PropTech touches every element of our lives. Most of the time, if all is well, we don’t even think about the roofs over our heads, the condition of the walls around us, or the windows we look through. Yet, technology is transforming all elements of the real estate life cycle all the time. By the end of 2023, there was $47.5 trillion USD in value locked into residential properties in the United States alone. This is to say nothing of multifamily homes and commercial properties. The value of the real estate market in Europe alone is even greater, estimated to climb to the heights of $174.5 trillion USD in value by the end of 2024. Valued at more than $634.90 trillion USD, real estate investments are the world’s largest asset class, while also being an asset class that is definitionally illiquid. And yet, technology is constantly transforming the way property is built, invested in, managed, and lived in. Robotics, 3d printing, AI/Machine Learning, and blockchain are just a few of the latest technologies at play. While new regulations are likely to emerge especially related to certain technologies, including pricing algorithms and tokenization of real estate, it is vital for us to understand the breadth and depth of technologies in the PropTech ecosystem. After all, it is these technologies that are rapidly coming to shape almost every element of the property lifecycle.
PropTech is a portmanteau of the terms “property” and “technology.” An alternative name for PropTech could be “Real Estate Technology.” Through combining technology, real estate, and platform economics PropTech is understood as a subsector of the broader real estate industry. We divide PropTech companies into four categories based on which stage of the real estate life cycle they are primarily engaged with transforming: Building, Investing, Managing, or Living. Within these four categories, it is important to understand that there are industries, such as “Construction Technology” (ConTech) that might not be automatically presumed to be part of the PropTech ecosystem in certain data sets but are indeed part of our in-depth analysis. In addition to all those materials, mapping, planning, permitting, and managing technologies related to the “Building” element of the property life cycle, this category of companies is also growing with the introduction of technologies like smart equipment and robotics.
When we investigate the Investing category of PropTech companies, many of these companies offer portfolio management platforms or software. Significantly fewer companies are involved with the developments of blockchain and tokenization of real estate as an asset class, however these players are certainly disrupting the existing market. Another core technology, beyond software, apps, and online platforms, for this category is data analytics. Massive collections of data now arrive so quickly they cannot be handled by traditional software. Termed big data, a whole new range of technologies are being created to handle massive and complex investor datasets. Further, big data analytics in all elements of the real estate life cycle is now increasingly enabled by a combination of algorithms, machine learning, and, more broadly, AI.
While the investing category may attract attention due to the promise of operating at the intersections of FinTech and PropTech, it is the Management category of PropTech companies that has traditionally attracted the most fundraising. Of course, PropTech technologies could be relatively simple user-facing software applications (apps) that facilitate searches for vacation rentals. However, complex data-analysis algorithms or business-to-business applications that facilitate the ease of real estate transactions are considered PropTech. Additionally, various forms of financial technology (FinTech), which might be used to facilitate the processes of applying for, evaluating, and providing mortgages – often referred to under a subcategory of companies called “Mortgage Tech” – are also part of the Management category in the PropTech universe. In the 2022 Barometer we summarized the field of PropTech through examining four key categories of companies in further detail (Building, Investing, Managing, and Living). This year, we are excited to maintain this simple rubric, for the ease of understanding the industry.
PropTech emerged from a combination of innovations in the major American Real Estate markets of New York, Washington D.C. and California in the 1990s. Although Real Estate lagged in the dot com tech boom of the 1990s and potential growth was stymied by the global recession of the early 21st century, PropTech finally took off in the second decade of the 21st century, quickly spreading throughout Europe, Latin America, Africa, and Asia, including significant markets in the Middle East.
In this year’s barometer, we will continue our emphasis on significant regions for PropTech. While we give a global update in Chapter 3, Chapter 4 examines the PropTech industry by regions. We begin with the United States, before progressing onward to Europe, and then developing detailed examinations of the markets in France, Spain, and Germany. Finally, we add a regional focus on Asia. Readers will find that PropTech is impacting certain Asian hubs in ways they might expect, such as the People’s Republic of China becoming a major leader in the building category in recent years. However, Japan and South Korea still loom large in the tech sector overall. Furthermore, smaller Asian countries and city-states, including Hong Kong and Singapore are becoming significant players, while developing economies like Malaysia and Indonesia are not far behind. In India, we have seen both the growth of the country into the world’s most populous market in recent years, coupled with ongoing crises of housing and resources, all while India has become a renowned global hub for the tech sector overall, as well as PropTech in particular. In Africa, South Africa and Nigeria are the most significant new hubs for PropTech, while Colombia, Brazil, and Chile have been attracting attention to Latin American markets. Finally, we have also seen surprising emergent companies establishing strong footing in Latin American states such as Peru and Colombia. In the end, as technology has become increasingly integrated into each element of our daily lives, it seems safe to say that PropTech is increasingly everywhere, all at once.
Who does PropTech impact?
Everyone. While it goes without saying that any serious investor in any industry should be keeping abreast of the developments in PropTech for the sake of maintaining an informed perspective on developing a diversified portfolio, it is also of note that those parties interested in PropTech are not limited to financial industry players alone. Ultimately, in our lives, we all live in property.
Whether you are a government, non-profit, or industry employee, someone searching for a short term stay somewhere, a renter, or a homeowner, and you have engaged in any form of property transaction lately, you have likely noticed the hybrid zombie of paper and e-documents that make up the contemporary real estate industry. Young professionals, families, university students, folks who are looking for a flat, or families looking for a home, including those looking for properties for their parents when they retire, your life is probably being transformed by PropTech as you read.
PropTech is so interwoven with our daily lives that we do not often think about it. Even for laborers in very different industries, the nature of PropTech will impact their lives, simply because the real estate market is so interwoven with the economy of every country on the face of the earth. If we look at the countries where the cost of real-estate to income is the highest on the face of the earth, we might find some markets we expect, like Hong Kong, South Korea, Argentina, and China, as well as some we do not, such as the UAE, Indonesia, and Peru. From Singapore to San Francisco, from Macau to Monaco, the innovation of PropTech impacts us all. Therefore, we have composed the 2024 PropTech Barometer to speak to the widest audience possible, from industry leaders, students, and government officials to the public.
