Green buildings GRESB

ESG and efficiency will continue to drive tech adoption, though investors will be more cautious in 2023. Credit: GRESB

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2023 proptech predictions | End of ‘period of exuberance’?

One year ago, the proptech market eagerly awaited another 12 months of high investment and adoption. Now, facing economic jitters and tightening purse strings, the sector is coming to terms with a gloomier outlook – alongside continued optimism.

“2022 was a period of exuberance, fuelled by cheap capital creating high valuations in the private and public markets, but it ended abruptly,” says Peter Bredthauer, CEO of rent roll startup Proda.

Oli Farago 1

Oli Farago, CEO, Coyote

But he sees the fall in activity in recent months as an overcorrection, predicting that investment will once again pick up in 2023. That view is shared by Coyote CEO Oli Farago, who says he has already seen investment ramp up, having signed up some of the biggest names in commercial real estate to its management software this quarter.

“The titans of our industry are taking action, something we see as a massive commitment to adopting the right technology,” he says.

‘Not a time to cut back on investment’

Indeed, speak to tech-minded developers and you get the sense that their interest has not waned. The goal for someone like Tom Smithers from Ashby Capital is to use tech for becoming more energy efficient.

“With a direct correlation between spend and energy savings, your strongest return on investment comes in this field, and this will be crucial at a time of elevated energy prices,” he says. “While we may already be in a recession, occupier demand for the very best buildings has proved extremely resilient, and tech is a key part of that – so it’s not a time to cut back on investment.”

Smart access gets smarter

Smithers adds that a recent “subtle touch” development Ashby is working on is developing Apple Wallet building membership cards with Smart Spaces for added convenience and reduced plastic. 2022 saw that technology ramp up, with Sharry introducing Apple Wallet access to Chicago’s 167 Green Street.

Access control guru Lee Odess says that engagement from companies like Apple and Microsoft sparked up conversations around commercial access and the role of innovation in security this year.

Meanwhile, transactions in the sector heated up, with Assa Abloy selling its Yale and August businesses and acquiring Spectrum Brands. What this means for next year is unclear, he says, though adding: “What can be said is change us upon us.”

No next big thing

David Fuller Watts Mallcomm

David Fuller-Watts, CEO, Mallcomm

Mallcomm CEO David Fuller-Watts says: “In the year ahead, there is no ‘next big thing’ for real estate. Most of the trends we have seen this year will continue. That means an ongoing focus on addressing ESG principles, particularly energy use to reduce consumption and costs.

“To continue to retain and attract tenants, a more innovative approach will also be required to improve their experience, and digital tech will be key to this.”

Others similarly predict a continuation of existing trends. Echoing the sector’s go-to phrase of the year, WiredScore president William Newton says: “Technology is no longer a frivolous ‘nice-to-have’; it’s an imperative.” There is growing urgency to ensure that buildings – especially older ones – are futureproofed with strong digital infrastructure.

Jennie Coleville, head of ESG and sustainability at Landsec, is similarly focused on continuity: “Our focus will be to continue to deliver on our Build Well, Live Well, Act Well commitments… we recognise that there will be challenges in delivering these plans and we don’t have all the answers, but we do believe that by being explicit in our targets, we can incentivise and support action across our industry.”

Further thoughts

Guy Windsor-Lewis, CEO of Locale Group, on what will happen to tech investment in 2023: “The champagne days are over, so a balanced fall is predicted. Investors in 2023 will be more cautious and diligent in their investment approach” – though he adds that Locale has no plans to stop or slow its development plans.

Sarah Geiger

Sarah Geiger, UK director, Alasco

Sarah Geiger, UK director at Alasco, on the driving force behind real estate: “The real estate industry is ruled by a number of benchmarks. In 2022, these included labour, costs and regulations, all of which tightened their grip as a result of unpredictable economies and shifting ESG requirements. 2023 will see more of the same, and real estate firms will have to continue navigating a shifting landscape. What we can be sure of, is that digitalisation is the best bet these companies have at generating revenue, remaining transparent, and acting as innovation pioneers.”

Marcus Moufarrige, CEO of ility, on consolidation in the sector: “There’s still a lot of overlap and gimmickry across the board, which presents a challenge for 2023. Those wanting to stand out will need to rethink their product, value proposition and market fit. To be unique is to have a competitive advantage, but to be usefully unique is even greater.”

Jeremy Sparrow, CEO of Captego, on the impact of an economic downturn: “The downturn will be broadly challenging for the industry but will highlight those businesses that have not previously invested in technology. This will further widen the gap between enterprises that do or do not implement systems that improve efficiencies, reduce waste, and genuinely utilise and learn from extensive data that they can easily gather and analyse.

Last word: Michael Beckerman, CEO of CREtech

While the proptech sector is still relatively fresh-faced, 2023 has the potential to make it a giant. With venture funding more cautious and real estate companies dealing with myriad market challenges, there is pressure on tech firms to consolidate and enhance integration among solutions. The result should give us a much stronger sector at a time when innovation is in greater demand than ever.

As tenants face their own business challenges, tech that drives engagement, improves the user experience, and increases productivity will prove compelling investments. Some of the other tech categories that will make waves in the coming year include construction tech and climate tech – this is vital because technology is essential in tackling the climate crisis. Real estate is the world’s largest asset class and the single largest contributor to climate change; while a huge responsibility to bear, real estate also has a unique opportunity to make a fundamental difference globally, and proptech must be at the forefront of that.

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