PropTech, short for property technology, has quickly become a transformative force in real estate today. Once a niche area of innovation, PropTech is now reshaping how properties are built, sold, and managed. From automating building operations to making life easier for tenants, PropTech is ushering the real estate industry into the digital age.

The sector is growing fast: the global PropTech market was expected to reach $38.4bn by 2024, with projections soaring to $89.93bn by 2032. Naturally, this rapid expansion is attracting investors, with total capital inflows expected to hit $68bn by year-end 2024.

Private equity and venture capital firms are increasingly drawn to PropTech, seeing opportunities for growth in sectors like smart buildings, blockchain in property transactions, and AI-driven property management.

In this article, we’ll explore what PropTech is, how it has evolved, and where investors are focusing their attention.

What is PropTech and when did it emerge?

PropTech refers to the digital transformation and disruption that is currently taking place in the real estate industry. Rather than being a recent development, it has a long history.

Economists have traced the emergence of successive waves of PropTech innovation: beginning in the mid-1980s, PropTech 1.0 took off with the rise of the personal computer, ushering in a new era of real estate software and analytics, and peaking with the surge of investment surrounding the dotcom boom around the year 2000.

PropTech 2.0 unleashed a second phase of exponential growth between 2008 and 2015, driven by frustrations with the limitations of real estate as an asset class, combined with rapid innovation in areas such as cloud computing, the Internet of Things (IoT), and consumer platforms. Disruptive firms like Airbnb and WeWork introduced new business models that enhanced customer experiences and unlocked new sources of value.

Since then, we have seen maturing and consolidation in the PropTech market, while investment has continued to increase. Rising interest rates and tighter capital markets have driven a shift toward financial discipline, with investors prioritising scalable, revenue-generating solutions. In 2024, PropTech investments saw a 32.5% increase in total dollar volume, with the average deal size rising by 12%.

As of today, PropTech has evolved to include solutions for smart buildings, construction tech, and platforms for trading and purchasing fractional ownership in real estate assets. This evolution has been driven by a growing demand for efficiency, transparency, and sustainability in the real estate sector, aligning with broader trends in digital transformation.

As for the underlying technologies, they span a wide range; from AI-driven analytics, virtual reality for property viewing, and blockchain for enabling secure property transactions. Essentially, PropTech is reshaping how we interact with every stage of the property lifecycle, from buying and selling, to leasing and management.

Where are the potential growth opportunities in PropTech?

As PropTech continues to evolve, its potential to disrupt traditional real estate models is driving significant interest from investors. Its broad scope also provides a wide range of growth opportunities, and investors are targeting those sectors that could potentially offer both high returns and true transformation. Here are some key areas where investors are focusing their attention.

Real estate platforms

While they may hark back to early PropTech success stories such as Trulia and Zillow, there are still opportunities to be found in real estate platforms. Buying, selling, or letting a property remains a heavily intermediated process in most markets, so PropTechs continue to take aim at tackling inefficiencies and streamlining workflows. Platforms will continue to embed advanced digital service enablers, like automated matching, remote viewing, and credit checks to smooth interactions between market participants. Recent deal activity in this space includes Main Capital’s acquisition of Xitres and Cinven’s acquisition of a 70 percent stake in Idealista. EQT had acquired Idealista at a €1.3bn valuation in 2020 before the agreement to sell its majority stake to Cinven in 2024 a valuation of €2.9bn.

Property management software

As portfolios expand, the tasks pile up for property managers – and this represents another growth opportunity for PropTechs aiming to streamline everything from operations, to rent collection and digital lease management. Success stories in this space are not hard to come by. Buildium attracted PE investment from K1 Investment Management, amongst others, before being sold to RealPage Inc., a global real estate tech platform, in 2019. More recently, Advent International sold Aareon, a provider of property management systems, to TPG and a Canadian pension fund at a valuation of $3.9bn.

AI-powered PropTech

Although AI is a horizontal technology that cuts across PropTech verticals, it is worth highlighting the opportunity around companies that place it at the core of their offerings. Unissu currently lists over 700 AI-powered Proptech companies around the world, $630m was invested in this segment in 2023, and AI is tipped to be one of the most transformative technologies in real estate in the coming years.

Beyond the buzz, AI is already delivering value. It is being deployed to unlock greater efficiency and speed in real estate production, for example, with companies like Core tackling delays in site and equipment scheduling. In property management, EliseAI offers AI-driven assistant, operations and CRM capabilities to upgrade automation and the tenant experience. Applications extend to document sorting, portfolio analytics, satellite image processing for valuations and beyond. AI adoption in real estate is in its early stages, but the growth opportunities for companies that focus on delivering tangible value are substantial.

Smart buildings

Smart buildings remain one of the fastest-growing areas within PropTech. With 30 percent of global energy consumption and 26 percent of global energy-related emissions stemming from the operation of buildings, the impetus for change is overwhelming. PropTechs launching IoT systems that can optimize energy use, automate building management, and lower carbon footprints are attracting investment.

For example, Infogrid, which uses AI to integrate and analyze IoT data to gain insight into building performance, raised $90m in 2023. Investors are keen on the scalability of these technologies, given that they can be integrated into new structures and retrofitted into existing buildings.

As the above demonstrates, PropTech is a broad umbrella term that covers a diverse set of opportunities, offering investors the chance to be part of an expanding market with high-growth potential.

Considerations for investors in PropTech

While investing in PropTech does offer exciting growth opportunities, there are important factors to consider.Regulation

Real estate is a heavily regulated industry, so keeping a close eye on changes on the regulatory horizon is a priority. The uptake of new technologies like blockchain or AI can stall due to compliance issues or the slow pace of regulatory change. The relevant authorities approach to PropTech regulation can have a major impact on the sector’s growth and profitability.

Market volatility

PropTech is not immune from market fluctuations. While it has shown rapid growth to date, the real estate sector is inherently cyclical, and broader economic trends could affect the value of property investments. The global property sector faces significant economic pressures, from geopolitical tensions to ballooning costs in construction, which could put the cost of integrating new tech out of reach of real estate operators.

Scalability

Many PropTech companies promise disruptive solutions, but not all will scale effectively or be widely adopted. This often leads investors to carrying out thorough due diligence on the business models of their potential investments in PropTech and really considering if the businesses are sustainable in the long term.

By carefully considering these factors, investors can arrive at a clearer view of the risks and potential rewards of investing in the PropTech sector.

Navigating PropTech’s potential and pitfalls

PropTech is a dynamic and fast-growing sector that aims to transform the real estate industry. This offers investors a range of investment opportunities, from AI-powered property management software to smart building solutions, highlighting the potential for innovation and capital growth. The PropTech market is expected to expand considerably over the next decade, offering investors the opportunity to participate in the digital transformation of real estate.

However, alongside these opportunities come challenges: regulatory hurdles, market volatility, and the scalability of new technologies are crucial considerations that can impact the long-term success of investments in PropTech. Carefully weighing these factors can improve chances of navigating the risks and capturing the potential rewards of a sector with such potential.