It’s not a slight, but if there is a sector outside of utilities that could do with some modernization it’s real estate. Fortunately, a new generation of exchange traded funds are answering that bell.
The newly minted Global X PropTech ETF (PTEC) is certainly part of that group. PTEC, which debuted earlier this week, “seeks to invest in companies that are positioned to benefit from technology that optimizes the way people buy, sell, rent, design, construct, manage, and research/market residential and commercial properties. This includes software used in property management, online marketplaces, real estate research and analytics platforms, as well as next-generation digital infrastructure/hardware, such as smart security systems and virtual or augmented reality solutions,” according to the issuer.
That’s a mouthful to be sure, but it doesn’t diminish the potential of the rookie ETF, which is benchmarked to the Global X PropTech Index.
Home to 36 stocks, PTEC lives up to its billing as a tech-based play on real estate. It’s light on traditional real estate investment trusts (REITs) and heavy on stocks such as Costar Group, Black Knight, Airbnb, Rocket Mortgage and Zillow, among many more.
One way of looking at PTEC is that it brings an element of disruptive investing to a sector that’s not only in need of it, but conducive to that style.
“The digitization of real estate access solutions and asset monitoring systems and the use of research and analytics are creating new opportunities to transform the industry,” notes Global X. “In addition, FinTech solutions are disrupting housing-related payment processes, including rent payments, insurance purchases, lending against equity, and more. In 2022, nearly $20 billion went to funding private technology-based ventures in the real estate space, an increase from $12.6 billion just five years ago.”
PTEC is useful for another reason. While the ETF holds just 36 stocks, that’s relatively deep bench relative to other thematic strategies, indicating the product as adequate breadth. That’s important because there are varying avenues through which real estate tech dollars are deployed.
“The breakdown of real estate technology spending can vary by market and company; however, typically, it can be segmented by solution and property type. Among solution types, property management software, financial services tools, marketing technology tools, and IoT systems for property monitoring and management comprise the largest share of real estate technology spending currently,” adds Global X.
Demographic Trends Could Propel PTEC
Rookie status aside, perks abound with PTEC, including leverage to important demographic and technological trends. That includes the increasing digitization of the home buying experience as well as the rental market’s elevated dependence on tech.
Specific to demographics, PTEC could offer clients notable inroads to capitalizing on important trends tied to millennial and Gen Z home buyers and renters.
“Seventy-two percent of renters are now millennials and Gen Z, and these cohorts are forecast to rent for much longer than the previous generations,” observes Global X. “We believe that this dynamic is likely to compel landlords to invest in technology to service the needs of these renters. When renting a home, nearly 62% of Gen Z look for apartment technology as a critical factor, including having mobile apps for managing maintenance, smart locks, and energy efficient appliances.”