Data analytics, data science, artificial intelligence and machine learning: these are the technologies most used by companies taking innovation into one of the slowest industries wishing to accept change, the real estate sector. That is the situation emerging from the 2023 survey carried out by Italian Proptech Network in conjunction with ARECneprix. In general, the report points to growth in the use of technologies by businesses in the sector, while bringing up the rear is the innovation of materials, robotic systems and 3D printing.

The numbers

The survey carried out by Italian Proptech Network covered a total of 337 businesses, up by 19% over 2022 and approximately eight times the number surveyed in 2018 when only 43 were involved. A vital ecosystem, especially in the North (61% of the total), compared to 16% in the Centre and 5% in the South. The report also finds room for 18% based outside Italy but set up by Italian founders. The lion’s share belongs to Milan, with the Lombardy capital accounting for 35% of the companies surveyed, a good 117. More than 80% have fewer than twenty employees: 42% actually have under five. The presence of women could be improved: only 33% compared to 67% for men. As to age, 67% belong to the cohort of the millennials, people born between the early 1980s and the mid 1990s.

Economic analysis

Digging deeper into the economic data, the report shows that 29% of the companies surveyed operate in the fintech cluster of the real estate industry, 28% in professional services, 18% in the sharing economy, 15% in smart real estate and only 10% in contech, considered the most stubborn and most resistant to innovation: we are talking here about construction technology, in a nutshell everything that revolves around worksites. Perhaps one of the last strongholds in which the human factor makes the difference. But also, and precisely for this reason, a territory to a large extent uncharted by the innovators, where interesting niches for growth can be found. Assistance for anyone physically constructing buildings may arrive from the latest findings in terms of measurement or, for example, occupational safety. “We’re practically at zero in the contech cluster”, remarked Andrea Ciaramella, associate professor of the technology of architecture at Milan Polytechnic and coordinator of the Italian Proptech Network study. “There’s an extremely low propensity to digitalisation. The technology is actually already available, buy you have to know how to use it and the construction industry is loath to do so”. “But contechs are capable of increasing the productivity and sustainability of construction companies, and significantly”, added Daniele Levi Formiggini, Head of Real Estate Services in ARECneprix.

“An interesting aspect”, said Ciaramella, picking up again, “is that a large percentage of the surveyed businesses are at the pre-seed or seed phase, meaning at the initial stages of business development”. That means, the professor continued, that there is excitement and enthusiasm, even if the market test has still to be passed: as happens to all start-ups, the mortality rate in this period of the life of a business is, in fact, high. In practice, it is a question of validating your business model: 92% have had to make changes to what they started out with before taking the lift to success.

Forty-four per cent of the businesses surveyed work in the facility management field, 39% in asset management; one in four includes planning among its business activities, meaning the digital management of projects and the resources deployed.

While the number of proptech companies is rising, Ciaramella noted, the number of funding rounds is falling slightly, in both the early growth and growth phases. “The sector as a whole”, the professor noted, “is undergoing consolidation, but this is still at its initial stages: you can, however, see a high level of flexibility and adaptability in the forms of funding”, with 50% of businesses supported by entrepreneurs and industrial groups, 33% by business angels, 19% by institutional investors and 17% by venture capital.

It is interesting to note that approximately 60% of proptechs, or three out of five, say that they have encountered critical matters of a legal nature. Of these, 19% speak of a lack of regulations, 17% of problems connected with intellectual property and 14% of issues arising in relation to capital increases. Only 11% on the other hand refer to the administrative sphere.

Concluding considerations

“Italian proptechs are usually set up by young partners who have found an interesting tech solution” Ciaramella concluded. “A good number of them have a technical grounding in the IT field; we note, however, that many of them are not familiar with the mechanisms governing the real estate sector, and when they begin to sell their products they encounter situations that are very different from what they had anticipated. This is clear from the events we organise: there is far too much concentration on algorithms and tools, while what is needed is a complete vision of the market they want to face. Business partners are often based in wholly unrelated sectors; we therefore hope that in future real estate will come closer to proptechs, also by taking steps designed to encourage the meeting between innovation supply and demand”.

 “Traditionally, investors in the real estate sector have been hesitant to put their money into technological innovation or research and development”, added Levi Formiggini. “Nevertheless the situation is gradually changing, with an increase in the awareness of the benefits that proptechs can offer in terms of operating efficiency. A growing number of operators are beginning to recognise the value of innovation in this sector and explore the opportunities they can derive from it”.

To update professionals in the sector, Italian Proptech Network has organised an executive course with a highly practical leaning. “The lectures will take place between June and July at Milan Polytechnic and there will be a focus on business cases”, stated Ciaramella, “because we believe that this is the most effective means of understanding this market”. The approach will be based on data analysis. Six thematic modules, with experts and executives having an international curriculum teaching by way of interaction with the students. It is precisely for this reason, Ciaramella concluded, “that I don’t believe that Italy is lagging behind. A start was undoubtedly made earlier elsewhere, but in London, at the biggest industry fair in the world, I received confirmation that the gap can be easily closed. What is missing in Italy is awareness of the ecosystem”.