Valley Bank (NASDAQ: VLY) released its third annual The Present and Future of Proptech report that examines the key macro factors shaping Proptech on the economic, demographic and market fronts as part of the backdrop to private investment trends. The report was developed in collaboration with Pitchbook, Chris Green, Founder and CEO of GreenPoint Partners and Zak Schwarzman, General Partner, MetaProp.
The majority of 2023 industry-wide investment in Proptech - 70 percent - was in venture capital with 144 deals closed for a combined value of $2.9 billion. This was a sharp decline from 2022 as the pace of deal making in Proptech was impacted by the general slowdown in most other asset classes.
“This decline can be attributed to a number of economic and geopolitical factors,” said Tom Iadanza, President, Valley Bank. “Rising costs of capital, overall economic unease and fears of geopolitical tension along with changes in supply chains’ speed and cost propelling revisions upward for construction and renovation created a cautious environment. However, Proptech investment activity continues to showcase pockets of resilience and represents a critical avenue for the gradual evolution of the global property sector.”
“The market correction has sharpened investors’ focus on companies that deliver proven ROI and are built on stable foundations - of which there are plenty,” said Zak Schwarzman, General Partner, MetaProp. “While Proptech fundraising volumes remain muted, it is clear from the front lines that deal activity began to meaningfully pick up in the latter half of 2023 as a back-log of higher quality companies reapproached the venture market with urgency to transact.”
“While both the real asset and venture capital sectors have faced headwinds in recent years, we believe technology will continue to play an increasingly critical role in shaping the future and advancing the long-term sustainability of the real estate ecosystem,” said Chris Green, Founder and CEO, GreenPoint Partners. “As dedicated investors targeting opportunities at the intersection of real assets, technology and sustainability, we remain incredibly optimistic about innovation, investment and growth across AI adoption, the energy transition and decarbonization-focused technologies. We’re thrilled to participate in this report and to showcase our long-term conviction in real assets technology alongside an exceptional group of industry leaders.”
Read the full report.
Key highlights from the report:
- 2023 saw an uptick in the proportion of transactions around property management and transaction solutions, while aggregate deal values were also proportionally concentrated in those same Proptech segments. This focus suggests that firms were prioritizing cost-saving and revenue-boosting implementations to costly, lengthy digital processes via automation. Physical property management, deployment of energy-saving devices and analytics packages also were prioritized.
- Although primarily concentrated in VC, private investment remains key to accelerating Proptech innovation, while the activities of other investment firms or nontraditional asset managers also speak to the maturation of the sector.
- Corporate venture arms and corporations themselves pulled back only in terms of the number of deals in which they participated - not the size of the deals themselves. They joined in 22 financings for a combined $2.1 billion in deal value, the bulk of all VC invested in 2023. That total was the lowest since 2017, yet the aggregate deal value was the second-highest annual figure on record.
- The need to continually develop and implement tools such as AI in service of sustainability and efficiency still exists and will drive deal making - particularly on the VC side as firms balance caution with sufficient investment in Proptech’s gradual spread across multiple aspects of the property sector.
- Regulations compelling greener construction will prompt a consistent level of funding for more radical innovations in materials and techniques, especially via digitalization.
Methodology behind the research
Estimates of market sizes and private investment activity within the Proptech space differ widely due to a variety of factors, such technology and types of real estate markets. This report views Proptech through a much more rigorous lens, using the Pitchbook platform to construct five distinct segments: asset utilization; finance and investments; construction, maintenance and renovation; property management; and transaction solutions. You can find more information under the methodology page in the report.
About Valley Bank
As the principal subsidiary of Valley National Bancorp, Valley National Bank is a regional bank with $61 billion in assets. Valley is committed to giving people and businesses the power to succeed. Valley operates many convenient branch locations and commercial banking offices across New Jersey, New York, Florida, Alabama, California, and Illinois, and is committed to providing the most convenient service, the latest innovations and an experienced and knowledgeable team dedicated to meeting customer needs. Helping communities grow and prosper is the heart of Valley’s corporate citizenship philosophy. To learn more about Valley, go to www.valley.com or call our Customer Care Center at 800-522-4100.
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