PropTech in Europe: four trends and the quest for the elusive unicorn

Over the past few years, PropTech companies have developed digital solutions that help tackle essential challenges in real estate, fulfilling an essential function for the sector. They create new dimensions for customer interaction and help optimise the use of resources, data and insights on the professionals’ side. In other words, they drive a true digital transformation in the real estate industry.

The real estate market has long been viewed as a traditional and analogue sector that relies on direct customer contact. However, more and more news stories recently go out about PropTech startups that have entered European markets, providing new digital access to all phases involved in real estate transactions and management using tools and digital technologies.

The consequences of this shift to PropTech platforms are potentially far-reaching. PropTech can change the way consumers and companies think and behave in the long term, especially by integrating innovative information technologies into new business models. In this case, “PropTech” includes various digital solutions, including smart homes, smart buildings, leasing, and commercial real estate services.

Our goal with this article is to give you an overview of how PropTech is developing, how this impacts the real estate industry and where the European market currently stands.

What is PropTech?

To begin, it's crucial to understand the exact meaning of PropTech. PropTech, or property technology (sometimes also known as real estate technology), involves the development of (enterprise) software for parts of or the entire real estate life cycle.

PropTech software utilises advanced technology, from online tours with virtual reality to building information modelling (BIM), to optimise various real estate investment and utilisation phases. Both established companies, entrepreneurs, tech companies, and other industry professionals explore PropTech solutions to benefit end consumers.

PropTech software can be included in a network of existing tech solutions, particularly FinTechs in the financial sector, LegalTechs for preparing and managing contracts, and ConTechs in the construction industry. The focus here is often complementary or even overlapping.

The greatest overlap is with the FinTech sector because it has such a close relationship to real estate. It’s also an open secret that the FinTech industry is several years ahead of the PropTech industry. This is especially interesting for investors because it can be used to better understand and predict developments in the PropTech space.

Now, let’s delve into the European PropTech market and its unique features and explore how the European market compares to the US. Keep reading to learn more!

Fragmented markets, united vision: PropTechs in European real estate

In contrast to the USA, the global market leader, PropTechs in Europe face additional challenges. A significant reason for this is the segmentation. Europe comprises multiple countries, and the thinking and planning processes are more complex: separate legal systems, different languages and cultures, and varying standards for the real estate market need to be considered.

Despite the significant differences among the individual US states, the US market is largely uniform. By contrast, European real estate markets are by their very nature fragmented. However, this offers significant potential: European PropTech companies are already well-tested in localisation. This competency can be transferred to the expansion into other international markets, such as in Asia, for example.

There are also significant differences in funding – and funding is a key factor for the long-term growth of startups, especially if the goal is to grow into a unicorn with a market value of over USD 1 billion. For this reason, substantial efforts are underway by PropTech companies to move to the USA. Initiatives like the German PropTech Initiative or the European Commission’s ESCALAR funding program have therefore made it their goal to help companies expand the PropTech sector in terms of growth and keep it in Europe over a long time.

Why are there hardly any PropTech unicorns in Europe?

Overall, the PropTech scene in Europe got off to a later start than those in the USA, and the conditions particular to the European market, as mentioned above, play a role too. If, despite fragmentation, market penetration increases, business models focus on scalability and disruption, and sufficient funding is provided, there is a good chance that the number of PropTech unicorns in Europe will continue to increase.

However, the number of European PropTech start-ups hitting unicorn status is just taking off. One example of a European PropTech company that has reached unicorn status is the German property start-up in the ClimTech sector, 1KOMMA5°. The company achieved a valuation of USD 1 billion in just 23 months and seven rounds of financing.

The positive news is that the European PropTech market is on the right track. According to data from the Statista Research Department, more than $8.9 billion (approximately more than €8 billion) was invested in European PropTech firms between 2010 and the first half of 2022. Around $7 billion (€6.5 billion) was invested in companies in Spain, the UK, and Germany alone. Consequently, over 300 new PropTech companies were established.

But how can we put these numbers into context? Let’s have a look at the numbers in the US market for comparison:

According to the annual "PropTech Global Trends 2023 Barometer" published by the Government of Monaco and ESCP Business School, the USA, the country with the most prominent players in the PropTech sector, received the largest share of investments. These totalled more than $241 billion from 2012 to 2023, corresponding to almost 59% of total global investments. In third place is the first European country (the UK) with an investment volume of $23.9 billion, followed by Germany with more than $17.16 billion.

Shaping the future: four PropTech trends revolutionising Europe's real estate 

Based on these and other observations and analyses, there are four main trends affecting the PropTech scene in Europe to look out for:

1) Digitalisation of processes

The shift from property management and home selling/buying processes to digital takes account of changes in consumer behaviour and offers enormous potential to optimise and conserve resources. This includes e-signatures, a trend taking hold in many countries and making it possible to sign contracts quickly on a terminal device. Another aspect is the automation of building management tasks, such as online payments and accounting, as well as the digital processing of repair requests and maintenance planning. However, due to the COVID-19 pandemic, the trend that has grown the most is digital tours of properties.

Providers like Nodalview that specialise in this area make it easy for brokers, as their platforms include photos, videos, 3D views, etc... The critical element here is a smartphone app. Customers also have the option of purchasing more suitable photographic equipment if necessary.

Offerings that span different sectors, such as Meero, are also used in the real estate market. This French start-up, which reached the coveted unicorn status in just three years, finds photographers on a project basis and uses artificial intelligence to optimise and retouch the resulting images.

Increasing digitalisation is affecting not only back-end processes –– it is also occurring on the customer side.

2) Digitalisation of daily work and lifestyles

Routine tasks and everyday work are primarily occurring on technology platforms in ever-increasing areas. This is reflected uniquely in the real estate world by the HqOS app. Like intelligent home technology, this app focuses on the digital networking and management of office and other commercial properties.

Marketed as a “tenant experience operating system,” HqOS makes it possible to design intelligent spaces that expand the customer experience as a tenant and user of real estate to include a digital dimension. It offers additional data analysis and tenant management capacities for property owners, making developing and implementing a letting strategy easy.

3) Real estate crowdinvesting

On the investment side, a concept that has already seen significant success in many other sectors is now catching on in the real estate world: crowdfunding or crowdinvesting. By enabling even smaller investment amounts, it taps an entirely new group of primarily young investors, previously deterred by the higher barriers to entry of traditional real estate investments.

For example, the start-up IMMO Capital works with residential real estate portfolios in high-quality European markets like London and Hamburg. By focusing on individual residential units, like condominiums, instead of entire apartment blocks, the investment management company can also cultivate a part of the real estate market often neglected by large investors.

4) Data-based and AI-supported solutions

One aspect that connects the many stakeholders in the real estate market is the need for reliable market data and analyses. These are now more accessible and meaningful than ever, thanks to property data collection and processing tech innovations –– provided they are used correctly.

This is precisely where PriceHubble comes into play. Originally from Switzerland, the B2B real estate PropTech is active in many European markets and Japan. Its innovative real estate valuation, insights and analytics solutions address the entire real estate value chain for real estate agents, banks and financial services, property managers and more.

PriceHubble applications collate data to deliver in-depth residential real estate market analytics. Its algorithms can accurately determine any residential property's current market and rental prices. PriceHubble insights therefore form a reliable base for any type of decision or measure related to real estate.

In the wake of these trends, the automation of repetitive and administrative tasks will become increasingly important. For example, with PriceHubble’s Property Tracker, it’s possible to automatically send property valuation updates to the real estate owners who were previous customers. PriceHubble thus provides support over the entire life cycle of a property.

Embracing the PropTech revolution: A look to the future

“Real PropTech” is not the only driver defining, expanding and changing the digital level of the real estate market. Take blockchain, for example; while it wasn’t developed specifically for the real estate market, real estate professionals (such as investors, property developers, or real estate agents) are holding their breath to see how this new technology will impact their business models.

That being said, PropTech promises to make a decisive contribution to changing interactions in the real estate market. It will be interesting to see the long-term effects the coronavirus crisis had on real estate markets and their processes, as it showed the need for digitalisation with particular urgency. Real estate companies may have returned to traditional methods after the pandemic, but other markets show that digitalisation is challenging to slow down and even more difficult to undo.

For this reason, all stakeholders in the real estate market are responsible for accepting digitalisation as a challenge. The targeted use of PropTech and a proactive response to emerging trends will enable success and offer more significant development opportunities. As social media, sustainability, and energy efficiency continue to be essential factors in the property industry, real-time dashboards and intelligent buildings are likely to play an increasingly vital role in shaping the future of the real estate sector.

Overall, the integration of tech companies, machine learning, and AI-supported solutions will further revolutionise the property industry in Europe, making it an attractive asset class for investors, home buyers, and renters alike. While the USA may currently lead in venture capital and unicorn startups, the UK PropTech scene and other European markets are steadily gaining momentum, hinting at a future where further PropTech unicorns in Europe may soon become a reality.