- As commercial real estate firms stepped up their adoption of proptech in 2021 and 2022, investment in the sector flourished. However, that momentum cooled last year due to inflation and geopolitical uncertainty, according to a new report from the Center for Real Estate Technology and Innovation.
- Overall, venture capital investment in proptech fell 42% in 2023 to $11.38 billion. In 2022, it totaled $19.75 billion after hitting an all-time high of $32 billion in 2021.
- The dynamics in multifamily were slightly different because the technology isn’t consumer-facing, according to Aaron Ru, a principal at Park City, Utah-based real estate technology venture capital firm RET Ventures. “I think what's been interesting this year is that we're still continuing to see pretty robust activity for technologies that are targeting the multifamily space,” he said.
Overall, proptech investment picked up throughout the year, according to CRETI. In the first quarter, it totaled $1.69 billion, which was slower than Q1s in previous years. But it picked up to $3.23 billion in Q2 and peaked at $4.58 billion in Q4. The fourth quarter also saw a spike in median investment at roughly $4 million, almost doubling the previous high in Q3.
CRETI characterizes 2023’s decrease in funding as a return to normalization following intense investment and a digital acceleration during the height of the COVID-19 pandemic. As real estate asset values fluctuated, there was “a more judicious” allocation of funds within proptech, according to the report.
Ru said the large investment numbers in previous years were also driven by consumer-facing technologies for organizations like Zillow. “I think a lot of the numbers in prior years had been inflated in proptech with some large [funding] rounds,” he said.
In 2023, investors focused on companies that demonstrate clear value propositions, can be profitable in the short to medium term and have sustainable business models, according to CRETI. They prized technology that could optimize operational efficiencies, reduce costs and enhance user experience.
Operational savings are also crucial for multifamily and single-family technologies. “We’re taking a closer look at the immediate ROI to deploy that technology for owners and operators,” Ru said.
Technologies that solve problems, like reducing fraud, in addition to saving users money, are still popular. “A lot of our limited partners have worked toward technologies that help with screening that bring in alternative data outside of just credit scores,” Ru said. “So that's been a really hot sector because you can easily deploy it, and it leads to pretty immediate ROI.”
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