Market insight: Why the proptech sector is booming

By Magdalena Barczak

You may be familiar with fintech, cleantech and biotech. But what about proptech? We’re here to explain all about one of the latest buzz sectors in the company sales market.

So, what exactly is proptech? We’re probably not taking you much further by giving the abbreviation its full title of property technology. There’s a lot more to it than that.

The term proptech refers to the unification of real estate, platform economics and digital technologies. These technologies consist of different software applications (apps), intricate data-analysis algorithms or websites that smoothen the affluence of various transactions in the real estate sector.

These solutions also contribute to the growth of an organisation’s sustainability, better investor returns and enhanced client experience.

Proptech is an industry witnessing unprecedented growth, with a rapidly increasing pool of acquirers seeking companies that will expand their portfolio by way of innovative new services they can offer to an ever more technology-focused consumer base.

The appeal of proptech companies to buyers and investors takes in the following factors:

Automation is becoming the norm

Enhanced efficiency as a result of automation enables property agents to spend more time on expanding their business, generating growth that attracts acquirers.

Rise of VR capabilities

Implementation of Virtual Reality, in regard to property viewings, means it has become easier than ever before for developers to sell properties still under construction.

Big data and AI

Proptech companies are using these tools to collect and analyse vast amounts of data within seconds, facilitating faster and more profitable investment decisions.

New opportunities from fractional investing

Investors can acquire shares in real estate properties for relatively small amounts due to proptech, an important development in opening the market to a wider demographic.

What is the current landscape of the proptech company sales market?

Deal activity in the UK proptech sector is largely propelled by domestic acquirers. Around two-thirds of transactions completed since 2020 have been acquisitions by UK buyers, and the remaining third from overseas. Sizeable transactions such as the £75m full management buyout of Orbis Protect, with investment from Synova and NorthEdge Capital, and £72m sale of TerraQuest Solutions to Apse Capital, underscore the sector’s high value.

Several key trends have shaped the UK M&A market in the proptech sector in recent years:

Pressure to invest in innovation

Platforms that simplify property searches and the purchasing process, and software that streamlines property management, are increasingly in demand from acquirers. The more traditional companies are increasingly sensing the requirement to transform how they function by updating their business strategies.

The surge in AI and Machine Learning

These tools offer smart data analysis, transforming the real estate sector by improving decision-making processes. With the use of big data analytics, this results in more precise and efficient strategies, especially in design, planning and forecasting.

Implementation of Virtual Reality

Augmented and Virtual Reality are revolutionising how properties are viewed, meaning clients can gain a true impression remotely – even of buildings still under construction. This offers a comprehensive and interactive experience without physically needing to be present, steering the industry towards a highly efficient, secure and customer-focused future.

Increasing use of blockchain

Blockchain is becoming increasingly prevalent on the UK property transaction scene as it brings a new era of security and transparency. Transactions can be executed smoother and with less risk of fraud, whilst ensuring secure record-keeping. Thus the property dealing process is faster and more reliable.

Advancement in buildings technology

Enhanced by the Internet of Things, buildings are becoming more energy efficient via use of interconnected devices which significantly reduce energy waste and costs, and promote sustainability by monitoring and analysing energy consumption.

Did you know…?

The UK had the world’s third highest value of proptech capital raised between 2012 and 2023, behind only the USA and China.

What is the main appeal of the proptech sector to private equity?

Attracted by the industry’s high growth potential and a penchant for recurring revenues, private equity houses have been drawn into the proptech channel in recent years. Having picked off larger, £50m-plus targets, PE funds have more recently shifted focus to the mid-market space.

As a result of this feeding frenzy, a plethora of private equity houses now hold investments in the proptech sector. These include Apse Capital, Rcapital, Inc & Co, Accel-KKR, Aurelius, Advent, Main Capital and CVC. KBS Corporate maintains good relationships with many global funds.

In a pattern that could be regarded as ‘bucking the trend’ but not at all unexpected for the sector, deal volume increased in 2020 and again in 2021 despite the COVID-19 pandemic. This is indicative of the fact the pandemic was positive for proptech companies because of the requirement for social distancing and restrictions on movement, and subsequently deal volumes have continued to rise.

Market Insight

The global proptech market size was valued at $33.57billion in 2023 and is projected to grow from $36.55billion in 2024 to $89.93billion by 2032, exhibiting a CAGR of 11.9% during the forecast period (2024-2032).

In the UK, the CAGR is projected to be even higher for the period covering 2024 to 2029 at 13%, with proptech having emerged as a crucial element of economic transformation within the country’s real estate sphere. From 2016 to 2024, investment in UK proptech surged from £172million to £2.66billion, reflecting the sector’s rapid growth.

In conclusion…

The UK proptech sector, and the ongoing company sales and investment appetite, is poised for continued growth, with strong investor confidence in the market’s scalability and high prospects for long-term profits.

A rising demand for the latest technological innovations to be incorporated into the property market, such as AI, Virtual Reality and blockchain, positions the sector for prolonged expansion.

If you have a company within the proptech space, contact us to learn more about the range of investment and exit options available.