The 2023 Trends That Dominated Proptech
And some that fizzled — metaverse, anyone?
You’ve had your turkey, stuffing, pie, and perhaps more than your share of adult beverages, along with inflated amounts of holiday weekend football. What’s missing from this contented picture?
Why, an easily digestible look back at some of the many issues that drove proptech in 2023, of course!
Here then are five areas, with a smattering of examples, that significantly impacted proptech development this year, and which may set the stage for even greater innovation in 2024.
Residential rentals rule
In a year in which proptech funding and innovation slowly began to accelerate after several years of COVID- and macroeconomic-driven gear grinding, the residential rental sector garnered heavy attention from entrepreneurs and investors.
Seeing opportunity in the ongoing U.S. housing affordability crisis, proptech has increased its focus on building profitable solutions for a massive market challenge.
In one of the biggest proptech bets of the year, Funnel Leasing, a software platform for property managers, announced in October that it had raised $32 million in what it called a Series B2 round. The company’s software offers customer relationship management, a virtual leasing agent, online leasing, onboarding, and a portal for communicating with residents. RET Ventures, which focuses on multifamily proptech investment, led the round, with Trinity Partners and a group of multifamily owner-operator co-investors participating.
On the single-family rental tenant side, Seattle-based Showdigs, an automated listing and leasing service for single-family rental owners, is a startup that addresses fake rentals, a growing problem for renters in an already tough market. Since 2019, the company has raised $10.4 million in seed-round money.
Other proptech platforms focused on single-family rental listings and leasing include BeHome247, ManageCasa and RentSpree, as well as incumbent industry organizations such as the National Association of Realtors, all of which continued this year to attempt to prevent scams.
Return to office
Although the post-COVID return-to-office push has been a slow one, including in the central business districts of major cities like New York City and San Francisco, a number of proptech companies are bullish on the future of hybrid work — where workers are in the office only part of the time — and the innovations necessary to build out and maintain that. At the same time, they are looking to provide landlords with the technology to attract tenants, while managing their properties more efficiently.
Cove, a Washington D.C.-based company that consolidates tenant experience, operations and key performance data for office and multifamily, also attracted interest from incumbent real estate entities such as strategic partner Cushman & Wakefield and client Willis Tower (formerly Sears Tower), the Chicago landmark and largest commercial office building in North America.
Overall, efforts to bring workers back to the office are moving apace as the workplace evolves into a more flexible concept.
Proptech and contech continue to connect
As the construction industry struggles to meet the huge demand for affordable housing, proptech entrepreneurs and investors continued this year to focus on bringing what was once the most technologically backward real estate sector into the 21st century.
The good news is that as construction demand for technology to improve efficiency and profits increases, contech is providing the innovation needed for the sector.
Proptech companies are attempting to address the high cost of housing — arguably the main cause of inflation in the U.S. — as buyers and renters seek affordable homes. Moreover, the scarcity of housing, particularly affordable housing of any kind, remains a huge economic obstacle, as supply is failing to meet demand and tenants cannot afford much of what is available.
One of the proptech startups that gained notable funding in 2023 was skillit, a data-driven recruiting platform for skilled full-time construction labor. The startup announced in July that it secured $8.5 million in additional seed-round funding. That funding was on top of the Manhattan-based Skillit’s $5.1 seed round in January, as the firm’s total funding rose to $13.6 million.
ESG is now the corporate ABC
This year saw the federal government, corporations and investors continue to rev up the energy behind the environmental, social and governance (ESG) movement. And proptech has been a major factor in aiding that propulsive growth.
These are just a few examples of the trend of proptech’s involvement in ESG:
In June, Reston, Va.-based GridPoint, an energy management platform for commercial buildings, received a credit facility of up to $150 million from climate investor HASI. GridPoint, which focuses on helping property owners increase energy efficiency and lower their carbon footprints, planned to use the financing to expand its reach into commercial businesses operating small to midsize buildings.
In another example of how efforts to slow global warming continue to be a major consideration for commercial real estate, in May Measurabl, a global data management platform for property, announced it closed a $93 million Series D raise to expand in the U.S. and internationally.
The funding will be used to continue expansion of Measurabl’s ESG technology solutions for real estate, as well as for more global partnerships.
It ain’t happening . . . yet . . .
The year has been full of too much talk and too little walk about a number of what could be characterized as “next-gen” proptech technologies. Although some of the following could have a discernable impact on proptech and real estate in the future, for now they are, with perhaps some exceptions, more fantasy than reality.
Arguably the strongest contender among these, currently and in the near future, is artificial intelligence (AI). As the world had an almost Taylor Swift-like hysteria about AI in 2023, the promise and threat posed by the technology remains for now more smoke than fire.
Likewise, the hype about the metaverse’s impact on real estate has been viral in its intensity. While 2022 proclaimed a highly anticipated virtual land rush into the metaverse, late 2023 has yet to see that charge materialize.
While real estate in the metaverse has not produced a brave new world of speculation and riches akin to the mercurial markets of cryptocurrencies and NFTs, it has begun to demonstrate actual utility for real property by combining hardware and software such as augmented reality (AR), virtual reality (VR), and digital twinning to produce powerful marketing and development functions.
Following the implosion of proptech and real estate banking stalwarts Silicon Valley Bank, Signature Bank and First Republic Bank, the question of where and when a full array of entrepreneurial funding will reappear remains unclear. So far, there has been no indication that other banks are stepping into the funding breach.
And, although a number of proptech venture capital firms gradually began to increase funding to startups, as well as to proven proptech firms, by mid-2023 their investment strategies hinged as much on factors outside the sector as within it. Proptech entrepreneurs know too well that VCs often sound bullish until the macroeconomic winds begin to blow cold and those same VCs then become the first to pull in their horns.
Let’s see if the proptech winds blow warmer in 2024 as winter 2023 commences.
Philip Russo can be reached at email@example.com.