Onwards and Upwards: APAC Proptech Trends 2020

Trends in the APAC proptech industry show promising signs for the future

Real-estate is one of the biggest, most valuable industries of the world. The world’s property is worth 12 times the GDP of the U.S., and with proptech, this US$228 trillion industry is now experiencing a wave of tech innovation that it could propel it to new heights.

Proptech refers to the application of tech-driven solutions to pain points within the real-estate industry, across property management, shared spaces such as co-living units, data and analytics, brokerage, lending, and construction, to name a few.

While perhaps not the sexiest branch of technological innovation today, it is nonetheless growing in tandem with Internet economies and smartphone adoption, expanding in scope and value.

In its early years, listing services were a popular trend within the proptech sector and remained that way for a long time. But lately, with the emergence of advanced technology such as big data and blockchain, the proptech industry has become more complex, with fintech products, fractional property investments and smart homes being added to the mix.

Today, living and working spaces are more compressed, consumer expectations and incomes are shifting, construction costs are likely to increase, and global volatilities such as the U.S.-China trade war and the 2020 pandemic continue to advance a climate of economic uncertainty.

Though a late adopter of the tech revolution, the proptech industry is itself going through a much-needed transition considering these pivotal ongoing shifts. As a sector that continues to attract VC interest in Asia Pacific, here are this year’s top APAC proptech trends.

China and Southeast Asia rake in proptech funding

Research shows that China and Southeast Asia are the top two regions to receive the most funding within global proptech.

China laid claim to a third of all the proptech funding in the APAC region between 2013 and 2018, and continues to be the largest beneficiary of proptech funding for the last two years. In 2019, despite a plunge of 41.6% compared to the previous year’s figures, China still took home $491.7 million in proptech funding.

According to a JLL survey, nearly 50% of industry players in China indicated an interest in hiking their proptech budget by up to 30% in the following two years.

“China is leading the way in proptech partly because of the market size, which gives it tremendous ability to scale,” JLL Asia Pacific Director of Proptech Jordan Kostelac said in a news release earlier this month.

“But it has also nurtured a dynamic and innovative ecosystem thanks to investment and engagement from various stakeholders, coupled with a tech-savvy population that demands effective solutions,” Kostelac continued.

He added that the Chinese model provided a better understanding of how other countries could accelerate the digitalization of their real-estate industry, particularly in Southeast Asia, which is home to several tech and startup innovation hubs.

In terms of funding, Southeast Asia follows China (albeit at a distance) as the second most proptech-funded region. Funding to the tune of $72.9 million made its way to the region in 2019, in addition to the second highest in investment deals by number for APAC proptech startups.

Some of the reasons proptech has been welcomed with such warmth in Southeast Asia are its mobile-first population, rapid urbanization, and growing real-estate industry. The region has both supply and demand in large and ever-growing quantities, making for a solid market opportunity for startups in this niche.

Hot markets in APAC proptech

Of the 548 proptech companies to be found in all of Asia, an extensive 82% are located in four countries alone. Surprisingly, China, an economy that is leading the ranks by population, GDP, and proptech funding, does not account for the most number of companies – that title goes to India.

The subcontinent is home to 170 proptech companies, followed by 144 in China, 84 in Singapore, and 52 in Japan.

China does, however, take the lead in funding as noted above, followed by India, Singapore and Japan.

The remaining 98 proptech companies in Asia are scattered mostly across Southeast Asia. Discounting Singapore, a combined total of 79 proptech companies come from Vietnam, Cambodia, the Philippines, Malaysia, and Indonesia.

The positioning of these countries changes significantly when the scope is expanded to include the Pacific region. Australia accounts for over 260 proptech companies, nearly half of the total for Asia. Further, in the last seven years, Australia has seen a monumental increase of 428% in the number of proptech companies founded.

But numbers alone do not guarantee market appeal. Singapore takes the lead when it comes to market popularity based on investment attractiveness and development prospects. Emerging from an over-supply that saw both capital values and rents drop, Singapore’s proptech industry has rebounded magnificently.

The country’s office sector has absorbed most of Singapore’s vacant spaces, and as of Q1 2019, cross-border inflows led to a surge in transactions for proptech in 2019 (some on account of Hong Kong’s geopolitical tensions with China).

COVID-19 abruptly turned the tide, however, and real-estate transactions saw a drop of 33% in Q1 2020.

Other attractive markets in the region include Tokyo, Ho Chi Minh City, Sydney and Melbourne.

APAC proptech startups to watch out for

Startups in the APAC proptech space made quite a few headlines this year. For starters, Singapore real-estate listing services PropertyGuru raised a near-quarter of a billion dollars in funding this year. The $220 million dollars (SG$300 million) it raised will catalyze the company’s growth across Southeast Asia and possibly take it closer to a second IPO bid.

PropertyGuru was earlier slated to go public in Australia last year, but a slump in the Australian market caused the startup to push back on its plans.

Another Singapore-based proptech startup to have raised a significant amount of money this year, Livspace, announced that its $90 million Series D had in fact been oversubscribed. The interiors tech platform is looking at Australia, Malaysia and Indonesia, and the Middle East as lucrative markets for expansion.

Propzy, a Vietnamese proptech startup, also made news with its $25 million Series A round. The startup offers a full-stack integrated marketplace for open house, closing-settlement services, turn-key mortgage financing, and enterprise software.

The company acts as a financial insurance and real estate tech platform catering to the end-to-end customer journey in a real-estate transaction.

Indian co-living startup from ZoloStays also raised substantial funding this year, with a $56 million Series C round, which the company aims to channel towards its technology and inventory.

Optimistic Sectors for APAC Proptech

With the establishment of logistics-related properties like warehousing as a core asset class for real-estate investors, several other niches within this category may benefit from an uptick in investments, according to a 2020 APAC report by PwC.

Of these sub-categories, prospects are looking especially good for data centers. Driven by the immense adoption of cloud services and global interest in 5G, data centers have emerged as a favored sub-category this year. 64% of investors surveyed by the PwC report are now active or plan to be active within this niche.

Moreover, other than self-storage – another logistics sub-category – data centers are the only other niche to have improved its investment prospects and sentiment between 2019 and 2020.

Other niche categories of interest in the APAC proptech sector included housing, shared offices and business parks, the report noted.

It added that investors are leaning toward these sectors due to prospects of stable incomes and higher yields amidst a climate of lackluster investment yields and volatile geopolitics. At the same time, they are also driven to these sectors by demographic demand trends in the APAC region.

Overall, the APAC proptech sector has a lot to look forward to as the adoption of 5G increases within the region, and cloud computing takes center-stage. Moreover, the permeation of big data and AI/ML applications within proptech substantially increase the scope for technological transformation in real-estate in the region.

What the APAC proptech industry must contend with, however, is not only a tense geopolitical climate, both with its western counterparts and within the region itself, but an end-to-end revision of how industry players conceptualize, structure, and purpose space.

Header image by 8photo on Freepik

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