Canada’s property technology (proptech) industry continues to flourish despite experiencing some of the same challenges faced by other segments of the Canadian real estate and tech markets.
The volunteer-run not-for-profit Proptech Collective has just released its third annual Proptech in Canada report, which presents insights from more than 500 Canadian proptech startups involved with construction tech, commercial and residential real estate from June 2022 to September 2023.
After experiencing a meteoric rise during the past decade, the Canadian proptech industry has experienced a reset period over the past 12 to 18 months that coincided with rising interest rates.
It has become even more important for budget-constrained real estate companies to focus on proptech that can clearly illustrate a positive return on investment through reducing costs, increasing net operating income or improving efficiency.
“I think that there have been a lot of lessons learned from the past decade that people are using now to build smarter businesses, as well as on the real estate side with the adoption of technology, and then also from the investor perspective about what areas that venture dollars make the most sense to flow into,” Alate Partners vice-president and report lead Stephanie Wood told RENX.
“It has been a challenging time and you can't turn a blind eye to some of the impacts that the tech ecosystem as well as the real estate industry are feeling, but there are a lot of things that make me really optimistic and I know all the founders and the real estate leaders, as well as investors, are still very bullish on the sector overall.”
Canada a strong market for proptech
Canada’s attractive immigration policies, access to a robust talent pool, enhanced support for innovation programs, a growing tech ecosystem, and influential real estate and construction industries have created an exceptional environment for nurturing innovation and fostering a thriving market for proptech companies.
“It's a really good place for proptech founders to headquarter themselves as well as for real estate companies to look in their own backyard and see what innovation is happening for them to try,” Wood explained.
About 77 per cent of Canadian proptechs are concentrated in Toronto, Vancouver, Montreal, Calgary and Kitchener-Waterloo. Nearly 46 per cent are within the Greater Toronto Area (GTA).
Seventy-five per cent of Canadian proptech startups were founded within the past decade, with 40 per cent of those analyzed emerging during the past five years.
More established companies which provide data and solutions for the proptech industry – classified by Wood as closer to operating businesses than startups – include Teranet, MPAC propertyline, FCT, FNF and REALTOR.ca.
More than 50 new startups in the past year
More than 50 new startups joined the Proptech Collective database in the past year, joining the more than 500 active companies founded in Canada.
New entrants included:
- Adaptis, which deals with circular construction project planning;
- Chexy, which is involved with tenant payments;
- Doormat, which provides legal services required to close on the purchase or sale of a property;
- Wiseday, an online mortgage brokerage;
- and Landslo, an artificial intelligence (AI) system to generate real estate and mortgage leads.
Canadian proptech startups have raised over $1.5 billion in funding since June 2022. More than 30 have raised funding rounds of greater than $10 million, with the top four garnered by:
- vacation rental management firm Hostaway ($238 million);
- home service software provider Jobber ($137 million);
- tenant and background screening company Certn ($110 million);
- and CarbonCure, which manufactures technology that introduces recycled carbon dioxide into fresh concrete to reduce its carbon footprint without compromising performance ($110 million).
Approximately 70 per cent of Canadian proptech companies are in the seed funding stage or earlier, having raised around $3 million or less.
“Even in an environment where funding felt really hard to get for founders, there have been some winners and there has been success at telling the story and proving return on investment for these proptech founders, because that's the way that capital is raised,” Wood noted.
“When we look forward at where the industry is moving, I think that there are a lot of really great tailwinds that are supporting investment in the industry.”
Growth areas for proptech
A heightened focus is being placed on sustainability and the integration of environmental, social and governance principles and data into day-to-day operations and ongoing reporting.
This trend aims to come to life through the use of sustainable materials on development sites, greater grid stability and energy management, as well as leveraging robotics to reduce waste for off-site construction.
Access to affordable housing has and will continue to affect the proptech industry’s future. The issue is sparking new approaches to improve housing security and address affordability challenges through the use of technology to explore alternative financing or co-ownership models.
There’s potential for increased integration and adoption of AI by real estate leaders, including leveraging it for scalability, data insights, automation, scenario analysis and predictive modelling.
There are 31 Canadian investors with two or more investments in Canadian proptech startups, while eight American investors have done the same.
“We've seen investments from a lot of U.S. funds into the proptech ecosystem here in Canada, which is exciting because it's always good to have diversified cap tables for founders so that they can branch their networks out within the U.S., as well as continue to find capital that can fund later stages of financing,” said Wood.
There are also over 100 incubators and accelerators in Canada to support founders and startups. While the accelerators are spread across the country, the GTA has a strong cluster that’s followed by the Kitchener-Waterloo area, Montreal and Vancouver.
Proptech company consolidation
As many proptech companies have emerged in Canada in the last decade, the maturity of the industry is opening doors to opportunities for consolidation and partnerships.
Among the biggest recent mergers and acquisitions:
- Esri Canada acquiring city planning and development platform Ratio.City in September;
- RBC acquiring residential real estate platform OJO Home (now known as Houseful) in February;
- and American-based HappyCo acquiring multi-family property management company Yuhu in November, 2022.
Wood expects to see more consolidation in 2024 and beyond.
She also anticipates more measured and consistent growth in the number of new proptech companies as opposed to the explosive increases of previous years.