At the end of lunchtime talks with a throng of real estate entrepreneurs at Oxford University’s Saïd Business School, a moderator ferrets around under a seat to extract a wad of pristine white boxes stacked neatly in a pile. Cufflinks are handed out to the day’s speakers, who giggle in amusement.
Not a single panellist has donned a suit, their ensembles of haberdashery contrasting with the austere black, blue and pinstripe-clad property investors who fill the hall. Perhaps this is unsurprising for a group of graduates who spend their time disrupting real estate markets from Manchester to Milan.
Oxford’s entrepreneurs are in the business of funding, leasing and selling property online. They form a rump of the nascent property-tech sector, an industry inspired by the success of the $20 billion flat-sharing site Airbnb.
Nicholas Russell, CEO of We Are Pop Up, an online marketplace for short-term retail property, is back on campus seven years after graduating with an MBA. Founded in 2012, so far it has more than 240 unique properties and 2,400 business listed, and has raised $2.7 million in funding.
“Where we are is really exciting,” says Nicholas. “When we went through our accelerator program two years ago, people didn’t even know what proptech was,” he says.
He will hope to emulate the success of market leaders. Several property-tech ventures have joined the billion dollar start-up club – including Zoopla and Rightmove, both listed on the London Stock Exchange.
It would mark a remarkable journey for the company, which started life three years ago as a search engine, soon securing £420,000 in investment. It has since moved into new areas, with the launch of its crowdsourcing concept this month that allows the general public to advertise spaces to let for retailers.
Nicholas says there is a power shift taking place in the property sector in which retailers no longer need landlords, driven by e-commerce. “E-commerce has disrupted the entire consumer chain,” he says.
We Are Pop Up was designed for users to advertise and find unique places to sell their products, with areas to rent varying from empty kiosks to walls and railings.
For those looking to let, its crowdsourcing platform ShopShare offers a means to advertise unusual spaces, and for start-ups it provides a route to get their retail offer to market.
Landlords who have used the online platform range from individuals to large commercial groups like Cushman & Wakefield and Jones Lang LaSalle.
Empty high streets have moved up the political agenda in the UK, with a flood of reports suggesting different ways to reinvigorate traditional retail fronts. Nicholas says bricks-and-mortar retail is like “the canary and the coal mine of property”.
But many online retailers are keen to try physical shops, with a prolonged period of falling property values showing signs of growth in recent years, according to data company IPD’s retail index.
Property portals are among the most cash generative online companies, and they will hope to benefit from buoyant activity in the UK property markets.
These ventures are profiting from meta-trends and changing workforces. “People are working from home. People do not want to commute as much as they did before,” says Tushar Agarwal, CEO and co-founder of office rental and sharing marketplace Hubble.
He launched Hubble, which connects start-ups and other small businesses with those who have space to rent out, in 2013. Formerly called Spacious, the venture has grown quickly, raising $800,000 in seed funding in its first year of business.
Tushar, a London School of Economics graduate and former investment banker at Royal Bank of Scotland and Barclays, says the fabric of large corporate businesses is changing, and with it their property needs.
He says back in the 1930s the average S&P 500 company lifecycle was around 80 years; that has now come down to 18 years, and will be 10 years by 2030.
“Property starts to become very rigid for companies that are very fluid and dynamic,” he says. “All of those huge trends are a big forcing mechanism for property office landlords, developers [and] investors to start re-thinking how they transact.”
Tushar believes that technology is allowing for power to be shifted back to the users of property. Such technological innovation has been the key to the disruption of real estate, allowing for renters and property owners to connect easily and at speed.
“We have our fingertips on the pulse of global innovation happening in the sector,” says Faisal Butt, a serial entrepreneur and investor who is the chief executive of Spire Ventures, Europe's first property innovation accelerator program.
He says that property-tech start-ups have developed cutting edge technology that corporates don’t have and that they crave.
Faisal became chairman of eMoov, the biggest online estate agency, four years after graduating from the Oxford MBA, in 2013, having first invested in the fledging company. He is currently a non-executive director at the group, which has sold £650 million-worth of homes in the past four years.
By abandoning the traditional model of placing offices on high streets, eMoov has been able to make cost savings, and online agents typically charges less than high street ones, and usually allow sellers to pick and choose what they want to pay for.
The online estate agency industry is still relatively small, with just a 5% share of Britain’s home-selling market, but it is doubling in size each year.
Faisal says that corporates want to be involved in innovation so that they can craft their defensive and offensive strategies for dealing with disruptive start-ups.
The growth of property-tech can be seen in the number of companies applying for a spot on Spire Ventures’ cohort. The last had 250 business plans submitted from 50 different countries, with only five selected, Faisal says.
Another example of the disruption of real estate is the rapidly growing crowdfunding sector, worth $10 billion-plus globally, according to industry bodies, led by the US.
Social Finance (SoFi), a San Francisco based peer-to-peer lender, plans to bring the entire mortgage experience online through smart devices and PCs.
Mike Cagney, CEO and a Stanford GSB MBA graduate, says that mortgage lending was once a draconian process where banks treated people like money launderers until they could prove otherwise. “The mortgage experience leaves much to be desired,” he says.
Since starting in this area of business last autumn SoFi has built a portfolio of around $100 million, offering mortgages of up to $5 million to about 20 US states.
Tipped for a potential IPO, the company recently raised $200 million in funding for its push further into the mortgage market, among other areas, and is backed by banks including Goldman Sachs, Deutsche Bank and Credit Suisse. “This is the start of a fundamental shift in how people will shop for loans,” says Mike.
Other crowdfunding ventures have been set-up to help retail investors build property portfolios. Property Moose, a property crowdfunding platform that seeks to open up the real estate investment market, is at the forefront of this industry.
Founded in 2013, it has grown to have 2,700 registered investors, who invest a minimum of £500.
Andrew Gardiner, CEO and founder, says Property Moose “completely democratizes” property investment, allowing individuals to self-select their own investments, as opposed to funds which individual investors have little control over.
The venture is small, having funded around £800,000 for ten properties, but the way that it uses technology to challenge established investment frameworks illustrates the innovation that is driving the property-tech sector.
Meanwhile, just before Spire Ventures’ Faisal picks up his cufflinks – the gathering's host is, to the delight of its audience, wearing a shirt and blazer – he says that he optimistic about the industry. But he adds: “The space is still quite nascent and there is still a long way to go.”