The PropTech cosmos of today has been saved
The PropTech cosmos of today
For many years we at Deloitte have been dealing with exciting questions concerning the PropTechs: Who are they? What is behind it? What value can they add/offer to the real estate industry?
After the first hype and the great mutual interest on both sides, we are currently observing a return of calmness on the part of the real estate companies. Activities such as market consolidation and specific projects for cooperation with PropTechs are visible, however at a moderate level.
PropTechs in the global focus
In 2018, approximately USD 15 billion were invested in PropTech companies worldwide. In regional terms, the USA were
by far the market with the highest amount of transactions (USD 6 billion), followed by China (USD 3.3 billion).
Significantly lower volumes were realized in the UK (USD 0.5 billion) and in the German-speaking area (Germany, Austria
and Switzerland with USD 0.2 billion).1
The reason for the large gap between the regions, apart from a different transaction intensity, is likely to be the
significantly different ticket sizes. For example, the largest VC deal in the USA realized USD 0.865 billion on its own for
a Construction PropTech. The second remarkable deal of USD 0.4 billion was achieved by a US platform solution for
purchase and sales of single-family homes. In the same year, this start-up already received funding of USD 0.325 billion. 2
In comparison: The largest funding campaign in the German-speaking area generated EUR 43 million for an IoT company from Munich in the heating control sector. Investors included Amazon, E.ON and the European Investment Bank. 3
Considering the regional distribution of PropTech companies, the dominance of the US market is underlined. Next to
the Western European region, especially the Asian region (China and India) experienced a strong growth in recent
years. 4 However, this trend is not just limited to the Asian entrepreneurial sector but also to the PropTech deals. Around 40% of the Top 10 PropTech deals were financed by Asian investors.
For global acting real estate investors, investing in PropTechs is a relevant aspect of the investment strategy. Our Global
Real Estate Outlook 2019 survey showed that more than 50% of the participating investors follow an investment
strategy which includes a funding or a cooperation with PropTech companies. 5 Overall, approximately 65% of the
respondents expect PropTech to have a significant impact on the real estate sector. 6
In 2018, there was a strong global focus among investors on start-ups in the construction industry. Innovative
technologies are expected to improve efficiency and to reduce costs in the real estate sector. The global focus is on
Smart Building technologies, pre-manufacturing and BIM (Building Information Modelling).
Click on the picture to enlarge
Are global developments reflected in the German-speaking area? We regularly analyze the PropTech cosmos in the DACH-region. 7 The current analysis shows a high volatility of the sector. Within one year, around 50 companies left the market. In particular these companies were bought or are no longer active in its market segment. At the same time, 70 new market entries were registered. In total it seems to be just a slight growth of PropTechs.
Of the 300 PropTechs currently analyzed, approximately 30% were assigned to the cluster of Rent & Sale 8, approximately 25% focus on Building technologies such as 3D/VR/AR and Smart Building and approximately 20% pursue digitalization in the property management. The rest were related to the cluster Investment (financing and valuation) and Construction management (ConTechs).
This year, the largest growth in the German-speaking area was recorded by start-ups with a focus on the construction
sector. Compared to last year, the share more than doubled. This reflects the market-driven maturing process that
appears in the global investment activity.
The amount of PropTechs decreased in the clusters Rent & Sale and 3D/VR/AR. On the one hand, the
acquisitions/takeovers by established market partners are responsible. On the other hand, the high competition and
the lack of convincing use cases in the real estate industry cause that development.
Just like in the past, Deloitte has observed some interesting PropTech trends/approaches with regards to housing
companies. To this, the product-USP, the degree of maturity, the safety, the business model, the financing, the pilot
projects as well as existing partnerships were considered. The individual evaluations were weighted for each
PropTech, summarized and visualized in the evaluation matrix. The product perspective is mirrored in the company
perspective. The score range between 100 and 500. The higher the score, the more positive is the assessment.
Click on the picture to enlarge
The greatest potential for real estate companies (High Potentials) is predicted especially for PropTech companies from
the Smart Building and IoT sectors, as well as the property management. This trend is stable compared to last year.
An important topic in the area of Smart Building and IoT is currently the development towards a connected building
infrastructure. Supported by integrated applications and IoT-enabled end devices, owners and/or tenants can
centrally control important building functions such as lightning, ventilation or temperature and track key figures in
real time. Housing companies will probably only be trail maker/pioneers for these applications. The potential is likely
to be even higher in the commercial sector due to the higher penetration.
The digital management platforms become more and more established in the real estate management. These enable
the tenant to communicate with the administration, to digitally demand and manage standardized processes (f.e.
additional expense settlement) via App/Web Access. Additionally, the platforms serve as a kind of digital notice board
as communication tool. The importance of platforms, not only for housing companies, is repeatedly confirmed by
surveys of the real estate industry. The large range of potential fields of applications and features is already obvious
today. However, only a fraction of tomorrow’s daily life is currently available or in preparation
Business as usual – Welcome to reality
In the course of our PropTech monitoring, we have observed several PropTech-pitches and events in recent years.
Currently the amount of events is decreasing significantly. Instead of events, business is taking its place, halfway
between everyday life and hype. Established companies and start-ups find, meet and know each other.
The cooperation between PropTechs or start-ups and companies is entering a new stage of development with new
challenges. Regarding the enormous number of PropTechs and start-ups from related areas as well as the extreme
volatility, it is challenging and complex to identify the right startup from a local position for a perfect match with a
reliable use case and a trustworthy cooperation. We at Deloitte combine our worldwide expertise in startup-scouting
with an innovative matching approach. We think from the desired result. Our global database with more than 1.3
million startups and our experience in how to manage a selection process efficiently with the best possible impact
enable us to test use-cases quickly.
The advantages speak for themselves: A flexible and technically well-based orientation of the startup scouting to the
specific use case without limitation by regional borders or silo-thinking and with a clear gain in speed and precision.
We offer our customers this service together with Startup[at]Scale.
1 Yostartups.com; accessed 17.09.19
2 PitchBook; GCA; ID972370
3 Gewerbe-quadrat.de, accessed 17.09.19
4 Venturescanner.com, accessed 17.09.19
5 Deloitte, 2019 Commercial Real Estate Outlook
6 Deloitte, 2019 Commercial Real Estate Outlook
7 Deloitte, u.a. PropTech für die Wohnungswirtschaft 2017
8 Including temporary rental and sales support in purchase via agent/tenant/landlord platforms