While as VCs we think in longer time frames, the start of the new year does allow us to reflect on our investment themes and how we see the world changing. We hope you enjoy reading our thoughts and look forward to engaging with you throughout 2023.
Disclaimer: The opinions listed on this blog are predictions only and are not intended as investment advice for anyone, including us…
Ajey Kaushal, Senior Investment Associate
Based in Los Angeles, CA, covering the U.S.
Three competing forces will make it financially challenging for investors, owners, and occupiers to adopt PropTech at scale:
- Increased global focus on CRE to reduce carbon footprint
- Reduced demand in non-Class A office space
- Lasting impacts from inflationary and market downturn environment
As a result, the PropTech that will separate from the pack will either help owners directly reduce emissions from day one OR create bottom line efficiency from day one. 2023 will not be a favorable year for the adoption of “nice-to-have” technologies.
Arnaud Bouzinac, Growth Principal
Based in Paris, France, covering the EMEA region
In EMEA, climate risks associated with assets will be a rising topic in 2023. Cybersecurity risks will also draw more attention from our clients. Measuring and reporting carbon lifecycles, as well as energy consumption and operation carbon emissions will also be a strong topic, lending to increased interest in low carbon construction. Our startups active in this segment will no doubt see a lot of opportunities in 2023. The challenges the industry is facing in 2022 will continue in 2023 (rising interest rates, inflation, mispricing of assets) but will hopefully soften in 2024. In the meantime, our clients – both investors and occupiers – will be cash strapped. Therefore, we will need to be able to demonstrate clear ROI with our startup solutions.
Carolyn Trickett, Growth Principal
Based in Sydney, Australia, covering the APAC region
I’m seeing a significant increase in focus on sustainability tech in the APAC region and I expect this to continue next year in the form of new funds, incubators, and accelerators in many countries. Products are evolving quickly from “measure and monitor” to proactive management of energy usage and building performance. Hybrid and flexible working are also still hot topics, especially the “hub and spoke” model to give employees more options to access an office environment without long commute times.
Chris Pu, Managing Partner, JLL Spark China Ventures
Based in Shanghai, China, covering the China market
- The inflationary cycle will depressurize the global economy in 2023, and there is no escape for China as a key player, primarily in cross-border trading. Nevertheless, with the removal of the pandemic lockdown and the addition of stimulus measures, there will be foreseeable tailwinds in business. Streamlining the real estate sector would be priority for China.
- Digital immunity and autonomous systems will be one of the key thematic areas. We will see fewer human driven billion-dollar industries, including CRE. The best autonomous systems will leverage digital twins, generative adversarial AI simulation, and new technology development to create better system resilience and intelligence.
- Entrepreneurs and VCs in China will swell after the investment drought of 2022. With the vibrant entrepreneur community and sufficient dry powder, the recovery of investment activities shall be anticipated after Q123.
Danny Klein, VP, Innovation
Based in Boston, MA, with a global innovation remit
In 2023, PropTech investments in sectors such as Sustainability and the Future of Work will see an outsized infusion of capital, especially in the early to mid-sized rounds. Also, VCs will continue to invest in AI-powered data analytics solutions to generate insight and make data-driven decisions.
On the client side, the macroeconomic environment will have a short-term impact on strategies for both occupiers and investors who will be focused on cost savings, creating efficiencies, and improving productivity. This might affect new investments in IoT solutions and Smart Building deployments for 1H23, with clients being more selective about the projects they pursue. The macroeconomic environment will also change the workplace dynamic where employees will be asked to go to the office more frequently, thus cementing the value of the physical assets. This will drive the need to have employee experience solutions like touchless physical access control, and asset reservation systems to effectively manage a company’s return-to-office strategies at scale. I expect that clients will accelerate their deployments in 2H23 as the economy recuperates.
Eddie Carroll, Growth Principal
Based in Washington, D.C., covering the U.S.
In 2023, AI will be the most significant commercial real estate industry trend, enabling real estate firms to streamline operations, reduce headcount, and drive better standardization across their portfolios. The use of AI for analytics and building automation systems will continue to evolve, and I expect to see the rise of PropTech startups using advanced language models (ex. GPT-3) for applications such as commercial lease abstraction and market analysis. Additionally, the emergence of “Models as a Service” will allow for more specialized data sets to power AI in the industry.
Javier Araujo O’Neill, Senior Investment Associate
Based in New York, NY, covering the U.S. and Latin America regions
Early-stage technology companies in emerging markets will outperform the developed markets in 2023. Emerging markets tend to have greater inefficiencies, making the technologies they adopt more impactful. This creates inelastic and enduring companies despite any economic headwinds.
Kitty Sullivan, Investment Principal
Based in Austin, TX, covering the U.S.
- Employers will accept the reality that the era of “five days in the office” is gone and embrace solutions that help them manage the complexities of a hybrid workforce. Particularly, employers will find that they need tools to help foster communication and strengthen culture across teams and offices.
- The PropTech ecosystem will find more use cases for generative AI across the asset lifecycle. For example, the construction industry will rely on it optimize scheduling, alleviating the acute pain of delays and budget overruns. In brokerage, generative imagery will be leveraged to market the potential of a space, precisely customized to a client’s need and taste.
Laurent Grill, Investment Partner
Based in Los Angeles, CA, with a global remit
The VC ecosystem will continue to invest in the PropTech space at record rates. Valuations will track with the rest of the tech industry (trending down), but simultaneously PropTech will have outsized interest due to the continued tailwinds related to sustainability goals, flex work, and affordable housing. A large portion of unknowns remain around how larger organizations will view hybrid work. We are starting to see more companies bring their employees back into the office which will lead to larger adoption of tools to ease that transition. The adoption of IoT technologies will require a need for cyber security for this new age of smart buildings as well.
Raj Singh, Managing Partner
Based in San Francisco, CA
- Conversions from commercial to residential and other uses will be a huge thing.
- Individuals will start tracking their carbon footprint including their residence, workplace, and everything in between, putting pressure on owners and occupiers to deliver accurate data.
- Interest rates will continue to crush several promising developments through most of the year.
- VCs will continue to pour money into sustainability-focused startups and PropTech will benefit from the inflow of cash.
Sean Wright, Growth Principal
Based in Frankfurt, Germany, covering the EMEA region
- Commercial real estate prices will continue to fall throughout the year, with a bottom in Q4. Europe will have deeper declines than the U.S., as the ECB will have to raise rates significantly in 2023.
- Sustainability will pick up steam in 2023, becoming the dominant PropTech investment theme, especially in Europe due to extremely high energy costs.
- 2023 is going to feel like a bad year for the economy, and especially the real estate industry, but it will be a great time to put VC money to work.
Tanguy Quero, Investment Principal
Based in Paris, France, covering the EMEA region
- All players will adapt their organization and budget to start 2023 in better shape. They will be in a “wait and see” mode during Q1 before deciding to stay on plan, slowdown, or accelerate investments for the rest of the year.
- The trend of insider-led bridge rounds will continue. M&A opportunities will also continue to grow. This will likely be an opportunity for the best financed U.S. startups to start expanding in Europe at a good price.
- In Europe, we will see more Pre-Series A and Series A rounds in sustainability and more VCs interested in investing. However, as regulation is the tail wind for those startups, the slow down of government incentives will be an issue. Energy will continue to be a hot topic, as will asset repurposing and circular economy.
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