Review of the German PropTech sector in the first half of 2024
The German PropTech sector achieved considerable success in the first half of 2024. According to the blackprint PropTech Report H1/2024, €1,789 million in funding was provided to PropTech startups in Germany during this period, a record that already surpasses the full year 2023. This funding underlines the confidence of investors and the increasing maturity of the PropTech sector, which is revolutionising the construction and real estate sector through innovation and digital solutions.
The top 7 cities as PropTech capitals
The geographical focus remains on the top 7 cities in Germany. Berlin, Munich and Hamburg are still regarded as the leading PropTech centres. Stuttgart and Düsseldorf in particular are seeing a significant increase in PropTech start-ups, making them attractive locations for young companies in the construction and property sector. These cities offer access to capital, networks and an innovation-friendly environment, which is crucial for the growth of the industry.
The growing relevance of these cities is also due to the increasing number of PropTech hubs and innovation centres in these regions. Munich, for example, has established a thriving tech scene in recent years that focuses heavily on property innovation. This is where technology companies, investors and property developers come together to develop solutions that digitalise all kinds of property processes. In Berlin, new coworking and accelerator programmes offer tailor-made support for young PropTech companies - you can find a general overview and a wide range of options for incubators and accelerators in this magazine article.
One-sided focus on energy efficiency in the PropTech sector
The strong focus on energy efficiency remains a key issue. Around 88% of the total financing volume in the first half of 2024 flowed into this area, which illustrates the immense importance of sustainability and decarbonisation in the property sector. This trend is being reinforced in particular by stricter legal requirements to reduce CO₂ emissions and rising energy costs. PropTech companies that focus on energy-efficient construction methods, smart building technology or innovative energy utilisation have therefore benefited particularly strongly from the surge in investment.
However, the report criticises the fact that other segments, such as smart city solutions or asset management, are receiving significantly less venture capital. This one-sided focus could lead to a slowdown in innovation in other, equally important areas in the long term. Solutions for the digitalisation of urban planning or automated property management could gain in importance in the future in order to meet the constantly growing challenges in urban areas.
New technologies in the PropTech sector
In addition to energy efficiency, other technological innovations are also gradually gaining in importance. Artificial intelligence (AI) and machine learning are increasingly being used in property valuation and analysis, both in Germany and internationally. In cities such as Berlin, Munich and Hamburg, PropTech companies are using AI to create market forecasts and improve property value analyses. Such technologies are also widely used internationally, primarily in the USA and the UK, and are used for precise market analyses.
Another growth area in the PropTech sector is the use of virtual reality (VR) and augmented reality (AR) for property viewings, with VR representing a fully computer-generated, immersive environment, while AR merely superimposes digital elements onto the real world and augments them. These technologies enable potential buyers and tenants to explore properties virtually before physically viewing them. In Germany, this is primarily used in large cities such as Berlin, while international markets such as Singapore and China already rely extensively on virtual viewing tools. This opens up new access to property, especially for international buyers, which facilitates global trade.
Capital providers for German PropTech start-ups
German investors remain the most important providers of capital for PropTech start-ups in Germany. They made a total of 85 investments in the first half of 2024. At the same time, international interest is growing, particularly from the UK and the USA. This development shows the increasing potential of the German PropTech scene on the global market, although there is still plenty of scope to attract more international investors.
The increasing internationalisation of the PropTech sector offers new opportunities for German start-ups to establish themselves on the global market. Some companies have already been able to enter into international partnerships to implement their technologies in other countries. This aspect is also important for the scaling of companies that develop sustainable construction methods or energy-efficient solutions and meet global demand.
Challenges and outlook
The first half of 2024 has shown that the PropTech sector in Germany continues to grow in importance and is supported by massive financing rounds. Nevertheless, the report shows that investments should be broadened in order to fully utilise the innovation potential in all areas. Greater consideration of technologies such as AI, smart city solutions and AR/VR could help to make the sector even more diversified.
The next few years will be decisive in further expanding the global influence of the German PropTech sector and taking on a pioneering role in the field of digital property innovations in the long term. It will be important to further strengthen cooperation between start-ups, established companies and the public sector in order to drive digital change in the property sector.