MetaProp’s Global PropTech Confidence Index reveals high levels of optimism for investors and startup companies.
The commercial real estate industry has seen its share of challenges since the COVID-19 pandemic hit the United States, but at least one facet of CRE, property technology (PropTech), looks to be “firing on all cylinders”, according to the MetaProp Global PropTech Confidence Index, which the PropTech venture capital firm MetaProp publishes.
The latest edition of bi-annual report, which a provides unique and in-depth insight into the health of the real estate tech market and offers perspective from PropTech investors and startup founders worldwide, recently reviewed the second half of 2020 and noted investor confidence is quite high.
The Global PropTech Investor Confidence Index score reached 9.2 out of 10; an increase from the 8.8 score recorded in mid-2019. Surprisingly, the COVID-19 pandemic helped elevate PropTech because technologies were not only adopted, but also put to use faster than normal, which investors noticed. The Confidence Index also noted that PropTech startup founders feel good about where the industry is, too. The index hit a record high of 7.7 out of 10. The better investors feel about the PropTech marketplace, the more they were willing to invest during the latter half of 2020. In turn, the increased investment dollars instilled more confidence in the startup founders who benefitted from the additional capital.
The turnaround in PropTech confidence has been significant. Almost 40% of startups said it would be easier to get venture capital funding during the next 12 months compared to last year. In the middle of 2020, only 12% of startups felt the same way. Additionally, 94% of investors believe that the COVID-19 pandemic will further accelerate PropTech adoption within the real estate industry. Almost 60% of investor respondents said they expect to invest in more PropTech during the next 12 months—a 33% increase from the middle of 2020. From the founder perspective, 10% of startups expect their space to be less competitive during the next 12 months, which is down from an all-time high of 21% in mid-2020.
“What’s been incredibly surprising is the record highs coming out of the COVID-19 response for both stakeholder groups,” MetaProp Co-Founder and Managing Partner Aaron Block told Connected Real Estate Magazine.
PropTech’s journey into the mainstream
The high confidence marks for PropTech among investors and companies might also surprise some due to its relative anonymity compared to other technology solutions like those in the financial world. The real estate industry has been slower to embrace technology than others, but that has not stopped companies like MetaProp from making numerous investments in real estate-focused solutions.
“(PropTech) has been the last frontier for many years,” Block told Connected. “I owe the success of MetaProp to a lot of key people, but also to the slow adoption if an industry to this space. It’s only in the last couple of years that we see a rapid institutionalization of the space.”
The rapid embrace of PropTech came as investors saw there was an opportunity to make money. Many real estate companies and investors were hesitant after they lost the money they had tied up in dot-coms during the late 90’s and early 2000, according to Block. They have started to make their way back as more winning PropTech investment opportunities become more readily available.
“These technology companies that were evolving during the early years of this latest wave started making a difference,” Block said. “In the last two years, we have started to see institutional capital come in, because PropTech investing, the real estate technology intersection and investing is becoming lucrative and is expected to be much more lucrative.”
Block also noted that well-known real estate firms like CBRE and CoStar as well as private equity firms getting into the PropTech investment game only adds to the industry’s credibility and potential in the eyes of future investors.
“You start to see these sophisticated players, institutional grade, publicly traded, privately held multi-billion dollar organizations seeing that they can make money in this space,” he said. “Add to that this opening up with the IPO market—it’s an indication to the investment community institutional or otherwise that you can make money investing in these companies for what feels like for the first time. (Especially) for the many folks who were burned in the last cycle.”
CRE firms creating their own PropTech—good or bad?
Real estate companies usually known for their property portfolios are now developing their own PropTech. For example, Rudin Management developed the Nantum operating system, a smart building platform designed to help CRE owners save money, make their tenants more comfortable and increase a building’s energy efficiency. The Nantum system will be used in Rudin’s 345 Park Avenue property, which recently became one of the first Citizens Broadband Radio Service (CBRS)-enabled buildings in the U.S. While it might seem like firms creating their own PropTech might crowd out startups doing the same, Block believes the more the merrier in this industry.
“I think it’s terrific for us and the overall ecosystem,” Block said. “(The entrepreneur and venture capitalist) path is not the only one,” Some of these incumbent real estate companies absolutely need to be creating new technologies and spinning them out into the world. I hope families like the Rudins continue to double down on their innovation focus. I think it’s a great example of something that will prove to be very lucrative—not just for the direct technology, but also for their brand and ability to recruit and retain talent for the next several years.”
You can download the full report HERE.
Joe Dyton can be reached at email@example.com.