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If 2023 sparked a revival in the real estate tech sector, a resurgence may be on tap in 2024.
That’s the consensus of more than 30 high-level proptech leaders who shared their outlook on the year ahead as part of November’s Inman Intel Index, this publication’s flagship industry sentiment survey.
These leaders are aware of the state of today’s depressed real estate transaction market. They’re also aware of the fact that some of their prospects may be entwined with the fate of ongoing lawsuits that threaten to upend how many of their clients make money from commissions.
Yet despite these challenges, real estate tech startup owners, investors and executives were generally bullish on the upcoming year, anticipating more business deals and stronger financial firepower to innovate and grow.
Here’s what they see ahead for their corner of the real estate industry.
2023: A rebuilding year
For many of today’s proptech companies, survival wasn’t a given.
As the era of near-free capital came to an end and access to funding became more restricted, many proptech companies were forced to slash costs or risk going out of business.
The push to become profitable — or at least slow the bleeding — continued well into 2023 for some companies.
- 37 percent of these proptech leaders told Intel that their headcount was smaller in late November than it had been at the same time the previous year.
- Another 19 percent said their headcount was mostly unchanged over that 12-month period.
Still, the largest group of respondents indicated that they had already entered growth mode in 2023.
- 44 percent of these proptech leaders reported a higher headcount in late November than the previous year.
And based on their other responses, these moderately positive hiring numbers may be an early sign of life for a once-floundering sector.
The bullish case for 2024
Some proptech executives are quietly laying the groundwork for a busier year.
- 70 percent of respondents said they expect to increase headcount in 2024, even as fewer than half did so last year.
Chart by Daniel Houston
This may be related to the fact that proptech leaders expect capital to flow more freely in the months to come.
The Federal Reserve has opted to keep interest rates steady in recent weeks amid slowing inflation figures and other positive economic data. Multiple rate cuts are expected to be on the horizon in 2024.
And proptech leaders expect this to create opportunities in real estate tech.
- Of the proptech leaders, fewer than 4 percent felt better about raising capital in late November than a year earlier, considering cost and availability.
- A much greater share — 30 percent — said they felt better about the idea of raising capital a year from now.
Even among those who didn’t have a strong feeling about the difficulty of raising capital, optimism is on the rise:
- The share who felt about the same but leaned “optimistic” about raising capital over the last year was 22 percent, compared to 37 percent who said the same about raising capital in the new year.
Like many of their broker-owner clients, proptech players are expecting more serious talks to arise surrounding mergers and acquisitions.
- M&A was already a serious topic of discussion for a group of proptech respondents in November, with 41 percent saying they’d place their discussions at a 4 or 5 out of 5 in terms of seriousness.
- That interest may only be accelerating: 59 percent expected a similarly high level of interest in M&A over the coming 12 months.
Downside risk ahead
Despite the early signs of promise for proptech, the sector’s future is tinged with uncertainty.
Proptech companies’ chief clients — and even some of their investors — are currently embroiled in a series of major lawsuits that could fundamentally alter how much money real estate companies make.
As settlements and the first jury verdict rolled in, real estate has had to grapple with the fact that the landscape is changing.
Proptech leaders, for the most part, appear to understand they are part of that landscape.
- 72 percent of proptech leaders surveyed reported having at least moderate exposure to the commission lawsuit fallout.
- By contrast, 8 percent said the potential lawsuit fallout would affect their companies only “a little,” while another 20 percent said they would not be impacted at all.
Methodology notes: This month’s Inman Intel Index survey poll was conducted Nov. 21-30, 2023, and the entire Inman reader community was invited to participate, and Intel received a total of 675 responses. Respondents for this survey were directed to the SurveyMonkey platform, where they self-identified their profiles within the residential real estate market. Respondents were limited to one response per device, but there was no limitation to IP addresses. Once a profile (residential real estate agent, mortgage broker/banker, corporate executive/investor/proptech, or other) was selected, respondents answered a unique set of questions for that specific profile. Because the survey did not request demographic information for age, gender, or geography, there was no data weighting. This survey will be conducted monthly, with both recurring and unique questions for each profile type.
