NEW YORK CITY – The commercial real estate property technology sector witnessed big gains in 2019, having a watershed year with the most invested capital on record. And 2020 is expected to keep up that momentum as investors focus on valuations and revenue as oppose to scalability and growth, Ashkán Zandieh, chief intelligence officer at CREtech, a global real estate tech-focused media, event and advisory platform, tells GlobeSt.com. "2019 was a breakthrough year for the proptech industry," he said.
Capital invested in proptech companies for the year totaled $24.9 billion, a 157% increase from 2018, according to CREtech data. And of the venture capital investments made, an estimated 57% were made during the first half of 2019.
Although capital is flowing into the proptech sector, the sense is technology investors and venture capitalists will deploy pragmatic strategies in 2020, according to Zandieh.
After the WeWork debacle this year, when the co-working company's valuation shrunk dramatically after filing for an initial public offering that magnified its lack of profitability and shaky corporate governance structure, the proptech industry has become cautious about high valuations with mismatch profits.
"Based on conversations with technology investors, I anticipate a stride to more conservative, a back to fundamentals, venture to valuation ratios across the board, especially in both mature markets and verticals," Zandieh said.
Despite tiptoeing investors in the sector, proptech has not lost its luster. According to a recent GlobeSt.com article, for 2020, PwC partner Tim Bodner predicted in a timely report there will be more investment by traditional real estate sectors in tech-enabling platforms, especially with the plethora of opportunities to innovate traditional real estate for greater returns on investment.
"The shift in trends and preferences in many sub-sectors opens the way for differentiation backed by many types of investors seeking higher yields," the report said. "We expect to see the introduction of unique offerings in real estate that capitalize on emerging social, demographic, and economic trends."
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Mariah Brown
Mariah Brown is the New York Bureau Chief and Real Estate Reporter for GlobeSt.com, covering the New York Metro area, Northeast region and national real estate trends. She is responsible for producing multi-media content, including articles, podcasts and video. Before joining the GlobeSt team, she served as a New York Times fellow, reported for the Associated Press in New York and Philadelphia and several other New York City-based outlets.
