$3B Investment Wave Expected to Drive Proptech Innovation in Asia

At a time when more than 300 million Chinese have used online food delivery and some 10 percent of the mainland population have signed up for ride-hailing apps, one may wonder when the tech revolution will reach what may be the region’s biggest industry — real estate. The answer, according to a real estate system provider that supplies some of the world’s biggest property investors, is soon.

Investment heavyweights like Blackstone and Brookfield will bring real estate technology, or proptech, with them into Asia, according to the head of Canadian real estate software and data provider Altus Group, adding further impetus for innovation to a market which has already received $4.8 billion funding for proptech over the past five years.

“Last year, there has been a huge flip [in the market]. Now what we are seeing is the consumer-led paradigm that is going on with the big players,” said Robert Courteau, CEO of Altus Group during an interview with Mingtiandi in Hong Kong.

Big companies like Blackstone and Brookfield are either investing directly in proptech or prompting their global partners to adopt more technology, which is causing more proptech applications in markets like Hong Kong and other parts of Asia, Courteau added.

Blackstone, which has $120 billion real estate assets under management, is actively backing proptech initiatives, including investing $3.3 million in New York-based leasing and asset management platform VTS in 2015. In the future, the US private equity giant will be open to investing in proptech firms if the opportunity brings strategic relevance to their global business and make them a better and smarter real estate owners and asset managers, Tyler Henritze, Senior Managing Director at Blackstone said in February, as cited by Propmodo.

Proptech Firms Get $3B in 2018

Globally, $3 billion will be channelled to support the development of proptech this year, Altus’ Courteau estimates. It is expected that the majority of the funds goes to Asian startups that facilitate brokerage and leasing, investment and financing, project development and management with technology. For example, Hangzhou Fanglu, a data analysis company that advises developers like Vanke and Greenland on property sale strategies, completed a RMB 10 million financing round led by Zhejiang-based Junrun Capital in late 2016.

From January through November last year, Asia Pacific accounted for 65 percent or $566 million of the worldwide investments in the proptech sector, a study released in November 2017 by JLL shows. Proptech companies in Asia Pacific raised a combined $4.8 billion in funding since 2013 to late 2017, largely driven by a surge of funding for mainland startups, JLL found.

Hong Kong Becomes Frontier Market for Mainland Tech

While the influx of cash has been transforming mainland China’s real estate industry, more established centres such as Hong Kong and Singapore have so far been relatively slow in adopting technology. According to Mingtiandi’s Building Asia’s Digital Future report published last year, spreadsheets remained a primary tool for information management for property players in the region.

However, Courteau believes that this situation could change rapidly. “I really believe that Hong Kong could be one of those intersection markets more than Singapore, probably more than London, because the capabilities that you have seen in China now that they have scale, are going to come to Asia first starting with Hong Kong,” Courteau said.

Although Hong Kong and Singapore companies lagged behind mainland-based firms in the adoption of tech systems, including software for property management, sales management and ERP systems, Hong Kong will be a very important market in three to four years because the city serves as a good place for mainland tech companies to go global.

“It’s not quite there yet in Hong Kong. It is behind some of the markets in San Francisco, New York and the like, but it shall come,” Courteau said.