Property technology investors and founders may have shied away from the sector as lending decreased in recent years, but confidence in the industry has slowly started to rebound, according to a recent MetaProp report.
The MetaProp Mid-Year 2023 Global PropTech Confidence Index revealed that investor confidence increased to 6.1 (out of 10) from 5.4 at the end of 2022. Meanwhile, proptech founder startup sentiment also went up slightly, 4.8 in mid-year 2023 vs. 4.4 at the end of last year.
“As the market advances into the next phase of correction, investor sentiment is marked by a nuanced shift in disposition, now echoing cautious optimism and departing from the prevailing apprehension that defined investor outlook since the broad market reset began in 4Q21,” the report said. “Although the enduring backdrop of market constraints persists, investors are exhibiting a prudent eagerness to reassert themselves into what appears to be an increasingly stabilizing environment for new capital deployment.”
The survey, which comprised proptech investors and startup entrepreneurs, also found that 43 percent of investors expect to put more capital into the sector — a big jump from the 26 percent who said the same at year-end 2022. Meanwhile, almost 40 percent of investors are confident in an uptick in proptech deal flow, which was close to the mark from the end of 2022, but a significant increase from mid-year 2022 (19 percent).
Other key takeaways included 34 percent of investors said they are more interested in AEC (architecture, engineering and construction) solutions than any other category — an index record.
“This interest tracks the growing maturity of the sector’s technology paired with an increased willingness from stakeholders to adopt technology to help address rising challenges in controlling project costs and securing skilled labor,” the report said.
Another all-time high — 77 percent of proptech investors stated they anticipate more merger and acquisition activity during the next 12 months. In line with proptech startups lagging behind investors in confidence, 60 percent of startups expressed an increased likelihood of experiencing a liquidity event during the next three years — up from 54 percent just six months ago.
Proptech startup founders also had a more nuanced outlook when it came to fundraising. Forty-five percent of founders said they think it will be more difficult to raise capital in the coming year — a drop off from 57 percent six months ago.
“Cash runway is the driving force narrowing bid-ask spreads in favor of investors,” the report said. “A multitude of startups who deferred capital raises amidst the market correction are poised to re-approach the venture market before their financial resources edge too thin, fueling a continued elevation in deal flow activity that has persisted throughout the year.”
While the increase in proptech confidence was modest, it’s still encouraging, given where the overall economy is MetaProp co-founder and managing partner told Commercial Observer.
“The jury was really out after the disastrous level of confidence (in the Year-End 2022 Confidence Index),” Block said “The jury was out on whether the malaise would get worse, continue, or get better. I think there’s a lot of uncertainty. I think the biggest surprise I’m seeing right now is that there’s light at the end of the tunnel in the confidence index. I can tell you that even subsequent to the survey results coming in, it really feels like we can see the future and we’re past at least this portion of the bottom of the market.”
Click here to review the entire MetaProp Mid-Year 2023 Global PropTech Confidence Index.