Property technology (Proptech) startup companies are currently on the rise, Crunchbase News reports. Venture capital-backed real estate companies have raised approximately $11 billion in 2021—a 22% boost from last year, according to recent Crunchbase data. Low interest rates, a good construction market and government spending have all played key roles in the uptick in proptech investment dollars. The flood of institutional money into the real estate industry has been the biggest factor, however.
For example, Blackstone has spent billions to gain a foothold in a variety of sectors including, movie and television studios as well as the San Francisco residential market. The firm is also the largest private commercial real estate owner in the world as of last year, as it backs more than $370 billion worth of property.
Why companies are betting big on proptech
Emerging themes in the modern economy such as e-commerce, media space and urban rental markets’ rising prices in areas like San Francisco, Los Angeles and New York City have made companies willing to take a risk on proptech. Investors understand that properties need and will be enhanced if they embrace the latest tech. This is especially true for CRE owners as large as Blackstone given how many properties in which it has a financial interest. Implementing the latest technology only makes their buildings more attractive.
Additionally, proptech can do things such as make it easier to locate properties, create more inventory and reimagine both the CRE and residential markets. Tech that can do any of those things will be invaluable to companies like Blackstone that operate at a larger scale. Rising proptech demand combined with an upward trending venture capital market leads to strong valuations for startups.
“This once unsexy, overlooked space has become the darling of investors in record time,” Maschmeyer Group Ventures investor Kevin Lynch wrote for Crunchbase News.
Real estate has often been the last to the table when it comes to tech and innovation, but the impact of the COVID-19 pandemic has shifted the industry’s perspective in that regard. Now, businesses that can find a place between demand and capital supply will have an opportunity to grow exponentially. For example, Crunchbase News reports that startup companies like Opendoor, Cover and Compass have garnered significant valuations and have quickly moved through funding rounds. They’ve also managed to use the capital to accelerate growth.
The future of proptech investing looks bright
The growing enthusiasm for proptech is reflected in the shift away from traditional homeownership and toward the property sharing economy, Crunchbase News reports. Online lodging provider Airbnb might have started the trend, but it’s continued during the COVID-19 pandemic. Home sharing combined with a large infrastructure bill could yield a promising future for proptech, which has been mainly overlooked up to this point. If investors continue to fuel this space with capital, it will only grow that much more.
Joe Dyton can be reached at firstname.lastname@example.org.