Preview

On April 13th, 2023, we listed the Worldwide X PropTech ETF (PTEC) on the NASDAQ. PTEC is created to deliver exposure to house technologies (PropTech) firms that are positioned to advantage from technologies that optimizes the way men and women purchase, sell, rent, design and style, construct, handle, and analysis and industry residential and industrial properties.

It is correct what they say that there’s no spot like house, but technologies tends to make house an evolving idea for purchasers, renters, and the agents who facilitate their transactions. Ideal from the discovery of the house via financing, deal close, move-in, and upkeep and service, the whole approach is ripe for technological disruption via computer software, the World-wide-web of Items (IoT), and FinTech.

In our view, shifting customer shopping for and rental behaviors as properly as the rise of quick-term holiday rentals generate thrilling possibilities for the PropTech theme. All told, worldwide genuine estate comprises more than $325 trillion in assets, and we think the addressable chance for disruptive technologies inside this sector is huge.1 The Worldwide X PropTech ETF seeks to capture this chance.

Essential Takeaways

• The genuine estate sector is a huge economic asset class and, in our view, its digitalization presents an appealing development chance for investors.two
• Technological adoption combined with emerging demographic trends creates thrilling possibilities to disrupt the genuine estate sector.
• We think the Worldwide X PropTech ETF delivers investors a differentiated chance to capture this early-stage disruption across genuine estate.

The Worldwide Genuine Estate Sector Addresses Trillions in Financial Worth

The genuine estate sector is extra precious than all worldwide stocks and securitized debt combined and represents the biggest retailer of wealth at almost 3 instances the total worldwide GDP.three Residential house accounts for 80% of all worldwide genuine estate worth and industrial 20%.four

In the U.S. alone, the total worth of genuine estate equates to $59 trillion, with the residential industry comprising about $43.four trillion of the total and industrial genuine estate about $16 trillion.five,six The significance of U.S. genuine estate can not be understated. The typical American spends 30% of their revenue on rent each year, and the typical American household spends $22,624 on housing annually.7,eight,9 Trillions worth of genuine estate exchanges hands each year. In 2021, six.12 million properties had been purchased and sold in the United States.ten At an typical house cost of $457,375, that amounts to a transaction volume of roughly $two.eight trillion.11

On the industrial side, U.S. transaction volume held up properly in 2022 following a record-setting 2021 and in spite of the financial slowdown. Immediately after hitting a record higher of $809 billion in 2021, industrial transaction volume levels came in just shy of $730 billion in 2022.12,13 The National Council of Genuine Estate Investment Fiduciaries House Index is forecast to return to eight% in 2023 and 7% in 2024, signaling that investment in industrial genuine estate remains robust.14

The sheer scale of the asset class underlines the prospective chance for technologies-driven systems to provide efficiency as men and women buy, operate, and handle genuine estate assets worldwide.

Technologies Can Usher in a New Disruptive Era in Genuine Estate

Technologies is discovering numerous frontiers to disrupt and streamline the enterprise of genuine estate. For instance, the digitization of genuine estate access options and asset monitoring systems and the use of analysis and analytics are developing new possibilities to transform the sector. In addition, FinTech options are disrupting housing-associated payment processes, such as rent payments, insurance coverage purchases, lending against equity, and extra. In 2022, almost $20 billion went to funding private technologies-primarily based ventures in the genuine estate space, an enhance from $12.six billion just 5 years ago.15

With technologies capable of escalating efficiencies and lowering operating expenses, experienced genuine estate management firms are also escalating their digital invest on technologies at a record pace. U.S. genuine estate computer software spending topped $9.34 billion in 2020 and is anticipated to develop at a 9.7% compound annual development price (CAGR) via 2028.16

A Deloitte survey of CFOs from important genuine estate brokerages indicated that spending is set to stay robust in 2023. Forty-eight % of North American respondents stated that they strategy to enhance tech invest in 2023 vs. 2022, with yet another 27% organizing to retain spending in line with the preceding year.17

The breakdown of genuine estate technologies spending can differ by industry and enterprise even so, usually, it can be segmented by option and house variety. Amongst option kinds, house management computer software, economic solutions tools, advertising and marketing technologies tools, and IoT systems for house monitoring and management comprise the biggest share of genuine estate technologies spending at present.18

Demographic Trends Make Possibilities for PropTech

We anticipate shifting demographics to tighten technology’s grip on genuine estate and house management in 5 key locations more than the lengthy term. 1st, house discovery is now largely a digital approach worldwide, mainly led by a purchaser mix that increasingly tilts towards nesting millennials. Practically 95% of U.S. homebuyers in 2021 employed the world wide web to come across their properties.19 Purchasers that found a house via digital channels are two.4x extra most likely to purchase the house than in-particular person discovery.20

In the U.S., genuine estate sales and brokerage is a $226 billion industry.21 On the other hand, we estimate that significantly less than ten% of this industry most likely occurs fully digitally.22 Agents and purchasers may possibly meet on the web, but they total the majority of transactions offline. In our view, platforms that can digitize the approach finish to finish have a tremendous chance. Practically 40% of millennials say they would really feel comfy shopping for a house completely on the web.23 A lot of U.S. agents recognize the rewards of incorporating technologies into their processes, with some spending close to $1,000 a year on technologies tools.24 eSignature options, digital listing, and consumer connection management (CRM) tools take precedence.

In addition, with the advent of virtual reality technologies and the mass adoption of customer tech such as the Metaverse, we anticipate genuine estate agents to be inventive and additional leverage frontier technologies to construct 3D viewing experiences. We anticipate digital listings to stay an revolutionary sub-segment, as mobile-1st experiences, extra precise house worth estimation, and simplified financing stay hot locations for additional disruption. The prime 3 genuine estate listing solutions in the U.S., Zillow, Realtor, and Redfin, get close to 470 million typical month-to-month exclusive guests involving them.25

Second, the rental industry presents compelling digital possibilities. Demand for U.S. house rentals is close to all-time highs, driven by restricted housing availability on the heels of the post-pandemic housing surge and macro uncertainties and increasing interest prices. Typical U.S. rental yields of six.12%, as of November 2022, improved 30%+ year-more than-year (YoY)  in a handful of important U.S. cities.26 We anticipate steep entry level house rates will continue to enhance the rental industry and positively influence the technologies spending.

Seventy-two % of renters are now millennials and Gen Z, and these cohorts are forecast to rent for a great deal longer than the preceding generations.27 We think that this dynamic is most likely to compel landlords to invest in technologies to service the requires of these renters. When renting a house, almost 62% of Gen Z appear for apartment technologies as a important element, such as getting mobile apps for managing upkeep, clever locks, and power effective appliances.28 Even how renters spend their rent can be a element. In the United States, digital payments for rent swelled to 33% at the finish of Q4 2020 from 17% at the finish of Q4 2019.29

Third, the boom in quick-term rentals is a important trend shaped by shifting customer demographics, especially in the aftermath of the pandemic and the rise of remote operating. Worldwide spending on quick-term holiday rentals topped $91.two billion in 2021 and is anticipated to develop at a 12.four% CAGR via 2030 to prime $315 billion.30 1.three million properties had been forecast to be listed in the United States as quick-term rentals in 2022, up 21% YoY compared to 2021.31

Marketplaces such as Airbnb and VRBO verifying, aggregating, and listing properties represent mounting competitors to the hotel sector. On the web travel platforms such as Booking, Expedia, and Priceline, which traditionally aggregated and displayed only hotel listings, now list quick-term rentals, assisting to market this industry and assisting drive mainstream acceptance.

Fourth, house management systems are swiftly digitizing as properly. On the customer front, clever locks and digitized safety systems are gaining ground swiftly. Practically 81.three million properties nationwide report getting a house safety program installed.32 These systems are maturing into extensive manage hubs for house automation, such as operating entertainment devices, clever appliances, automated cleaning systems, and extra. The typical quantity of connected devices per household in the U.S. has swelled to 22 in 2022, up from 11 barely 3 years ago.33 On the industrial side, access systems are actively becoming digitized. Ideal from visitor management, ID verification, record maintaining, and extra, digital options are adding unbelievable worth and efficiency to the approach. Improved use of IoT systems is also assisting industrial house managers have an understanding of overall health and everyday operations of substantial buildings.

Fifth, we anticipate the improved use of devices and the information assets that they produce to drive use of specialized computer software and tools to enhance efficiency, asset monitoring, tracking and extra. Insights gained from this information will drive essential choices for genuine estate investors, industrial house managers, and other individuals, escalating the industry for niche analysis and analytics offerings. Demand for document management tools, signature solutions, advertising and marketing platforms, and other workplace and back-workplace cloud applications will most likely develop in the close to future as properly.

PTEC: An ETF Targeting Disruptive House Technologies

The Worldwide X PropTech ETF strives to incorporate targeted exposure to the house technologies theme by investing in firms that derive at least 50% of their revenues from a single or extra of these 3 key locations of the genuine estate technologies worth chain. Combined, these sub-segments deliver direct exposure to higher development locations inside the broader house technologies universe.

• House Management: Providers that deliver computer software and/or info technologies solutions to facilitate the management of industrial and residential genuine estate, such as house automation, clever safety systems, tenant management, power management/monitoring, insurance coverage, and building approach management.
• Marketplace and Platforms: Providers that operate on the web marketplaces and platforms that facilitate the buy, sale, rental, sharing, discovery, and/or financing of genuine estate.
• Analysis and Analytics: Providers that use computer software, information, artificial intelligence, machine mastering, spatial recognition and/or other info technologies to deliver genuine estate analysis and analytics. Also, firms that deliver virtual and augmented reality options to the genuine estate sector.

Conclusion: PropTech an Early-Stage Theme with a Vast Addressable Industry

Shelter is proper alongside meals and water as an necessary, and the approach of obtaining and keeping it is becoming a great deal extra technologies-primarily based. We think that the ongoing digitization of genuine estate, whether or not residential or industrial, more than the lengthy or quick terms, represents a dynamic development chance. Buyers, especially the younger demographics, will continue to drive the adoption of digital channels in house discovery, management, and payments, prompting landlords and industrial vendors to invest in technologies that supports customer demands.

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