PropTech (or property tech) is undoubtedly one of the current buzzwords of the real estate sector. All the new technologies for managing Real Estate construction, purchase, maintenance, investment and administration come under this term, and the PropTech market reached almost US$21 billion in 2021 (according to data from Crunchbase). The industry is expected to continue growing in 2022.

To understand the reality of the PropTech explosion, one must consider the breadth (and therefore complexity) of solutions encompassed within the industry. From (for example) tools that facilitate communication between all parties involved in an investment, to the application of artificial intelligence and data analytics to identify trends. In addition, if we look at the complexity of the Real Estate sector, the technological solutions found for the construction phase (which are further classified as ConTech) are not the same as those applied in the residential, commercial or hotel fields.

According to the PropTech Global Trends 2020 report, under the umbrella of PropTech we find twelve categories: commercial real estate search, vacation and short-term rental, long-term rental / purchase / sale search, home services, insurers, investment portfolio management, property management, IoT at home, property and service management, construction management, tools for real estate agents, and indoor mapping.

According to data from Ascendix, the United States holds the largest number of PropTech companies, with 59.7% of the world total, followed by Europe (27.2%) and Asia (3.5%). In Europe, a breakdown by type shows that B2B leads with 60.14%; in terms of industry, residential is the leader with 55.14%.

The recent development of this sector (according to data from the PropTech Global Trends report, the industry topped almost US$85 billion between 2010 and 2020), is motivated by various causes. Of course, macroeconomic issues are uppermost, but the increasing presence of innovative and easy to implement technologies, cultural changes that raise the capacity of use and appetite of consumers, increasing acceptance by managers, and, of course, the changes generated by the Coronavirus pandemic, have all accelerated the rising PropTech trend.

A growing and consistent investor appetite

All this is reflected in global investment markets.

In Europe, according to Property Week and also citing data from Pitchbook, the European PropTech market registered a record year in 2021, reaching approximately 20% of global investment, including over 200 venture capital investments totalling €3.8 billion (representing a growth of 350% compared to 2020).

In the UK, according to research from VC firm, Pi Labs, PropTech investment reached £1.6 billion (US$1.9billion) in 2021 – more than four times the 2020 total and more than 15 times higher than the total sector investment in 2016 (which was £105 million). The same report notes there were 152 global PropTech investments in 2021, with the total investment worth US$18.2 billion.

Across the pond, Houlihan Lokey’s Q1 2022 PropTech Market Update notes the U.S. market saw US$4.8 billion in investment across 134 investments. In the first three months of 2022, there were 27 financing rounds of over US$50 million, and 12 rounds of over US$100 million.

According to information from Startupeable, the number of VC investments in Latin American PropTech startups grew by 54% between 2018 and 2020 (collating data from Pitchbook), reaching 43 operations in 2020 with a value of US$571 million. This made PropTech the fourth largest industry of 2020 (by rounds raised), and the market hasn’t stopped since. Brazilian website, Startups, reported that SlingHub’s May 2022 market report noted that companies providing technology for the real estate market raised $367 million across nine rounds in the month – producing 3 LATAM PropTech unicorns: Habi (from Colombia), Dock (from Brazil -) and Nowports (from Mexico).

So, what are some of the most prominent uses of PropTech and where will it have the greatest impact? Let’s take a look.

Smart and green contracts

The application of PropTech allows generation of transparent, measurable, and fair relationships between the different actors involved, for example through the application of technologies such as blockchain for the implementation of smart contracts. In addition, the growing need to include ESG criteria in property management can also benefit from PropTech through the implementation of green contracts. And, as green clauses in rental contracts become even more prevalent, technology can support both the measurement of and compliance with these clauses – guaranteeing transparency of information and monitoring the efficiency of the property, and even ensuring clauses are fulfilled when the time comes, among other uses.

Real Estate Analytics

The application of big data and the analysis of the information obtained is, without a doubt, one of the great opportunities of the PropTech sector. In 2018, McKinsey advanced the possibilities of this type of solution, and it has not stopped growing since. Taking advantage of all the opportunities offered by data management allows you to have more and better information (in aspects such as property valuation, maintenance, etc.), maximize the return on investment, detect opportunities and areas for improvement, reduce the risk associated with the property (which also implies savings – insurance, for example), or improve the financial aspect, which brings us to the next section.

Automating property management

The administrative management of properties is, possibly, one of the activities with the greatest impact on the day to day of real estate investment management teams.  The property managers in charge of this work usually have a lot of information, which often means they spend too much time processing the information and not enough to their work of managing the properties, which is where they can give greatest added value.  The application of PropTech, especially those that allow automating these types of functions represents an opportunity for funds and investors.

Cross-border opportunities

Until now, the real estate sector has needed local knowledge to understand the market and investment mechanisms in a particular country. In addition to multiplying the opportunities, PropTech companies are also increasing the geographical reach. The application of tools that facilitate communication make it possible to solve the difficulties associated with having to manage large and, particularly, offshored teams. Technologies such as virtual and augmented reality allow you not to have to depend on being physically in the same place as the property.  Or, to give another example, the application of big data allows understanding of trends and commercial opportunities in international markets.

In short: there is no doubt that PropTech is revolutionizing the Real Estate sector – particularly, for investing and managing portfolios.

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Raimundo Diaz
Sr Vice-President Global Head Intl Corporations

Adolfo Poveda
Sr. Manager Real Estate

Local Knowledge – International Coverage

Founded in 1979, Auxadi is a family-owned business working for multinational corporations, private equity funds and real estate funds. It’s the leading firm in international accounting, tax compliance and payroll services management connecting Europe and the Americas with the rest of the world, offering services in 50 countries. Its client list includes many of the top 100 PERE companies. Headquartered in Madrid, with offices in US and further 22 international subsidiaries, Auxadi serves 1,500+ SPVs across 50 jurisdictions.

All information contained in this publication is up to date on 2022. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice.No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.