Proptech boom in Spain

Proptech boom in Spain

Sign of maturity or another bubble about to burst?

Spain has fully entered the first division of 'proptechs'. In 2023, our country is expected to receive 990 million dollars of investment in this market. A universe that revolves around the use and application of new technologies in the real estate sector to improve or reinvent services within real estate, an industry — real estate — that moves between 10 % and 30 % of the GDP of an economy.

According to the PropTech Global Trends 2022 report, prepared by ESCP Business School and the Principality of Monaco, worldwide, it is estimated that there are more than 2,000 companies that could be included under the proptech umbrella, companies that have attracted almost 4,700 investors during the year past and more than 20,400 million dollars of investment.

Spain will enter the top 5 in world investment this year with 990 million

The United States is the undisputed leader in the proptech industry, where it emerged at the beginning of the 21st century when technology broke into real estate, a sector that initially lagged behind technological innovation that, on the contrary, did fully enter other industries such as finance (fintech), in the late 1980s and early 1990s, also in the United States.

A market, the North American, which in 2023, according to PropTech Global Trends 2022, will attract the shocking figure of 400,000 million dollars, light years from the 5,905 million of the United Kingdom, the 1,963 million of India or the 1,493 million dollars of Korea of the South, the most powerful markets worldwide. A market in which Spain has carved out a particularly relevant niche.

In fact, according to the report by ESCP Business School and the Principality of Monaco, the forecasts for Spain in 2023 stand at 990 million dollars of investment, a figure that will allow Spain to return to the top 5 in the world as an investment destination, since in 2020-2021 he managed to win second place with 974 million dollars, barely 20 million less than the forecasts for this year, but well above the 290 million dollars received between 2021 and 2022, when Spain fell to eighth place.

«Without a doubt, capital investment in Spanish proptechs has been notable in recent years. And, while it is true that in recent years investments have increased and decreased following the general trends of the Western European and North American markets, there are also some differences regarding the trends in Spain," explains Jaime Luque, director of El Confidencial. the Monaco Government Chair in Real Estate Technologies at the ESCP business school.

Along with England, Germany and France, among the main proptech markets in Europe in the last decade, Spain has entered in recent years. “After an initial burst in 2014, the Spanish market has been growing steadily and the ability of Spanish companies to collaborate internationally will be a key indicator for future growth. Fortunately, the aggregate performance data has been very positive from 2020 to 2022, even taking into account the challenges of the last few years," explains Luque.

Excess optimism in the middle of a change of cycle?

Black on white, the investment figures invite optimism. However, as some experts warn, it is convenient to put the data into perspective, since not everything is fresh and new money for these companies, since sometimes it is about capital or debt increases, on many occasions from the shareholders themselves, to keep up with the business, as explained in this Ibex Insider.

For example, the Spanish Clickalia, founded by Pablo Fernández and Alister Moreno, raised no less than 460 million euros between the end of 2021 and the beginning of 22, divided into 60 million equity (Softbank and Banco Santander-Mauro Capital) and 400 million debt with Deutsche Bank; while the Italian Casavo raised 400 million in July 2022, with 100 million of new capital and another 300 million credit lines after doubling its position with Goldman Sachs, D.E. Shaw and Intense Sanpaolo.

Other smaller proptech such as Housfy, Brickbro, Psquared, Ukio, LemonKey have also had to resort to debt or capital increases in the recent past to continue maintaining their activity and growing and, in an environment of crisis in the technology sector and a change of cycle like the current one in the real estate market, with a forecast of falls in housing transactions of around 20% for this year and up to 30% of new mortgages, experts expect this trend to continue, although they do not rule out that some companies may disappear (as happened with ProntoPiso and Kasaz) or be forced to make some personnel adjustments, such as the one announced just a few months ago, precisely by Casavo, which in February announced the dismissal of 30% of your employees.

Layoffs that have followed, moreover, in the wake of some North American proptechs, and that could be anticipating what will happen sooner or later in other markets such as Europe or Spain.

The economic and real estate cooling in the US has caused a wave of layoffs

Redfin and Compasss are two examples. Both companies announced in the middle of last year cuts in their staff of 10% and 8%, respectively. These layoffs put 1,300 workers on the streets due to the economic and real estate cooling on the other side of the Atlantic, which has also translated into a significant stock market punishment for some of these companies such as WeWork, whose price slightly exceeded 13 dollars in October. of 2021, but which is currently trading at just 20 cents.

A punishment, the stock market, from which proptech in Spain is free for the moment, since although the plans of both Idealista and Clickalia go through making the leap to the stock market, this has not yet occurred.

Anecdotally, fintech became world famous last December for calling 900 employees into a Zoom meeting and firing them all at once. In just one minute, 15% of the workforce was on the street. Better, Redfin or Compass are part of a long list of companies that started 2023 with layoffs. A list in which Business Insider identified more than 50 in this detailed article.

And it is that, as pointed out in the Ibex Insider, «there is no longer any joy to continue financing disruptive promises at a loss.»

The euphoria around proptech has also fizzled out. The PropTech Global Confidence Index for the end of 2022, prepared by MetaPro in collaboration with PwC, suggests a stabilization after reaching highs in recent years. The outlook for investors and companies in the sector fell sharply, reflecting the uncertain and corrective climate that prevailed in the markets in 2022. Specifically, at the end of 2022 this index stood at 5.4 points out of 10, slightly below the 5 .8 points from mid-2022, but well below the 9.3 at the end of 2021.

«The proptech field in Spain is beginning a process of maturity after five years of expansion and development of different innovations and technologies,» Arturo Carballo, head of Strategy and Corporate Development at CBRE Spain, points out to El Confidencial. «During this period we have seen how many companies have passed the seed phase [seed] and are now in more advanced stages of growth.»

In the opinion of this expert, «the annual rate of creation of new proptechs is no longer as exponential as in the early years, but new companies continue to appear continuously.» And he believes that «the sector has a long way to go to continue innovating and launching new solutions in the coming years.»

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