What’s Next For Proptech In 2022? More Investment In Construction, Optimizing For The Gen Z Renter, And M&A
Proptech had a golden year in 2021, with high points like Procore’s IPO and low points like the collapse of construction startup Katerra. Crunchbase data shows that venture-backed startups in the real estate and property tech area raised approximately $21 billion in total.
According to Crunchbase data, there will likely be increased investment in real estate software involving the construction and property management spheres in 2022. These two industries were outstanding areas for investment in proptech in 2021. According to specialists in the field, more consolidation is likely in the business as companies age and seek exits.
According to Lauren Weston, an associate at Thomvest Ventures who focuses on early-stage investments in the fintech and real estate industries, the macroeconomic situation is perfect for proptech investing due to a shift in institutional investors buying single-family homes.
Renting is growing more prevalent in general, but more individuals renting from firms like Blackstone makes it possible to invest in various forms of technology.
Real estate is a profitable asset class for investors, especially now that interest rates are so low.
“Institutions are interested in real estate, which implies technology must follow,” Weston explained.
Embedded finance, project management software, and home improvement tech will all be popular areas for investment in building tech next year, according to Weston. According to Crunchbase data, venture-backed construction IT businesses garnered more than $3.8 billion in funding in 2021.
According to Weston, embedded finance—or the technology that enables online payments—is already a prominent theme in fintech and is being implemented in the proptech sector. However, it will most likely become more significant in construction technology next year, particularly with embedded loans. Lendflow, for example, is a business aimed at making it easier for software companies to integrate loan services into their products.
As the construction sector strives to digitize pre-construction, workflows, and financial management, project management software that replaces spreadsheets and emails, such as Bridgit, will likely be popular with investors. Homeowners’ attention turned to house maintenance during the COVID-19 pandemic, and with a housing supply constraint, upgrading obsolete and neglected properties could be another method to provide more housing.
“I think proptech is huge and broad, and there are so many tailwinds in the industry, especially in residential proptech, where I focus,” Weston said.
According to Raj Singh, managing partner of JLL Spark, the commercial real estate firm’s proptech-focused venture fund, there’s a new wave of construction tech companies emerging that want to combine design, offsite construction, and new materials, and those companies will likely be “key areas for investment” as well.
Property management tech
According to Fatima Dicko, founder and CEO of Sugar, a proptech business that links members of residential communities, Gen Z is also becoming older and becoming renters, which is a factor in an emerging pattern that affects all aspects of proptech.
“You’re seeing more Gen Z people renting, and they’re a lot more computer savvy,” Dicko said. “They’re interested in smart home technologies, and they want to control everything from their phone.”
According to her, there is a growing desire for digital solutions for paying rent and unlocking doors, as well as seeing houses and executing lease agreements virtually.
“We’re seeing a lot of stuff around digital tours,” Dicko said. “We’re seeing a lot of stuff around being able to virtually tour an apartment from online, being able to acquire a digital key and do a self-guided tour.”
The COVID-19 pandemic has hastened the normality of virtual tours and signings, and now is a better time to invest in technology that will appeal to Gen Z renters.
The IPO of Procore earlier this year was a watershed moment for the proptech industry. It was a significant exit for a VC-backed construction tech firm and a confirmation of the sector’s investment. According to Weston, Procore’s IPO suggested a big total addressable market for the construction industry and the development of the proptech sector.
“We’re seeing proptech mature, which is really positive,” Weston said. “You also have larger corporations in the ecosystem that might be prospective buyers of companies, which is huge.”
According to Singh, a JLL assessment from 2021 indicated that the space was mature, which had implications for consolidation.
“While it will be gradual, we expect to see more mergers, acquisitions, and IPOs in the coming year, particularly M&A as industry consolidation begins,” Singh wrote in an email.
According to Crunchbase data, 125 venture-backed real estate startups were bought in 2021, the greatest number in the previous five years. This trend is projected to continue, especially as legacy players attempt to expand their portfolios with proptech software businesses.
“These classic hardware companies and these residential engagement or software companies are definitely going to consolidate further,” Dicko said.
ARTICLE: CrunchBase News