Has Asia Pacific reached ‘peak proptech’?

Beijing, 10 March 2020 – After reaching a high of more than US$1 billion in disclosed funding in 2018, property technology – or proptech – start-ups in Asia Pacific saw their funding decline by 38.4% in 2019.

Last year, proptech start-ups in the region raised US$625.9 million, according to research by JLL and tech media firm Tech in Asia. Deal counts also fell across the board to 38 deals in 2019 compared to 50 in 2018. 

In China, proptech start-ups raised US$491.7 million in the past year, which was a 41.6% drop, compared with the figures of 2018. The number of deals also declined from 24 to 16, according to the data.

Nevertheless, China remained the largest investment recipient for proptech start-ups even during the period of decreased funding. The country accounted for 42% of the deals in the region and received 78.6% of the total proptech funding in APAC. China’s proptech funding was nearly 9 times that of India - a rapidly growing country in the proptech scene, which ranked second across the region with US$56.8 million funding in 2019.

Bright spot in pre-series A

As early-stage companies are starting to get more attention from investors, pre-series A start-ups experienced the biggest increase across all rounds in the regional funding. The infographic by Tech in Asia showed a year-on-year rise of 117.5%, from US$12 million to US$26.1 million. Series B, C or higher start-ups had a slight increase by less than US$10 million while series A and other funding start-ups encountered huge decline by more than 50% in the past year.

“We wanted to get a sense of the Asia Pacific proptech funding scene now compared to two years ago when we first commissioned Tech In Asia to produce Clicks and Mortar: The Growing Influence of Proptech. Fresh data from their sources shows that there’s been a significant decline in funding in the region,” says Jordan Kostelac, Director of Proptech, JLL Asia Pacific.

“These figures are only indicative of VC interest and they’re less reflective of what’s truly happening in our industry. In our work with clients and fellow corporates, we are seeing that interest in proptech in Asia Pacific continues to grow, with traditional players taking a strategic, integrated approach with start-ups instead of the VC investment route.”

The real estate industry has been relatively late to the tech revolution, which has given major corporates and other real estate firms a greater runway to innovate and invest internally in technology. And in Asia Pacific, where corporate tech adoption is very quick due to the dynamic nature of the markets, many companies are entering partnerships while increasing trials and deployments of new technologies in their portfolio. For instance, JLL has an extensive suite of tech solutions and set up a global Centre of Expertise for Technology, Data and Information Management two years ago to develop new solutions harnessing the latest technologies available.

China continues to lead in regional proptech scene

As the data has showed, China has been the leading destination for funding across APAC since 2017 and kept the momentum in 2019.

“The real estate industry and technology are further integrated. Chinese companies have become more tech-savvy since the rise of mobile internet and as technology evolves with AI, IoT, blockchain, VR, we can expect to see more proptech unicorns growing in China,” says Mr Kostelac.

Given the great potential on the proptech scene, JLL has partnered with Swire Properties and Ping An Urban-Tech last year, where they jointly launched UrbanLab in China. The partnership aims to foster promising tech companies in the dynamic proptech ecosystem and to create innovative technology solutions for the real estate industry.

Since its launch, UrbanLab has invited 116 tech company candidates with 22 categories of digital applications in real estate, such as data analytics, robotics, AR, VR, MR, etc. These proptech start-ups are still in an early stage with 88% founded in or after 2013 and 48% having received seed, angel or series A funding. In the first cohort, 12 companies were selected to join UrbanLab, and JLL collaborated with four of them to optimise their products in smart workplaces, BIM visualisation, big data analytics and AI operations.  

“This is a good opportunity for these start-ups to grow and support the industry with applicable products and improve their competitiveness. It’s also a successful trial to provide innovative solutions for clients and help drive technology further applied in the real estate industry,” adds Mr Kostelac.

Proptech, sustainability and data

JLL projects that real estate firms will be looking to invest to tackle the tough issues of data privacy and how to use technology to achieve greater sustainability in the built environment. 

“We’re living in an age where data is easily collected and data privacy needs to be taken seriously. Building owners and occupiers have to ensure adequate protection and proper management of their data,” says Mr Kostelac. 

Similarly, there is an increasing demand to ensure Environmental, Social and Governance (ESG) metrics are met in buildings and the wider real estate industry. Well-employed proptech solutions, like platforms to track and benchmark energy consumption in buildings, have the power to deliver clear sustainability benefits on these fronts.

Particularly, after the outbreak of Covid-19, building management and delivery standards on health, safety and risk control are expected to be improved, which will lead to more demand for real estate companies to purchase and deploy technology products.

“Every development will give rise to new booming sectors. In the short term, the popularity of proptech is bound to be extended to some extent. However, to achieve long-term development, it’s equally important to establish partnership and enhance innovation. Looking at the technological innovation process of different industries, it is far from enough to rely on one or a few leaders in the industry to actually realize digital transformation. The construction of proptech ecosystem should revolve around the practical application scenarios and user needs, and go deeper on the same platform to promote industrial innovation connecting companies and experts across different sectors including developers, building designers, owners, tenants, property management, technology companies, scientific research institutions, government and capital, etc.,” says Chen Lou, UrbanLab Lead at JLL.