Bluebox PropTech Report June 2017

June 13, 2017

The property industry has historically lagged other sectors in terms of utilising technology to disrupt standard industry practices. Over the past two years, there has been a significant rise in the ‘PropTech’ sector as existing and new industry practitioners have recognised that the industry is ripe for disruption. Almost every subsector within the real estate industry is now experiencing the impact of innovative PropTech solutions that have been introduced to the market.

2016 saw a substantial increase in funding into the sector with a rise of 23% from 2015 levels of funding. Most of the activity is taking place in the USA, UK and Asia, with Europe falling slightly behind. With a large proportion of UK residents owning their own homes and having a large share of personal wealth tied in property, the country provides fertile ground for PropTech innovations to take off.

 

Recent activity

M&A activity has experienced a recent uptick, as young, innovative firms that provide alternative solutions to the traditional processes in the property market, requiring seed and growth capital to meet demand. In addition, as the industry continues to develop, existing market participants will be searching for opportunities to scale and expand their services, and as such merger and acquisition activity should continue to increase.

Notable areas within the PropTech sector, which have shown significant activity that is likely to continue include, online mortgage providers & marketplace operators. This is highlighted by three firms receiving a collective £23m in investment over the past 12 months. Online estate agencies have also received attention from investors and this trend is likely to continue as the market matures and established firms such as Purplebricks look for new opportunities.

 

Success Stories: Zoopla

Zoopla is celebrating its 10-year anniversary this year and successfully IPO’d in 2014 at a valuation of c. £920m. It is now the 2nd largest residential property listing website in the UK, providing residential property search, market data and local information to consumers. During the past decade, the firm has expanded rapidly, both organically and through frequent acquisitions of competitors and firms operating in adjacent markets. The businesses’ strategy includes investments into start-ups, as evidenced by their investment of £1m into four young firms in February 2016. It is clear in the table below that Zoopla’s appetite for acquisitions and further growth has not subsided as the Company has made four acquisitions since March 2016.

 

 

Potential Tailwind: Brexit

The shock of the Brexit vote last June may have a counterintuitive impact on the PropTech market. The uncertainty created by the referendum result may direct attention towards technology-based efficiency improvements and innovative methods to cut costs.

 

Who’s Buying?

As the industry is still in its infancy, it is no surprise that a significant source of capital is from venture capitalists. As the sector matures and the direction of the technology developments becomes more apparent, a greater proportion of the capital will be provided by trade.

In the past 12 months, most of the investors were UK based, but acquirers based in the USA, Europe and the Middle East have also invested in the sector.

 

 

 

By Jamie Kerr, Senior Research Analyst at Bluebox

To view in PDF please follow link: file:///H:/PropTech%20Report%20120617.pdf

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