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Proptech in Canada report first ‘comprehensive’ sector study

Canada is becoming a global hub for real estate technology and innovation, and Proptech Collectiv...

IMAGE: Proptech Collective has just released the first PropTech in Canada Report. (Courtesy Proptech Collective)

Proptech Collective has just released the first PropTech in Canada Report. (Courtesy PropTech Collective)

Canada is becoming a global hub for real estate technology and innovation, and Proptech Collective has just released a report that offers insights into key trends, startups, investors and accelerators​​ within the space.

The report analyzed some 300 Canadian proptech (property technology) companies in construction tech and commercial and residential real estate. It involved interviews with more than 20 real estate companies, proptech startups and investors.

The report was written by three Proptech Collective members: Alate Partners principal Courtney Cooper; Oxford Properties Group tech strategy manager Alice Guo; and real estate professional Stephanie Wood. It was produced with sponsorship from PwC Canada, LMRE and BDC.

“You have to start somewhere and this data didn’t exist in one place before,” Cooper told RENX. “We think it’s quite comprehensive, but a big part of this report and putting it out there is to generate responses that tell us what other companies exist and what we’re missing.”

Proptech Collective is a Toronto-headquartered, not-for-profit organization comprised of real estate professionals, technologists, entrepreneurs and community builders interested in technological innovation. It provides a forum for people to connect, learn and work with each other to advance the industry.

Proptech and its growth in Canada

“Proptech is not a new phenomenon,” said Cooper, noting real estate technology groundbreakers such as Yardi and Altus Group have been in business and had a Canadian presence for many years. “There has always been real estate technology, but there has been a significant shift in the environment and the amount of companies, and the technologies.”

Canada has become a prominent proptech market for a number of reasons and COVID-19 has accelerated the adoption of technology in the real estate and construction industries.

Ten of 2020’s 50 largest global institutional real estate investors are Canadian and they’re building internal innovation teams, expanding strategic partnerships and indirectly or directly investing in proptech to gain a competitive edge.

“They’re very much focused on how they use technology within their portfolios and anything that can increase NOI (net operating income) and anything that reduces costs,” said Cooper. “There’s a lot of interest in sustainability, ESG (environmental, social and governance) and net-zero.”

Canada is the most educated country of the 37 in the Organisation for Economic Co-operation and Development and has approximately 500,000 students enrolled in post-secondary science, technology, engineering and math programs.

There’s support for innovation through more than 175 incubators and accelerators as well as $3 billion in annual national tax incentives.

People with startup experience from other industries are now becoming involved with proptech, according to Cooper.

Canada has a diverse population and friendly immigration policies which are expected to attract 400,000 new immigrants annually over the next three years.

Canada’s top proptech markets

Eighty per cent of proptech companies in Canada are located in the Greater Toronto Area (GTA), Greater Vancouver Area, Greater Montreal Area, Calgary and Kitchener-Waterloo.

About 46 per cent are in the GTA, which makes sense considering the report claims: it’s home to a large number of real estate companies; it’s the fastest-growing city in North America; it has the most cranes in the sky on the continent; and it’s North America’s largest tech hub, with 24,000 companies employing 270,000 workers.

“There are also great companies that are starting in Edmonton, Saskatoon and some of the smaller markets,” said Cooper.

What Canadian companies do

IMAGE: Courtney Cooper, is a principal at Alate Partners. (Image courtesy Alate)

Courtney Cooper, is a principal at Alate Partners. (Image courtesy Alate)

Sixty-seven per cent of Canadian proptech companies were founded after 2014 and more than 60 per cent are still in their early stages when it comes to funding. The top three Canadian proptech categories are: viewing and imagery; building automation and Internet of Things; and digital construction collaboration.

The fastest-growing categories are: rental management; building automation and Internet of Things; property data and appraisal; storage and logistics; energy management; and digital construction collaboration.

That’s just the tip of the iceberg, however, as there are proptech companies involved in these wide-ranging areas:

– property listings and marketplaces;

– equity financing platforms, as well as alternative financing;

– digital brokers and lender lead generation;

– lending technology;

– transaction management;

– property management and tenant engagement;

– co-working and office space;

– retail and industrial utilization;

– indoor navigation and occupancy analytics;

– agent tools and agent matching;

– customer relationship management and marketing;

– home and rental insurance;

– title and escrow;

– home improvement and maintenance;

– tenant screening and payment;

– co-living;

– planning and design;

– construction marketplaces;

– pre-fabrication, and new materials.

Proptech investment and funding

The categories that raised the highest funding were: hospitality, energy management, and co-working and office space in commercial real estate; property data and appraisals, home improvement and maintenance, and alternative financing in residential real estate; and digital collaboration in construction tech.

Investment in Canadian proptech startups comes from a variety of sources, and Cooper said, “There is more capital available to proptech companies than there has been in the past.”

Alate Partners, Greensoil, GroundBreak Ventures and Venturon are Canadian venture capital funds that use their industry knowledge and tech skills to invest in early-stage proptech startups.

Inovia Capital, MaRS IAF, Panache Ventures and Real Ventures are the most active generalist investors in proptech. Institutional investors such as CDPQ and OMERS Ventures have also participated in late-stage financings.

SOSV, FJ Labs and Second Century Ventures are the most active American investors, and Cooper said more companies from south of the border are now focusing on Canada.

“The problem is not funding for companies in this space. There’s a lot of capital that’s waiting to be invested in this category.”

Five Canadian proptech companies have raised more than $100 million in funding:

– short-term rental platform Sonder has raised $698 million since 2012;

– smart thermostats company ecobee has raised $203 million since 2007;

– home improvement marketplace BuildDirect has raised $183 million since 1999;

– flex space marketplace Breather has raised $162 million since 2012;

– and residential brokerage and financing platform Properly has raised $118 million since 2018.

The report also lists the next 20 companies in terms of how much they’ve raised, but Cooper said “there’s a ton of great talent and a ton of great Canadian companies that are getting started, growing and scaling.”

Acquisitions and accelerators

There have been some mergers and acquisitions activity in the Canadian proptech market over the past two years, with Altus Group (One11 Advisors, Taliance, EstateMaster, RatesRecovery, RealNet and Argus) and Constellation HomeBuilder Systems (Leverance, New Home Listing Service, Woodland, O’Brien & Scott, Conasys and POMS) being among the most active acquirers.

Canada’s strong proptech ecosystem has also been aided by several industry-specific accelerators.

Colliers Proptech Accelerator and Reach Canada are two of the most notable, investing in approximately 10 global startups annually.

World-leading accelerators, such as Y Combinator and 500 Startups, attract Canadian startups to their programs. Local accelerators also provide world-class programs, especially in artificial intelligence and energy.

In addition to national government programs, many cities have dedicated accelerators to support local entrepreneurs with funding, mentorship and incubation facilities.

Canada’s growing and thriving proptech ecosystem is also prompting global startups to build footprints in the country. Examples include visual construction platform OnSiteIQ, leasing and asset management platform VTS, and digital home renovation platform Skylight.

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