In 2018, the total funding in Proptech start-ups1 is estimated to have reached $18Bn globally (vs $3Bn in 2014) according to Deloitte2, and in the first half of 2019, $12.9Bn investments in Proptechs were recorded according to the Wall Street journal3: the Proptech market is very promising in terms of growth and investment. And it has been gaining diversity in the actors involved for the past few years: today, more and more real estate corporates are collaborating with Proptech actors as they see many opportunities emerge. Where does Unibail-Rodamco-Westfield stand with respect to Proptech? What projects have been led so far? What can we expect in the coming years?
Proptech: a growing market in shaping phase
Proptech, that stands for “Property Technology”, encompasses all the applications of digital technology to the real estate market. Since 2001, it has gradually become a significant market, mainly in the U.S. and China throughout three consecutive waves of innovation identified by the World Economic Forum:
- 2001-2008: Proptech 1.0 with market disintermediation and the emergence of online platforms aggregating real estate offers,
- 2008-2014: Proptech 2.0 with the vertical integration of processes and the use of big data and IoT for an improved user experience in real estate operations,
- 2014-today: Proptech 3.0 with the application of emerging technologies, digitization and automation of workflows to reduce costs and to assist decisions through AI for example.
According to a Deloitte report, global fundraising in Proptech grew from $3Bn in 2014 up to $18Bn in 2018 (the U.S. concentrates 52% of total funding, mainly early-stage funding). While investments have increased, the number of Proptechs launched has been declining since 2014, going from 255 in 2014 down to 21 in 2017, which signals the increasing maturity of the second wave of Proptech (2008-2014) and the anticipation of the advent of the third wave.
More actors involved on the Proptech market
This growth has created many business opportunities for all activities concerned with Proptech – construction, transactions and sales, property management, or services (such as communication, coworking, mobility…). And it has also benefitted other fields that intersect with Proptechs, from fintech, to the collaborative economy, smart cities or Contech (construction management). There are currently 21 Proptech unicorns (start-ups valued more than $1Bn). Most of them are B2C online real estate brokering platforms, such as American Homes 4 Rent, Campass or Homelink Lianjia, and newcomer B2B software companies, such as C3 IoT, VTS (leasing management) or Procore.
In parallel, many specialized VC funds have emerged, alongside corporate venture capital funds, such as JLL Spark or RXR Realty’s own fund. Other structures – incubators and accelerators – have boomed, some being independent (The Factory), while others are attached to VC funds (Pi Labs, Fifth Wall, MetaProp), corporates (Colliers accelerator, JLL Spark, Stockland), or associations (REACH by the U.S. National Association of Realtors).
Despite disparities in its maturity (the U.S. being a more mature market), the Proptech market has been gaining diversity in the past few years, with B2B companies emerging. It has led some real estate corporates to collaborate more and more with Proptech actors (participation to associations and events, investment in dedicated VC funds, creation of corporate funds, business partnerships with Proptech start-ups).
Seizing opportunities for Unibail-Rodamco-Westfield’s assets
The specific sector of commercial real estate has also been directly impacted by these new technologies: a total of $10Bn is estimated to have been invested in commercial real estate in 2018 according to CREtech4. The advent of Proptech has prompted many business opportunities for Unibail-Rodamco-Westfield as the Group manages all steps of the life of its assets, from initial development to advanced services. For instance, since the creation of URW Link, the Group’s open innovation platform, Unibail-Rodamco-Westfield has identified business partners, such as start-ups and VC funds.
Many actions have already been undertaken with pure Proptech startups, and the Group continues to explore opportunities in all these fields:
- in construction tech: Combo Solutions (data aggregation tool that measures carbon footprint of a project and identifies the ones with the lowest footprint), Hoffmann Green Cement Technologies (cement produced with 5 times less carbon than regular cement, used for Ateliers Gaîté’s stairways construction), Twinmotion (Business Information Modeling tool for 3D visualisation),
- in property management: Deepki (uses data to monitor and save energy, was deployed in all French assets in 2019, POCs of an AI system is ongoing in 2 centres), Green Cityzen (IoT solution continuously measuring environmental data – CO2 ratio),
- in tenant engagement: Mallcomm (Connect by Mallcomm is the app engaging and connecting tenants in each centre, rolled out in 74 centres).
Further collaboration with start-ups operating in the field of Proptech helps the Group pave the way towards setting new industry standards, leveraging technological improvements to better design, build and manage buildings, contributing to the “Strengthen Agility” pillar of the Group’s innovation strategy.
Julie Villet
1 Estimations vary depending on the perimeter considered. For instance, Venture Scanner says Proptech fundraising reached $20Bn globally in 2018.
2 Deloitte report, 2019 : https://www2.deloitte.com/content/dam/Deloitte/us/Documents/financial-services/us-fsi-dcfs-2019-commercial-real-estate-outlook.pdf
3 Article in The Real Deal : https://therealdeal.com/national/2019/07/02/halfway-through-2019-proptech-investment-has-already-hit-a-record-high/
4 Assumptions for total investment in Proptech at large being on high side for CREtech.