Research commissioned by JLL with data compiled by Tech in Asia reveals proptech funding for start-ups in SEA is second highest in Asia-Pacific in 2019
Southeast Asia poses the second highest number of deals and undisclosed funding across of Asia Pacific in 2019, showing a strong focus in proptech funding since 2017. This is despite an overall funding decline by 38.4% in Asia Pacific last year after reaching a high of more than US$1 billion in disclosed funding in 2018.
“The demographic in Southeast Asia has favourable elements supporting investment into proptech. This includes a young and growing tech savvy population, urbanization and a growing real estate footprint fuelled by strong economic growth and higher market transparency. We expect investments to continue in the region and play an increasingly influential role in the way real estate is managed and transacted,” says Chris Fossick, CEO, JLL Southeast Asia.
Last year, proptech start-ups in the region raised US$625.9 million, according to research by JLL and tech media firm Tech in Asia, out of which, Southeast Asia raised a total of US$72.9 million. Out of the 38 total deal counts in 2019, SEA accounted for 11 of these deals, clocking in the second highest record of deals as well as funding across of Asia Pacific.
“We wanted to get a sense of the Asia Pacific proptech funding scene now compared to two years ago when we first commissioned Tech In Asia to produce Clicks and Mortar: The Growing Influence of Proptech. While fresh data from their sources shows that there’s been a significant decline in funding in the region, we are still seeing a healthy appetite in investors’ interest in high potential start-ups in pre series A or lower,” says Jordan Kostelac, director of proptech, JLL Asia Pacific.
“These figures are only indicative of VC interest and they’re less reflective of what’s truly happening in our industry. In our work with clients and fellow corporates, we are seeing that interest in proptech in Asia Pacific continues to grow, with traditional players taking a strategic, integrated approach with start-ups instead of the VC investment route.
“The real estate industry has been relatively late to the tech revolution, which has given major corporates and other real estate firms a greater runway to innovate and invest internally in technology. And in Asia Pacific, where corporate tech adoption is very quick due to the dynamic nature of the markets, many companies are entering partnerships while increasing trials and deployments of new technologies in their portfolio. For instance, JLL has an extensive suite of tech solutions and we set up a global Centre of Expertise for Technology, Data and Information Management two years ago to develop new solutions harnessing the latest technologies available.”
Bright spot in pre-series A and Southeast Asia’s proptech funding scene
The infographic by Tech in Asia shows that pre-series A start-ups experienced the biggest increase in funding from US$12 million to US$26.1 million, a rise of 117.5% year-on-year. Funding in Southeast Asia as a whole grew from US%13.8 million in 2017 to US$72.9 million in 2019.
“Governmental regulations have not always been able to catch up with changing technology, presenting a hurdle for proptech start-ups. Policy challenges are the most visible in peerto-peer accommodation start-ups – those similar to Airbnb. A notable example to show the substantial impacts of governmental policies on start-ups is the closure of Roomorama, a shortterm and vacation property rentals platform headquartered in Singapore. It is reported that Roomorama had to deal with regulatory issues regarding its business model in many markets including Singapore. Roomorama itself cited “regulatory headwinds” to be one of key reasons that “make it ever more challenging” to keep operating in the industry.”
Proptech funding, sustainability and data
Mr Kostelac projects that real estate firms will be looking to invest to tackle the tough issues of data privacy and how to use technology to achieve greater sustainability in the built environment.
“We’re living in an age where data is easily collected and data privacy needs to be taken seriously. Building owners and occupiers have to ensure adequate protection and proper management of their data,” says Mr Kostelac.
“Similarly, there is an increasing demand to ensure Environmental, Social and Governance (ESG) metrics are met in buildings and the wider real estate industry. Well-employed proptech solutions, like platforms to track and benchmark energy consumption in buildings, have the power to deliver clear sustainability benefits on these fronts.”
“Increasingly within the region, Singapore appears to be the only country that has a market mature enough for proptech. 2018 would mark the end of the country’s property market downturn. Both residential and office markets have passed inflection point and are on track to recovery, backed by strong economic prospects
and improved market sentiment.
A healthy property market will certainly promote Singapore’s proptech scene. 2018 could potentially witness new deals or expansion plans for Singapore’s proptech start-ups. In fact, 99.co, a Singaporean list and search startup, opened the year by buying UrbanIndo, the largest property portal in Indonesia with over 1.2 million active listings. The acquisition is essential to the Singaporean start-up’s goal of being the No. 1 proptech company in Indonesia.
However, there are also challenges ahead for the Singaporean proptech community. Specifically, start-ups that support house rental would be affected by the continuing weak demand in the rental market. Brokerage and leasing start-ups, would probably face increasing pressure to offer high value-added services, such as financing advice or linking homeowners with interior designers. Such high use of technology is an inevitable trend that should be sustained in an advanced market like Singapore.”