The UK is leading the way in proptech investment in Europe, a report from Oxford Saïd Business School has uncovered, with 2020 set to be a pivotal period for adoption, subject to overcoming regulatory hurdles.
As of June 2019, over $5bn was invested in 805 UK proptech companies, five times more than Germany.
Investment in proptech start-ups has been coming from several directions: traditional venture capital funds with diversified portfolios, specialist funds and accelerators. Traditional real estate companies are also diving in, with over 400 directly investing in at least one type of proptech company.
Venture capital funding rocketed to $14bn in the first half of 2019 and has grown by over six times its 2015 amount in just two years – twice as fast as the fintech market. The largest funds in the sector include venture capital firm Fifth Wall, which has raised a $500m specialist real estate tech fund.
“Everyone, it seems, is looking for the next unicorn,” said co-author Prof Andrew Baum.
In the search for rapid adoption, the legal framework cannot be bypassed by tech providers and overcoming regulatory hurdles, especially around ownership of data, in the coming years remains one of the biggest challenges to growth of the sector, Baum and his co-author Andrew Saull assert.
All signs now point to a proptech market that is maturing, with a decrease in new startups corresponding with an increase in funding. Mergers and acquisitions within the market have also increased, rising from nine in the second quarter of 2017 to 24 in the first quarter of 2019. The authors believe the maturity of the market points to an oncoming ‘third wave’ of proptech, which they state will be driven by global forces of climate change and rapid urbanisation.
For traditional real estate companies, the most significant harbinger of disruption is the entrance of the tech giants into real estate. Amazon, Apple and Facebook all made forays into the sector in 2019, with Facebook announcing a $1bn affordable housing initiative in October. The authors predict these companies will leverage the wealth of data they possess to create complementary proptech offerings.
The report concludes that the most important proptech ventures will be those that produce and extract value from data, such as research and information company CoStar and US property sales platform OpenDoor. They also state the pressures of a growing global population will push ‘smart city’ technology to the forefront of the burgeoning proptech market.
Baum, leader of the Oxford Future of Real Estate Initiative commented: “Our report demonstrates that the proptech movement is reaching a critical mass. Regulatory roadblocks remain, but the first companies to overcome them will reap huge rewards. 2020 looks set to be a year of disruption for the real estate industry.”
The Oxford Future of Real Estate Initiative is supported by Arcadis, Bryan Cave Leighton Paisner, CBRE, The Crown Estate, EY, Nuveen Real Estate, Redevco and UBS.
Proptech 2020 was compiled using data from Unnisu and Crunchbase.