Proptech can solve our greatest challenges in 2023

Here we are, 2023. What is the sound you’ve been hearing for the past fortnight? It’s the release of a pent-up, collective sigh of relief from the real estate sector, that’s what it is. We made it. 

It didn’t look very likely not so long ago. While 2022 started promisingly for the property industry – an industry I’ve called my own for decades, even before I took up the mantle of championing proptech and, in particular, its role in tackling the climate crisis – circumstances quickly turned it into an annus horribilis. Global economic challenges, compounded by events such as the war in Ukraine and Covid-connected unrest in China, threw the market into flux. While much of the attention has been on the impact on the buying and selling of physical real estate assets, the tech sector has had its share of uncertainty too.

Yet I am overwhelmingly optimistic about the opportunities awaiting proptech this year. That’s not to say it’ll all be plain sailing. But 2023 is set to be one of the most consequential years in proptech’s still relatively youthful history – and that will bring benefits to property, people and planet.

Pivotal for proptech

With venture funding already being more selective and real estate companies dealing with myriad challenges, technology will be in more demand than ever to help deal with these extraordinary headwinds. 

At the same time, there is real pressure on tech companies to enhance integration among solutions for the sake of their real estate customers. A key barrier impairing the merger between proptech and real estate is poor adoption rates. My prediction is that driven primarily by unclear ROI, in-house digital strategies and so-called ‘champion users’, the tech industry will put much more effort into proving and selling itself. The money taps for proptech are applied much more cautiously, and the arguments that need to be made for the retreating funding will result in a stronger sector.

This of course would be a good thing. Too often people in the tech sector, particularly in proptech, celebrate raising vast sums of venture funding as the most important barometer of success. Bullshit. Yes, venture funding is critical as the fuel (or the EV battery charge, preferably) that propels start-ups to build and scale, but it’s a false metric of success, as clearly shown by the venture sector finally coming to grips with investing in growth for the sake of growth and driving up valuations to undesirable levels. 

With a more disciplined approach to venture, and start-ups as a result being forced to build revenue-generating solutions above all else, 2023 will be the year where rational investing returns to proptech and we will be celebrating more important milestones such as ARR above all else. 

Downturn not the enemy of progress

With landlords having to fight harder than at any time in recent memory for customers, technology and innovation will be what truly differentiates properties from one another. As commercial tenants face their own business and workforce challenges, technology is increasingly seen as a way not only to lure workers back to the workplace, but also to drive engagement, tenant experience and overall productivity. 

That said, the type of solutions adopted may have a clearer distinction as the must-haves become a business priority and the nice-to-haves are put on the back burner. As a result, there will likely be growing demand for solutions that address value for money and operational efficiencies.

Who will be the big winners?

The real estate sector is faced with a plethora of headwinds including a tech market correction, rising interest and inflation rates, as well as a global energy crisis. These are compounded by investor and occupier pressure to decarbonise. Proptech will not be immune to the larger tech market correction, and may actually be more susceptible to economic shocks given that the industry (by and large) is in its infancy.

These market shocks will translate into increased M&A and consolidation – which, ultimately, will benefit end users. Conversely, early stage funding remains strong as the next wave of innovation is emerging in the marketplace.

As we gear up for our London conference in May, we’re predicting innovators and disruptors in certain real estate tech categories will be particularly popular. These include construction tech, property management tech, fintech, data analytics, flex space, spatial analytics, tenant experience and, increasingly and importantly, climate tech. 

Climate tech set to rise up agenda

One of the biggest reasons – beyond the M&A, consolidation and pressing need for innovation – that 2023 will be such an important year for proptech is because of the continually pressing need to tackle our climate crisis.

The real estate sector is simultaneously the world’s largest asset class, valued at $327trn, and the single largest contributor to climate change, with our built environment contributing 40% of all greenhouse gases. While tackling this will be a massive undertaking, the industry also has an opportunity to capitalise and lead global efforts in combatting climate change. Key realms that need to be addressed include operational carbon, embodied carbon, physical asset protection and risk mitigation measures. These are all spaces that technology can not only contribute to, but actually solve.

This year, for these reasons, should be a huge one for proptech. It’s an opportunity any forward-thinking business keen to improve how it operates and mitigate the worst of the economic downturn should be looking to seize.