Welcome 2025. In just the first few weeks of the year, a new, pro-business, anti-regulation administration has sparked excitement in the investment community, much of it through executive order. Even with the implementation of disruptive tariffs, the year has really jumped off to a risk-on environment with equities, cryptocurrencies and everything AI benefiting from positive investment flows and capital appreciation. Even though we’ve only reached mid-February, sentiment remains bullish, in spite of, and arguably because of, some really wild headlines: seriously, who had a $500 billion dollar government sponsored AI infrastructure project, China’s launch of a cheaper and more capable AI model than ChatGPT, and a U.S. strategic reserve of digital assets on their markets and macro economic bingo card?
With so much excitement pulling the investment community forward, and AI and crypto related news dominating the headlines, it’s no wonder that other areas of the market, which have also exhibited strength, have gone unnoticed, drowned out by the hype cycle. And one of these areas in particular, a specialty vertical here at Wellesley Hills Financial, has moved in a tightly correlated manner with the market mojo. On a relative basis to its peers – other fintech, payments, and B2B software verticals – property related technologies (PropTech) has outperformed, with an explosion of activity in both mergers and acquisitions, and fundraising. At least out of the gate, it’s on course to be the hottest sector of 2025!
To put names and data on this statement, take a look at the chart below, which roughly comports to the activity in PropTech in the last six weeks, with 19 total transactions consisting of nine acquisitions, nine fundings, and one merger.
What’s also fascinating about the deal activity is the variability in the assets being funded and acquired. There’s no doubt that PropTech covers a slew of unique technology solutions, many of them point solutions solving specific problems, but the range in ‘type’ is really broad. Not just a few years back, the range of solutions was much narrower, consisting mainly of business management solution software aiding residential and commercial property management companies. Really, rather simplistic technologies that helped facilitate such tasks as the collection of payments and vacation rental scheduling, to rental and sales CRM and HOA community UXs to speed up the reporting and redress of maintenance issues.
Today? Well, the categories below speak for themselves, from financial services and constant, autonomous property monitoring, to asset management (physical) and the tokenization and securitization of RWA.The diversification in the sector is rich, spanning fintech, markets and trading, lending, IoT, machine learning, blockchain and IDV.
We teased out 15 different asset types.
• Vacation rental software
• Management tools for real estate agents
• Rental management software
• Financial software / mortgage tech
• Property management accounting SaaS
• Maintenance technology
• Property management + payments
• Parking management systems
• Office leasing software
• Fraud prevention
• Construction management software
• Lending & factoring solutions
• Architectural planning solutions
• AI-facilitated contract negotiations
• Access management and security
Cutting the data another way, a little more than half of the PropTech deals involved the merging of some form of lending, fintech and or payments element, undergirding the notion that more efficient, data rich financial transactions are a compelling value-add throughout the space. Also, that most if not all of the acquisitions were non-financial sponsor deals, shows that the core strategy being employed is vertical integration and value chain capture, not consolidation and EBITDA-driven bulking up.
This strategic ‘lean’ toward the vertical strategy suggests that the PropTech investment cycle is in its early stages. New, innovative solutions are still coming to market and investors and operators are jockeying for position to provide and monetize the best products for their respective unique end-users. What’s extraordinary about the PropTech space too is the software / hardware mix, which also bolsters the early investment cycle argument. Characteristic of the space is the need for constant monitoring of real word assets (property) which requires hardware in the form of measuring devices and sensors, a.k.a. The Internet of Things or IoT. This may be a contrarian take, but in this sense, PropTech is mirroring what’s happening with artificial intelligence and the rush toward AI applications. Even though new AI applications are announced everyday, to the discerning eye, the infrastructure problem (hardware in the form of servers and chips, and powerplants to supply the computing power) problem has yet to be addressed, and historically, it’s the innovation and evolution of infrastructure that marks the beginning of a new technology cycle.
To this observer, PropTech is also mirroring a key characteristic of Fintech – the label (name) doesn’t mean much without further qualification. This bodes well for the category because just like Fintech, it indicates that the vertical has a lot of room yet to run. Sure, it’s still early in the year and the overall cycle, but the trajectory for deals and innovation is pointing north. Layer-in some of the unique foundational technologies that are driving innovation, especially IoT devices, and the future gets really interesting. Those devices represent constant data collection, and with constant data collection comes the wherewithal to build extremely effective and targeted machine learning models. This positions PropTech for one heck of a great commercial run.
Written by Adam Hark
Researched by Camila Cimirro
Graphic and image by Grace Highum
