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More than $13 billion in investment flowed into real estate tech startups in the first half of the year, a banner figure that was surprisingly resilient in the wake of a broader cooling in America’s housing market.
But while this puts proptech companies on track for one of their strongest fundraising years ever, investors are beginning to temper their excitement for these companies amid the ongoing slowdown in real estate activity, and in financial markets generally.
These takeaways come from a recent report by the Center for Real Estate Technology & Innovation, which found that investment in proptech was actually 5.7 percent higher during the first six months of the year than it was over the red-hot first half of 2021.
“It remains to be seen, but at these levels, the proptech industry is on pace to match or set a new record in venture funding,” said Ashkán Zandieh, the center’s co-chair. “While I’m bullish on the financial health of the private proptech venture market, it’s worth noting that there is some choppiness in the market which makes landing a little rough for companies across the board.”
Some of the uncertainty lies in the fact that most of the investment occurred in the first three months of the year.
Well over $7 billion of the total investment amount came before the calendar turned to April. Since then, the market fell 23 percent as investors shifted its attention away from seed and Series A companies, the report states.
Some are expecting that slowdown to continue.
“I do expect a flattening or slight decline in venture activity for the year, mirroring what we are seeing across all verticals in venture capital, primarily as a reflection of broader macro concerns and the impact of public stock performance on private market valuations,” Nima Wedlake, principal at Thomvest Ventures, said in a news release accompanying the report.
Still, the venture capital market for proptech companies appears to be “quite robust” compared to historical norms, Wedlake said.
The report tracks investment in a broad range of real estate tech. Residential construction, single-family, multifamily, commercial, industrial and brokerage services were all included in the final tally.
The sector that saw the biggest gains in the first half of the year was industrial real estate tech, according to the report. More than a quarter of all proptech investment went toward this category in the first half of the year.
Construction tech investment also boomed in the first six months. Together, construction and industrial proptech companies accounted for $4.2 billion in investment so far this year.
But as the Federal Reserve continues to shrink its balance sheet in an effort to slow inflation, some investors expect they’ll be more selective going forward in which companies they’ll choose to buy into.
“The macroeconomy, [venture capital], and real estate markets are now correcting. Both venture investors and real estate operators are increasingly looking inwards at their portfolios, with the pace of new venture investments modulating,” Alex Shtarkman, vice president at Revolution Ventures, said in the release.