Real Estate and law firms share a collective reputation of old, conservative business practices. These industries are regularly criticised for their resistance to change. The late emergence of technologies and data-driven insights in both these industries have been noted since early 2010. However, PropTech and LegalTech both have traction and many shared applications. Indeed, global venture capital investment in PropTech grew from $1.8 billion in 2015 to 11.2 billion in 2018, while legal tech investment surged from $174 million in 2015 to $1.66 billion in 2018. There is an increasingly crowded marketplace, and the desire or need for a competitive edge are active drivers that make both law firms and real estate stakeholders more willing to look towards the future.
Throughout our PropTech essentials section, we have documented the Real Estate industry expansion and different size. The LegalTech industry is itself growing at a steady pace in Europe and the world in general since a few years now. More and more sectors of the economy currently start facing the consequences of this new industry on their activity. As Europe is not a uniformised market for the entering legal tech actors, it is clear that the emergence of a massive actor able to act as a regional superpower in the legal tech industry will not rise rapidly, if it ever does. The disruption meant by the legal automation start-ups in Europe will follow much more of a local rather than the regional trend in its development. Although European laws create legal uniformity to some extent across the EU, most of today’s real estate services are directly regulated by national entities and remain under the prominent influence of federal lawmakers.
As it happens, real estate regulations are directly supervised by national politics and won’t see the sudden arrival of major EU legal tech actors. It is interesting to ask whether or not the current companies of the real estate sector will be deeply affected by the upcoming legal tech expansion. Will legal tech destroy jobs in rental agencies? Will it disrupt the current state and shape of the market in the long run? To answer those questions, we first have to ask ourselves what type of services legal tech actors can provide to the real estate sector. To what extent is the offer made by the legal automation technologies directly linked with core activities of the housing, rental and commercial Real Estate.
Clients want things done fast, and they can’t understand why lawyers can’t do it more quickly. They don’t realise that lawyers are enabled to widely use automation software for making relevant changes inside a 100-page lease while potentially cutting down on errors. Still, lawyers aren’t just going to get away with delivering faster contracts. Some leading law firms are aware of this and look at a more holistic understanding of how technology can be a boon to their business.
Contracts, construction plans, and tender proposals exist only on paper format most of the time due to formal requirements, which brings about some challenges for companies and their legal advisors. Digitisation is currently disrupting the way real estate transactions are being processed. In the past, lawyers reviewed large piles of files for so-called due diligence, while today, lawyers are supported by data rooms and virtual, self-learning assistants.
Landlords who want to distinguish their residential stocks from all of the others on the market might inquire about tech that can be used to enhance the tenant experience, like an app that lists all of the nearby restaurants or attractions. Some tools can directly impact the bottom line by measuring key variables inside a property such as energy efficiency. Because real estate can be a very narrow industry, many real estate stakeholders try to gauge what’s available and what’s just around the corner in the world of PropTech.
Real estate tools aren’t designed with lawyers in mind. Most technology is created by engineers and people that grasp the benefits of efficiency. But the tools that are being created often make `the end user’s life harder.
The decision-makers from Real Estate and Legal industry are querying technology providers for several reasons. On the one hand, the economic upturn has led to numerous portfolio transactions that easily contain thousands of lease contracts. That leads to steadily increasing requirements for professional data processing on both the seller and buyer side. On the other hand, companies want to save costs for standardised workflows such as contract management.
Through the automated data extraction, technology providers allow lawyers to focus on the core tasks of their work again – the legal assessment of the information within contracts, a bridge-builder between the analogue and digital business worlds. Facilitating transactions to be more efficient is key for greater integration between PropTech and LegalTech.