking at new technologies and the way we are working is constantly evolving. We recently launched two new business units, Clifford Chance Applied Solutions and Clifford Chance Create, which help us identify and develop tools both for our use and as new solutions for our clients.
LegalTech is a rapidly growing area and one in which you can see real similarities with PropTech, particularly in terms of the speed of growth and the importance of engaging in partnerships – for example we are one of the partners of Barclays Eagle Lab which is an incubator for LegalTech businesses.
You said that the legal industry is in a similar position to the property industry, how does it compare in terms of maturity?
I see similarities in how the legal industry and the property industry have historically been conservative and slow to embrace change. In both industries that attitude has changed.
This is partly through end-user demand, for the property industry this means the occupiers, and in the legal industry it’s the client. As people continue to experience massive improvements in technology and efficiency in their personal lives, they then expect it in their business relationships as well.
It’s also driven internally as employees are increasingly motivated and willing to engage in technology and that has an influence on the culture and in both industries. I think we are seeing a tipping point where the culture is changing which in turn rapidly speeds up adoption .
What advice would you give to PropTech start-ups entering the market, and what advice would you give to real estate companies exploring tech?
For PropTech companies I’d suggest it’s important to get the balance right between having a slick and well-developed product, being scalable and not focusing on a very narrow problem. It takes significant management time and focus for many large property companies to identify and work with a start-up and if your product is too niche or does not integrate with other systems, it’s unlikely to justify that investment.
For existing real estate participants, they need to solve the problem from the other end. Traditional procurement processes may need to be re-visited and adapted to allow relationships with companies that do not have a lengthy track record and who may still be actively developing their product.
PropTech clearly delivers huge opportunities, but both start-ups and existing participants have to step back and think about how to mitigate potential downsides. Lawyers are often accused of focusing on problems, but new technologies and new business processes will also give rise to new issues and those organisations that have identified and mitigated the issues in advance will be much better placed to ensure that PropTech delivers on its potential.
Where do you see the industry going in the next 2 – 5 years?
We recently produced an insight piece called “Talking Tech: Real Assets” where we interviewed leading participants from across a number of key asset classes in the property industry looking at the impact of PropTech. There were some clear themes that came out of this.
PropTech will cease to be distinct from the property industry itself. You can already see that happening – real estate events and conferences are increasingly populated by technology companies, not just to attract customers or investors but because they are part of the industry itself.
The other key development is the continued focus on real estate as a service and the importance of the customer experience. Investing in a static asset, granting long term leases, collecting the income and getting a bit of capital growth at the end of it will become much harder. This will result in increasing opportunities for investors to curate those assets and create new revenue streams whilst simultaneously making their product more attractive.