If property tech (proptech) wasn’t already on the minds of savvy real estate professionals pre-pandemic, the last two years – with remote work taking centre stage – certainly served as a catalyst for it to become the talk of the industry.
In basic terms, proptech is the application of information technology and platform economics to real estate markets, especially in global cities. The goal is smarter, smoother, and faster transactions.
And it’s attracted the attention — and dollars — of venture capital investors with serious cash.
Globally, investment proptech hit $32B in 2021, a 28% increase from 2020 and a 3.23% increase from 2019, according to the Center for Real Estate Technology & Innovation’s 2021 Real Estate Tech Venture Funding Report. Overall, the global proptech funding focused on residential tech, which attracted 49% of investments, compared to just 7.6% for tech focused on commercial owners and tenants. But that figure is set to continue increasing, according to the report.
READ: Toronto-Based PropTech Company Ventures West, Taking On Vancouver’s Condo Industry
“Last year was a record-breaking year for proptech fundraising in North America, setting an industry standard,” says Tim Ng, owner of Toronto-based digital real estate agency ADHOC STUDIO. “In 2019, it hit $9B; in 2021, it hit $9.5B. Venture capitalists and investors just poured their money into technology firms.”
Ng is a pioneer in Canada’s proptech industry, having fused his love of technology and real estate with the creation of ADHOC 13 years ago. In the early days, much of its business involved creating and building out interactive sales centre touchscreen applications. In the last couple of years, business has shot through the virtual roof for Blackline, an app-based sales management software created by ADHOC.
But Blackline is just one example of a game-changing proptech product that’s shaken up the real estate industry as of late. For example, startup Sugar connects members of residential communities, enabling residents to pay rent, unlock doors, share keys, interact with neighbours, and more. Meanwhile, service management software ServiceTitan has become the world’s leading all-in-one software for commercial and residential HVAC, plumbing, electrical, and other field service businesses.
And investors have certainly begun to take notice of them and others.
“Sonder, one of the Unicorn companies, recently got a $2.2B valuation,” says Ng. “It was originally a small platform that subleased apartments and ended up turning into a competitor to Airbnb because the whole industry gravitated to their platform. They went public last year. That’s just one example of how crazy the industry can get.”
Last year, California-based construction software company Procore Technologies — which was founded back in 2002 — made headlines when it raised $634.5M in an IPO priced above the average range. This was seen as a major milestone for the proptech industry.
The tech-propelled industry shake-up is one that Ng says was overdue.
“The real estate industry is so far behind; there are so many things that tech can solve and make smoother and more efficient,” says Ng. “Since 2019, there are many companies starting up to facilitate this. We are seeing this across the board in the industry — from construction and materials used in real estate, to office space, to residential.”
While this proptech movement was brewing before COVID-19, the pandemic accelerated it, says Ng. “Everything is getting disrupted — from commercial real estate and the workspace to construction, the sustainability of building homes, and, of course, residential space,” says Ng.
According to Ng, many of the early venture capital investors in proptech were involved in the the real estate industry. This makes it an easy transition investment-wise.
“One of the reasons that investors are directing their money into proptech as opposed to other industries is that they — many of the executives on these venture capital firms or the company themselves — are already involved in real estate or get a sizeable amount of their capital through real estate,” says Ng. “It makes a lot of sense for them to invest in proptech because they understand the industry. Traditionally, they’d invest in industries that they don’t fully understand or weren’t part of — for example, fintech. The last couple of years, however, there have been many opportunities in proptech.”
Furthermore, many of these investors are directing their dollars into products that they may actually use themselves on their real estate projects, highlights Ng.
“It’s been an easy transition for them to look at a company’s potential or their product, then decide to invest, because it may affect one of the venture capitalists’ companies if they can directly use it themselves in their real estate projects and portfolio,” says Ng.
As the industry continues to grow, proptech will surely attract people with no professional connection to the real estate industry. “Even if the initial investors are already in the real estate industry, that will only help a lot of these tech firms continue to grow, and that will eventually help other venture capital companies not in the real estate space see the potential of proptech,” says Ng.
For those looking to get in on the action, Ng stresses the importance of doing one’s due diligence.
“With any investment-driven initiative, I would advise venture capital firms to research and get to know the founders behind these proptech companies, because it’s really the founders and their characteristics that drives the success of those companies,” says Ng.
This is just the beginning of the proptech explosion, predicts Ng. “I think proptech is going to be even bigger in 2022 than 2021.”
This article was produced in partnership with STOREYS Custom Studio.
The post Here’s Why Proptech is One of the Hottest Investment Opportunities Right Now appeared first on STOREYS.
Leave a Reply