Market Update: PropTech 1H 2020

COVID-19 and the associated economic shut-down has broad implications for the Real Estate and PropTech markets
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EXECUTIVE SUMMARY

  • COVID-19 and the associated economic shut-down has broad implications for the Real Estate and PropTech markets
  • Market environment has created both opportunity and dislocation in PropTech and while some companies and market segments will be negatively impacted, many will benefit from tech tailwinds created by the crisis: PropTech is a massive market category with sub verticals that are impacted in very different ways depending on their end-market focus, go-to-market strategy, distribution channels and revenue models
    • Sub-vertical Matters: Residential RE, CRE Office, CRE Multifamily, Mortgage Tech, Hospitality Tech, Construction Tech, Facilities Management, Data / Analytics businesses, etc. all have very different end-market dynamics that impact performance
    • Business Model Matters: Enterprise vs. B2C; recurring subscription revenue vs. transactional models; and fixed asset cost vs. variable costs drive preservation of revenue and unit economics
    • Scale Matters: Scale platform solutions help enhance ability to weather slowdown and emerge as a leaders and consolidators going forward vs. point solutions
  • M&A and growth investment deals are still getting done despite macro headwinds
    • 1H 2020 decline of only ~6% y/y in capital raise activity in the PropTech market despite COVID-19 and Q2 saw a 97% increase in invested capital y/y – driven by large investments in category leaders Vacasa, AirBnb and Sonder
    • $4.4Bn in growth capital raised YTD in the U.S. PropTech space across 136 deals through June 2020
    • 36 U.S. PropTech M&A transactions through June 2020, including two significant transactions, First American’s acquisition of DocuTech and CoStar’s acquisition of RentPath
  • GCA believes that PropTech adoption will accelerate due to COVID-19 and the industry will emerge stronger as a result

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