Investors are looking to put the breaks on pumping cash into proptech deals over the next 12 months, while start-ups are bracing themselves for a harder fundraising climate, new research shows.

According to Metaprop’s Global PropTech Confidence Index in partnership with the Real Estate Board of New York and RICS, nearly a third (30%) of investors are planning to make fewer investments over the next year.

Roughly the same number of investors (33%) said they were planning to make more investments, down on 64% from last year.

However, investors have spotted a Covid-19 silver lining for proptech, with 89% claiming the pandemic will accelerate the adoption of tech.

Smart buildings remains the hottest area for investment, with 35% of investors most interested in splashing cash in this sector. Close behind in terms of the deals investors said they were most likely to sign for were start-ups offering solutions for the architecture, engineering and construction sectors (22%), and for finance and investment proptech start-ups (20%).

Strong tailwinds

Some investors are preparing for a drop in valuations. One anonymous investor who filled out the survey said they were expecting to see “lower valuations as risk profiles adjust following declining revenues in traditional real estates sectors, particularly retail and office”.

Another said they were expecting to see “more bankruptcies” among start-ups, but Covid-19 will prove to be beneficial for proptech in the long run as the adoption of more technology will “be a necessity”.

Meanwhile, start-ups are expecting it will be harder to source cash for their businesses. Over half (56%) of all start-ups said it will be harder to fundraise over the next year compared with the last 12 months.

Working from home is here to stay for the majority of proptech start-ups, with half of all companies expecting at least two thirds of their team to stay at home over the next year.

Metaprop co-founder and managing partner Aaron Block said: “Over the past six months, the proptech ecosystem’s strong tailwinds suddenly turned into galeforce headwinds thanks to a combination of the Covid-19 health crisis and the stress it placed on the world’s supply chain, a broad real estate market downturn, and a severe global economic slowdown.

“We are still early in the real estate industry’s technology adoption evolution. I’m confident that these unusual and trying times will lead to even more new technologies, new investment successes, and new business models for our industry.”