Investment into the UK’s prop tech sector has reached record levels in 2021 and more than quadrupled since last year, as the growing sector matures.
In analysing UK prop tech funding round data for 20211, prop tech-focused venture capital (VC) firm Pi Labs identified there has been £1.6 billion of investment into the sector so far this year, a 360% increase from the £347.79 million seen in 2020.
The figure is more than 15 times higher than the £105.68 million of UK proptech investment achieved in 2016, as evidence of the long term trend that the sector continues to grow and attract investment capital.
The global story paints a similar picture with more than $20.57 billion (£15.52 billion) invested in proptechso far this year, more than double the $9.37 billion (£7.07 billion) invested in 2020. It is also nearly a three-fold increase from $7.06 billion (£5.33 billion) in 2016, as further confirmation of the long term appetite for prop tech investment.
This surge in prop tech investment over the past 12 months has been driven by the creation of a broad range of technology solutions which address common issues in the real estate world. Prop tech start-ups are currently solving issues around sustainability, logistics, construction, robotics, workplace wellbeing, and bringing the metaverse to the built environment, to name a few key examples.
Prop tech mergers and acquisitions (M&A) have also been on the rise, with Pi Labs’ analysis of M&A data 2 showing that there have been 152 global prop tech acquisitions so far in 2021, up from 92 in 2020 – the most global prop tech M&A activity since records began. Activity has mainly been driven as a result of better capitalised and established players acquiring competing or complementary companies in order to consolidate their position and gain access to new markets.
This was seen recently, with US end-to-end commercial tenant engagement app HqO acquiring its leading European counterpart Office App, creating a new entity valued at over half a billion dollars. Similarly, US prop tech unicorn VTS acquired global leasing, marketing, asset management and tenant engagement platform Lane in a $200 million deal to solidify its position as the international market leader in the space.
As efforts to decarbonise the real estate sector continue gathering momentum following increased stringency in energy codes and net zero targets, prop tech solutions helping developers and landlords improve sustainability credentials experienced a tailwind both in terms of institutional capital and deployment. Notable deals included Nordic real estate fund manager NREP raising €268m from investors including Norwegian state’s climate investment company Nysnø, Credit Suisse, BMW Foundation, Woven Capital and other investors, to invest in technologies related to sustainable property development.
With logistics being commercial real estate’s fastest growing sub-sector, and supply chain issues, labour shortages and space constraints forcing operators to increase efficiencies, the transatlantic weight of capital targeting prop tech solutions addressing urgent pressure points has also gathered pace. Examples include US-based warehouse management orchestration platform Fulfilld raising $2.5 million in an oversubscribed seed funding round co-led by Pi Labs and involving former Amazon CEO Jeff Wilke as well as US VCs TenOneTen Ventures and Matchstick Ventures.
Commenting on the findings, Pi Labs’ CEO Faisal Butt said: “Prop tech investment is growing significantly year-on-year, as the real estate sector is increasingly aware of the operational performance gaps that have been unaddressed for a number of years. As the UK real estate sector wakes up to the changes required to reach net zero targets, landlords, investors and occupiers are realising that technological adoption will play a crucial role in future-proofing assets and meeting sustainability pledges.
“On the back of the large wave of capital raised this year, and accelerated adoption within the sector, many prop tech companies are now achieving scale and we can expect later stage funding rounds and M&As to drive investment growth in 2022. Generalist VCs, particularly tech-focused Silicon Valley investors, are also now starting to get in on the action – especially from Series A. For example, Updata Partners led the £42 million LandTech Series A round last month.
“We are also seeing some of the world’s largest institutional real estate and tech investors enter this interesting intersection after identifying the tailwind for growth. Recently, Abu Dhabi’s Sovereign Wealth Fund Mubadala invested into London-based Plentific’s $100 million Series C round alongside Brookfield Technology Partners and other institutions.”
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