Asia Pacific – part 2: Distinctive real estate trends and PropTech VC activity 

We recently explored the real estate industry in Asia Pacific and why it offers vast potential for PropTech solutions. Now we look at the some of the PropTech adoption trends and why there seems to be a lower volume of VC investment compared to the US and Europe. JLL’s Global Real Estate Outlook 2024 highlights several global trends where Asia Pacific differs from other regions, such as sustainability, technology consumption, and PropTech investment. 

Sustainability  

In Asia Pacific, there is a growing focus on low-carbon office space. This emphasis on sustainability has resulted in demand for 4.6 million sq ft of low-carbon offices, which is slightly lower than the U.S. demand of 7.1 million sq ft. Interestingly, the supply of low-carbon offices in the Asia Pacific region has already met 41% of this demand, demonstrating a significant commitment to sustainable practices. In comparison, the United States has only managed to fulfill 25% of its demand for low-carbon office space. 

This variance in unmet demand could be due to stricter sustainability standards in many countries across the Asia Pacific region as noted in JLL’s recent real estate outlook. These policies have fostered a higher level of integration of sustainability measures into new building developments. Rapid urbanization in many Asia Pacific cities has provided an opportunity to integrate sustainability from the ground up, resulting in a higher adoption rate of technologies that enable more sustainable building operations. In many cases, large established developers and technology firms are building new technology solutions themselves, resulting in fewer venture capital investment opportunities. 

Technology appetite 

The 2023 JLL technology survey features questions on the appetite for technology spend and the confidence in technology as a competitive advantage. The results showed that these figures in Asia Pacific are very close to the U.S. results. Some results are even higher than the U.S. – for example 100% of occupiers surveyed in both Japan and India believed that technology would provide competitive advantage. Similarly, in all Asia Pacific countries surveyed, over 90% agreed they were willing to pay a premium for tech-enabled spaces. This can be attributed to post-pandemic return to office rates being significantly higher in Asia Pacific with an average of 85%, compared to 75% in Europe and 55% in the U.S. 

PropTech investment landscape 

The U.S. has a large volume of investment and venture capital firms, and an accompanying ecosystem that thrives on the network effect. These ecosystems also exist in Asia Pacific, but there are many more of them, spread across many different countries, and so more dispersed without a single lens across the whole region. 

Investing in Asia Pacific is also more fragmented. For an investor to assess the potential of a startup in any country, there is a layer of knowledge required to conduct effective due diligence, including an understanding of: 

• Product-market fit against local market expectations and business norms 
• Local competitive landscape 
• Cultural nuances that will influence adoption 

This results in what some would see as a disjointed investment market, as well as a localised success rate. Any given product category could have numerous market leaders across multiple countries and even within the regions of that country. There may be an identical product in the country next door, but they are not competitors, because they are tailored to the local market and culture. 

Despite the hurdle of navigating cultural and country nuances, venture capital investments are gaining traction in the APAC region. Local and international VCs, including the JLL Spark investor team, are taking notice of the tech appetite in the region, partially fuelled by the global responsibility of lowering the industry’s carbon footprint. 

At JLL Spark, we leverage the local knowledge of our JLL business teams on the ground. We have subject matter experts who run local innovation teams and can test local solutions even before they are ready for investment. There is a solid stream of new products coming through and plenty of opportunity for new successful PropTech investment in Asia Pacific; this is the tip of the iceberg! 

Written by Carolyn Trickett, Growth Principal at JLL Spark

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