Why 'proptech' is the best ally of real estate investment

PUBLISHED ON

Octubre 30, 2024

CATEGORY

Real Estate

Accustomed to associating real estate with the word brick, it is easy to overlook the technological revolution that the sector is undergoing. The proptech industry, the catalog of innovations linked to an activity that dates back to the Neolithic era, includes such surprising things as Martian concrete, as the real estate consulting firm JLL reminds us.

But what exactly is proptech? The best approach to real estate technology is offered by Jaime Luque, associate professor and director of the Monaco Real Estate Tech Innovation Chair at ESCP Business School: it encompasses “ software, tools, platforms, apps, websites and other digital solutions” used in the real estate sector, whether by appraisers, real estate agents, architects or builders.

Worldwide, the number of tech startups operating in real estate is estimated to have skyrocketed by at least 300% since 2010. A JLL report published last August paints a very promising picture, which in any case has already broken investment records: no less than $9.7 billion in the first half of 2021, according to the British-based consultancy.

Most of these startups are young; 75% have been formed in the last ten years, again according to JLL. They are estimated to number around 8,000 companies worldwide, which would have captured around $97 billion in equity investment in the decade leading up to the first half of 2021. The growth of this market led to the creation in 2016 of Fifth Wall, the first venture capital fund specializing in real estate and technology. In 2021 alone, Fifth Wall raised more than $1.1 billion.

Spain, a 'proptech' powerhouse

Spain's role in this technological ecosystem may also come as a surprise. Our country is, in fact, the second largest investor in the world in the proptech sector, behind only the United States. It was no less than 856 million euros that, according to ESCP Business School, were allocated to real estate technologies in Spain between June 2020 and June 2021.

Companies such as Tiko, Casavo or Clikalia -which recently raised 460 million Euros- give an idea of the proptech boom in Spain. At the intersection with fintech, the technofinance sector, it is necessary to mention the rise of real estate investment platforms based on participatory financing. In this sense, Urbanitae has established itself as a leader in the sector, hand in hand with developers such as Caledonian, Gestilar or Carpio Capital. In 2021, Urbanitae financed more than €32 million and so far in 2022 it totals close to €14 million.

But what trends will mark the evolution of proptech in 2022? In essence, this year will see a further step in the application of established technologies - such as artificial intelligence (AI) or the internet of things - to the real estate sector. According to corporate information platform Crunchbase, this year will see greater prominence for embedded finance, i.e., the provision of financial services, such as online payments, by non-financial companies; project management software in construction; and digital home improvement and renovation solutions. The rental interest of Generation Z - the generation that follows the millennials- will also drive digital property management, particularly of leased real estate.

The real estate sector has already implemented the use of apps that allow property occupants -whether tenants or owners- to “digitally interact with physical spaces”. Big data will also play a major role, aimed at analyzing both user behavior in sectors such as retail and monitoring the use of space in office buildings.

Efficient buildings are another up-and-coming trend. The approach is twofold: the implementation of techniques such as the internet of things, machine learning or 5G will make it possible, on the one hand, to optimize the sustainability of buildings - for example, heating and ventilation systems - and, on the other, increased connectivity will make it more efficient to monitor all the systems in a building in real time.