The Present and Future of Proptech: Charting a Clearer Path in Murky Markets
The majority of 2023 industry-wide investment in Proptech - 70 percent - was in venture capital with 144 deals closed for a combined value of
“This decline can be attributed to a number of economic and geopolitical factors,” said
“The market correction has sharpened investors’ focus on companies that deliver proven ROI and are built on stable foundations - of which there are plenty,” said
“While both the real asset and venture capital sectors have faced headwinds in recent years, we believe technology will continue to play an increasingly critical role in shaping the future and advancing the long-term sustainability of the real estate ecosystem,” said
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Key highlights from the report:
- 2023 saw an uptick in the proportion of transactions around property management and transaction solutions, while aggregate deal values were also proportionally concentrated in those same Proptech segments. This focus suggests that firms were prioritizing cost-saving and revenue-boosting implementations to costly, lengthy digital processes via automation. Physical property management, deployment of energy-saving devices and analytics packages also were prioritized.
- Although primarily concentrated in VC, private investment remains key to accelerating Proptech innovation, while the activities of other investment firms or nontraditional asset managers also speak to the maturation of the sector.
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Corporate venture arms and corporations themselves pulled back only in terms of the number of deals in which they participated - not the size of the deals themselves. They joined in 22 financings for a combined
$2.1 billion in deal value, the bulk of all VC invested in 2023. That total was the lowest since 2017, yet the aggregate deal value was the second-highest annual figure on record. - The need to continually develop and implement tools such as AI in service of sustainability and efficiency still exists and will drive deal making - particularly on the VC side as firms balance caution with sufficient investment in Proptech’s gradual spread across multiple aspects of the property sector.
- Regulations compelling greener construction will prompt a consistent level of funding for more radical innovations in materials and techniques, especially via digitalization.
Methodology behind the research
Estimates of market sizes and private investment activity within the Proptech space differ widely due to a variety of factors, such technology and types of real estate markets. This report views Proptech through a much more rigorous lens, using the Pitchbook platform to construct five distinct segments: asset utilization; finance and investments; construction, maintenance and renovation; property management; and transaction solutions. You can find more information under the methodology page in the report.
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