Report: Proptech Recovers From COVID-19 Recession

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The COVID-19 pandemic has negatively impacted almost every aspect of the real estate industry, including property technology (proptech). In 2020, global venture capital in proptech commercial real estate fell nearly 80% compared to 2019, while venture capital in proptech residential fell less than 10% over that period. in accordance with PitchBook data. However, as the pandemic dies down, it looks like both real estate segments are seeing renewed interest from venture capitalists.

As we approach mid-202, VC deals with CRE reached $ 2.6 billion in funding, making this segment the second most important venture capital segment this year, according to financial data and software company PitchBook. Meanwhile, Proptech’s residential real estate project has already hit an annual record of $ 6.2 billion. In previous years, the most talked about proptech companies have served the CRE markets, but more and more venture capital is channeled towards startups targeting the hotter residential sector.

“There are so many interesting trends happening in the living space that it’s hard to ignore them,” said Frank Rothmann, co-founder and partner of QED Investors.

This shift is a result of the current housing shortage in the US and the large number of millennials reaching their peak home buying age. In addition, the traditional way of buying and selling homes has become less popular, which has opened up new opportunities for real estate startups.

“To build really big business, you only need to cover single-digit percentages of these markets,” Lisa Wu, partner at Northwest Venture Partners, told PitchBook. Wu’s firm recently spearheaded the $ 136 million Series B for Homeward and co-led the $ 150 million Series C for Flyhomes, which both offer platforms to help buyers purchase full-cash home offerings.

The future of proptech and CRE after COVID

According to PitchBook, it is easier for investors to predict the future of residential real estate given that housing demand will outpace supply for many years. Meanwhile, the post-COVID CRE situation remains a mystery. Rothman said the opportunity for CRE proptech investors is “naming the right future” for these sub-segments.

“You have to be very familiar with these markets,” he said. “Office buildings in Manhattan are very different from shopping centers in the suburbs.”

Despite the unresolved question marks around CRE, some market trends are starting to rise. For example, the growing trend of online shopping has led to a surge in logistics and warehouse technology.

“We have a thesis that retail and logistics are essentially merging as an asset class,” said Zach Aarons, co-founder and general partner of MetaProp, a venture capital firm specializing in early-stage real estate startups that just closed a third fund at $ 100 million. said PitchBook.

For example, Flexe, which offers large retailers a marketplace to buy warehouse space on demand, raised $ 80 million in Series C last winter. Other investors expect a need for flexible office space in the post-pandemic world. Coworking space provider WeWork, whose first IPO attempt failed in 2019, agreed to go public earlier this year through a $ 9 billion merger with SPAC, including debt.

Residential real estate is currently ahead of CRE, but Aarons is confident the latter will have more room for technical glitches in the future. “Commercial transactions are much more complex, but over time they will also be digitalized,” he said.

Joe Dayton can be reached at joed@fifthgenmedia.com.

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