The digital revolution is well underway in real estate as new technologies offer up new challenges and opportunities on an ever-changing basis.
Proptech – short for property technology – has become one of the buzzwords of recent times, referring to all technology-based solutions that aim to transform every part of the value chain in the industry.
From funding and transactions to designing and building to tenant operations, there are few areas of real estate left untouched. And there’s plenty more to come.
Since 2008, the number of Proptech start-ups has jumped from 176 to over 1,600, fuelled by investments from a wide range of sources, including real estate companies that recognise how it’s driving change within the industry. Indeed, the buzz and attraction around the Proptech movement have led many to call it the new Fintech.
Over the past few years, there has been a robust growth in investment in real estate technology, with a significant jump from US$4.2 billion in 2016 up to US$12.6 billion in 2017, amid rising interest form the venture capital and wider investment community. Deals included Japanese banking group Soft Bank’s US$4.4 billion investment in coworking space WeWork and a further $450 million in US-based start-up Compass.
Indeed, the U.S. is a popular destination for Proptech investment, accounting for more than 50 percent of total funds in 2017, followed by Asia at 25 percent and the UK at 10 percent. Several start-ups in the US, including Compass, OpenDoors and SMS Assist, have now acquired ‘unicorn’ status with their valuation exceeding US$1 billion.
Yet looking back over a longer time frame, Asia Pacific attracted the most investment between 2013 and 2017 with 60 percent of the total. Start-ups focusing on brokerage and leasing receiving the lion’s share of the money.
Over in Europe, investment in Proptech has been growing consistently with the UK of particular interest to investors, accounting for 60 percent of the continent’s activity. Among the most significant equity rounds of 2017 was the London-based property financing platform LendInvest, which raised almost £100 million of new capital for its flagship discretionary fund.
But other European countries are catching up. In France, for example, there are more than 400 Proptech start-ups. Around 15 of these have raised more than €1 million in the past two years, including ManoMano with €60 million in September 2017 and Guest to Guest with €33 million in March 2017.
As the money flows in, Proptech has become a major talking point in the big real estate events taking place in Europe. This year, MIPIM is holding the first MIPIM Proptech Europe while others such as ExpoReal are putting a stronger focus on technology and start-ups, offering opportunities for new channels of discussion between entrepreneurs, investors and established companies.
While Proptech is in its early stages, it is gaining momentum as the start-up ecosystem grows and new innovations scale up across the industry. For real estate companies, it’s not only about keeping up-to-date with the changes but also about interacting and collaborating with relevant Proptech start-ups to develop new solutions to challenges, bring fresh ideas to the real estate market and improve their client reach.
Forward-thinking companies are increasingly opening up to innovation and starting to seize the opportunities that Proptech offers. Those that don’t risk being left behind as the speed of change in real estate starts to pick up the pace.