PropTech

Real estate disruptors reach ‘critical mass’ as investment soars

Published

PropTech 2020: the future of real estate? launched at Oxford Real Estate Conference

  • Oxford Saïd Business School report explores potential of property technology (PropTech)
  • UK leads in European PropTech funding with over $5bn invested
  • VC funding in real estate tech startups soared to $14bn in first half of 2019
  • 53% of 400 major real estate companies surveyed are directly investing in at least one type of PropTech company
  • PropTech industry is maturing with a fall in new startups as investment increases
  • tech giants Amazon, Apple and Facebook will enter sector
  • Report concludes that the most important (and investment worthy) property technologies are those which produce digital data and generate value from it.

 

The UK is leading the way in PropTech investment in Europe, a report from Oxford Saïd Business School has uncovered. 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 PropTech 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, who have raised a $500m PropTech fund. ‘Everyone, it seems, is looking for the next unicorn,’ stated co-author Professor Andrew Baum.

 

Everyone, it seems, is looking for the next unicorn.

Andrew Baum

Professor of Practice

Andrew Baum

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 2nd 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 complimentary 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.

 

Professor Andrew 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.’