Robert Khodadadian – Commercial Observer

As 2022 comes to a close, PropTech Insider is taking a look back at what factors impacted proptech the most during the year. Along with the usual churn of the sector and the real estate industry it seeks to engage with, here is what we think were the major takeaways from 2022.

Emerging from COVID-19

Nearly three years into the onset of COVID-19, the pandemic’s impact on just about everything cannot be overstated. Even as the world and proptech returns to something like normality, the after affects of COVID-19 are still being felt.

Perhaps the chief impact of the pandemic was the flight from offices to working from home (WFH). The return to the traditional workplace continues to drag, with both multi-industry New York City and tech-centric San Francisco’s central business districts arguably suffering the most.

Office property owners and occupiers continue to struggle with strategies to lure workers back to the office, as many employees and executives have found WFH to be a still-unrivaled solution. Whether workers will ever again occupy office buildings as they once did remains an open question.

On a practical, everyday basis, the slow return to offices has shifted the emphasis in proptech workplace innovation from access control to ESG (environmental, social and corporate governance). The shift is reflected not only in landlord strategies, but in occupier, developer and investment capital focus.

More than ever, 2022 saw investors and employees demand more and demonstrable ESG improvement in the workplace, refusing to accept phony corporate “greenwashing” attempts.

The seriousness of ESG-driven proptech strategies was felt in the venture capital fundraising world when Fifth Wall announced it had closed a $500 million fund to invest in clean energy tech in July.

Macroeconomic drivers: Inflation, interest and mortgage rate spikes

The trifecta of bad macroeconomic news hit everyone hard in 2022 and proptech was obviously no exception.

Venture capital investment in proptech dropped 38 percent year-over-year in 2022, dipping to $19.8 billion from 2021’s $32 billion.

Although reluctant to give out numbers, proptech companies saw the macro and investment bad news result in employee layoffs, though often not to the extent of general tech firms like Meta and Amazon that over-hired before and during the pandemic. As late as September 2022, some proptech companies even insisted they were still looking to hire talent.

The result of such negative macro and VC news was a clear drop in proptech startup valuations. That made the prospects of down rounds and outright shutdowns of companies a clear danger.

Adding to the year’s proptech gloom was the virtual vaporization of the “blank check” SPAC (special purpose acquisition company) market. Startups like Latch and OpenDoor and SmartRent, which had taken the SPAC path to going public, found themselves in variously tenuous positions.

Big deals

Not all the news was bad, with the proptech sector seeing a number of positive financial boosts in 2022.

The big deal continued as a number of proptech startups saw major funding rounds close successfully. Among some of the biggest were OpenSpace’s 2022 total of $111 million, HappyCo’s $52 million growth round, and CrowdStreet’s $43 million raise.

Some other notable raises were Keyway’s $25 million Series A funding, VendorPM’s $20 million Series A, SwiftConnect raising a $17 million Series A, and WiredScore closing a $15 million Series B round.

Proptech venture capital had a lot to crow about too, as Fifth Wall and Camber Creek closed huge investment funds in 2022. Fifth Wall topped its $500 million ESG fund closing with the announcement in December of its $866 million Fund III, the biggest proptech VC fund ever. Camber Creek’s $325 million IV Fund in February was the other gigantic closing of the year.

There was also some big M&A news this year, as JLL announced in January that it had acquired Hank, a virtual engineering AI platform that manages HVAC systems, for an undisclosed sum. The deal came hard on the heels of JLL purchasing building operations platform Building Engines for $300 million in November 2021.

CBRE was also highly active in proptech investment in 2022, placing a $100 million bet on VTS in September.

As usual, Altus Group and MRI Software were active acquirers of proptech companies in 2022, as the former bought Rethink Solutions, and the latter purchased Angus Systems.

On the talent acquisition front, proptech continued to attract highly experienced executive and technology professionals from traditional real estate companies. One example this year was digital twinning proptech company Willow bringing on Microsoft Azure IoT partner Bert Van Hoof.

Although he joined JLL Spark Global Ventures in May 2021, managing partner Raj Singh, who previously had been an executive at IBM and at Booz Allen Hamilton, continued to make major investment news into this year. JLL Spark invested a total of $340 million into 40-plus startups, including Aunt Flow, Ecoworks, Safehub, SwiftConnect, Re-leased, Veev, and VergeSense.

Continued globalization of proptech

Despite COVID-19, the economic downturn, wars and other catastrophes of the year, global proptech continued to grow, sometimes in the least expected ways and places.

Little Liechtenstein invested $100 million in Greensoil PropTech Ventures Fund II, while Nigeria continued to see an investment surge among African nations fostering a proptech scene. Pakistan also demonstrated a vibrant and growing proptech startup ecosystem in 2022, despite devastating flooding in more than a third of the country.

Such success beyond the U.S. proptech scene should provide some optimism about the sector and real estate on the whole in 2023.

Philip Russo can be reached at prusso@commercialobserver.com.

As 2022 comes to a close, PropTech Insider is taking a look back at what factors impacted proptech the most during the year. Along with the usual churn of the sector and the real estate industry it seeks to engage with, here is what we think were the major takeaways from 2022. Emerging from COVID-19Read MoreChannel, Technology, Camber Creek, CBRE, Fifth Wall, JLL Spark Global Ventures, proptech, proptech insider  Commercial Observer Read More 

Robert Khodadadian has long had a simple philosophy about selling real estate. The way he sees it, there are approximately a million buildings in the city, and the broker that gets to sell any one among the multitude that will hit the auctioning block at a given moment is, sometimes, simply the person who happens to pitch their services to the right seller at the right time.

Robert Khodadadian, properties, ground leases, ground lease, off market, investment sales, khodadadian, Commercial Real Estate Sales, Commercial Observer, Retail For Lease, Commercial Observer,

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