Valley Bank recently released its second annual Present and Future of Proptech report, which summarizes industry trends and the impact of rising interest rates, remote work and economic uncertainty on the property technology sector.
The report was developed in collaboration with Pitchbook; Chase Gilbert, co-founder and CEO, Built Technologies; Jeffrey E. Berman, general partner of Camber Creek; Chris Green, founder and CEO of GreenPoint Partners; Kurt Ramirez, general partner, Nine Four Ventures; and Bryan Kallenberg, vice president, Capital Markets.
Venture capital made up most of the proptech investments in 2022 with 213 deals closed for a combined value of $4 billion. Transaction solutions and property management combined for a plurality of deal volume.
“Despite rising interest rates and volatile economic factors, proptech remained a strong investment category in 2022,” Stuart Cook, chief innovation officer, Valley Bank, said in a statement. “The shift towards sustainably built new structures and retrofitting existing assets is either in progress or being planned for extensively by owners and investors. Investors are likely to remain active given broader dynamics and longer-term horizons at play in regard to real estate.”
Key takeaways from Valley Bank’s report included that investments in private markets for proptech were better than expected, given how volatile 2022 was. Property management and transaction solutions were among the segments that held strong.
“Especially in a cautious complicated environment, investment in tech that is seen as readily accretive to the bottom line will continue to attract capital,” the report said.
Meanwhile, private investment that’s mainly focused on venture given proptech’s maturation is ongoing and, “remains a key force in propelling the digitization of many real estate workflows.”
Corporate players also remained active in proptech investing, according to the Valley Bank report. Businesses took part in 45 completed venture transactions valued at more than $1.8 billion. Additionally, nontraditional investment firms, such as hedge funds and asset managers, participated in 86 deals, for approximately $3 billion in total deal value.
“These figures compare favorably to the past, indicating that although they may join in fewer deals during tumultuous times, they will still participate in larger deals for more mature and established businesses — much like they have in the past,” the report said. “Corporate venture players’ motives are both financial and strategic, while non-traditional players are certainly seeking financial returns while also considering broader portfolio implications, hence their ability to remain somewhat unaffected by broader factors believed to be shorter term.”
Curbing greenhouse gas emissions and improving sustainability throughout all of real estate remains a priority for the industry, as key players explore and embrace innovation on all fronts. Builders are deploying more sustainable concrete and recycling waste into useful adjacent products, such as gravel on construction sites and fill. Meanwhile, property managers are updating monitoring systems to better improve energy consumption in homes and common areas. Brokers are investing in more secure and transparent portals with improved visualizing and modeling systems and remodelers are using recycled wood and novel designs.
“These examples and more, spanning other arenas of proptech, continue to deliver opportunities for both innovation and investment, which this report provides an overview to inform and provide a springboard for planning and taking action,” the report said.
Read the full report here.
