Amid this macroeconomic backdrop,
technological innovation is shaping
the real estate sector as investors and
innovative companies seek to address
all parts of the home-buying value
chain and improve the experience
of real estate agents, consumers and
every other constituent in the massive
ecosystem (e.g., lenders, insurers,
brokers, appraisers, title). William
Blair has completed 12 M&A deals in
the property technology (“PropTech”)
sector in the past two years, totaling
over $10 billion of deal volume. We
highlight some of the key macro trends
discuss what is driving M&A activity
and value in the PropTech space.
Key macro factors shaping the real
estate sector today
During the Global Financial Crisis
of 2007–2008, a sharp economic
contraction adversely affected new
housing starts in the years to follow.
The subsequent recovery and growth
were fueled in part by historically
low interest rates, favorable lending
standards, and new home formations
that generated housing market
demand with minimal new supply. The
COVID-19 pandemic introduced a new
era of growth in the housing market
as interest rates dropped to historical
lows and more people searched for
new homes, particularly once work-
from-home arrangements became
more common. From 2020–2022, home
prices soared and demand substantially
exceeded supply. In fact, some industry
commentators have referred to today’s
residential real estate market as the
most under-supplied market in history.
1
the Fed began to increase interest
2022. It opted to tighten rates again
by 75 basis points on September 21
and expects to increase them by an
additional 125 basis points by the end
of 2022. The Fed signaled an intent to
reach a terminal rate of 4.6% in 2023.
This, among other indicators, suggests
PropTech Sector Sees Growing M&A
Interest as Macro Trends Reshape
Real Estate Market
The U.S. housing market has experienced a prolonged boom.
Fueled by low interest rates, favorable lending standards,
below-average new home construction volumes, and
continued population growth, home prices have reached new
highs while demand has exceeded supply by a wide margin.
The COVID-19 pandemic disrupted the market as people
began house hunting in the suburbs and the commercial
real estate industry grappled with the implications of
work-from-home arrangements. Despite a rising interest
rate environment, COVID-19’s impact on the real estate
technology sector will leave a lasting impact for years to come.
Industry Commentary
Pete Dalrymple
pdalrymple@williamblair.com
Brandon Dobell
bdobell@williamblair.com
Matt Schultz
mschultz@williamblair.com
Greg South
gsouth@williamblair.com
Charlie Kurose
ckurose@williamblair.com
Akash Patel
apatel@williamblair.com
1. InvestorPlace, “Fears of a housing market crash are creating huge opportunities,” July 21, 2022.
1
that the housing market’s ascent may
be nearing an end. Total mortgage
quarter to the second quarter of 2022
and is projected to continue declining
in the near term due to rising rates, but
consumer demand for housing remains
strong.
3
“This time is different”
Looking closely at buyer demographics,
particularly the millennial generation
(those born between 1981 and 1997),
the struggle to get into a starter home
existing home sales are largely
competitive (homes selling at or above
asking price), there is a shortage of
approximately 3.8 million housing
units according to Freddie Mac, and
builders are not yet responding to the
appetite for new housing stock.
5
In
addition to the housing shortage, U.S.
2. National Association of Realtors, “Existing Home Sales,” August 2022. United States Census Bureau, “New Residential Sales,” August 2022. Freddie Mac,
“Mortgage Rates Increase,” August 25, 2022.
3. Mortgage Bankers Association, “MBA Economic Forecast,” September 19, 2022. Chart shows the dollar value of 1-to-4 family purchase originations in
USD billions.
4. Ibid.
5. Freddie Mac, “” April 15, 2021.
6. National Association of Home Builders, “” August 15, 2022.
7. Realtor.com, “June 2022 Monthly Housing Market Trends Report,” June 30, 2022.
Rental Market Tracker: Growth in U.S. Asking Rents Slows for Second-Straight Month,” August 19, 2022.
9. Apartment List, “Apartment List’s 2021 Millennial Homeownership Report,” February 9, 2021.
10. Ibid.
11. National Association of Realtors, “,” August 18, 2022.
12. National Association of Realtors, “,” May 20, 2021.
Secular growth in transaction volume and decline in mortgage rates
2
homebuilder sentiment dropped in
July 2022 to its lowest level since the
start of the COVID-19 pandemic, as
borrowing costs in more than a decade
standstill.
6
At the same time, home
of June 2022, inventory of available
homes was 19% higher than it was in
June 2021.
7
Even so, home inventory is
lingering at about half of the level seen
prior to 2020, and the rental market,
with the median monthly rent rising
14% year-over-year as of July 2022.
8
In addition to challenges with housing
inventory, demographic trends are
shaping the housing industry. As the
pandemic took hold, many young
people moved back in with their
families. They are now looking to
move back to the cities, driving up
the rental market that already is
experiencing tight supply in major
metropolitan areas across the
country. Caught between high rents
homes, millennials are running far
behind previous generations in terms
of home ownership. Less than 50%
of millennials in the United States
owned homes in 2020, according to
an Apartment List analysis of census
data.
9
Comparing homeownership
across generations, at age 30,
millennial home ownership was 42%
compared with 48% for Generation X
and 51% for baby boomers.
10
Despite
the current gap, however, millennials
are expected to provide strong demand
for homes in the years to come.
At the same time, the baby boomer
generation is retiring in large numbers
today. Demand for second homes and
in the housing market, particularly in
popular retirement regions including
Phoenix, Las Vegas, and Florida. For
these and other wealthy homebuyers,
the desire to limit debt burdens is
of all U.S. home sales as of July 2022,
up from 15% in April 2021.
11 12
also gaining traction as private credit
markets extend their reach into
residential housing. While affordability
has notably declined over the past
several quarters, the growing range of
available capital sources for
borrowers and buyers has and will
remain an important driver of the
housing market.
With change comes opportunity:
M&A activity in the PropTech sector
trends, the real estate industry is
experiencing a wave of technological
innovation across all areas of the
ecosystem, from buyers and sellers to
appraisers, lenders, closing attorneys,
and loan maintenance providers.
Several factors drive the vibrant
innovation taking place in the PropTech
Purchase originations expected to maintain steady seasonal volumes
4
USD billions
Home
Sales
0
2M
4M
6M
8M
30-year Fixed
Mortgage Rate
2
$0
$100
$200
$300
$400
$500
$600
Q1
2021
Q2
2021
Q3
2021
Q4
2021
Q1
2022
Q2
2022
Q3
2022E
Q4
2022E
Q1
2023E
Q2
2023E
Q3
2023E
Q4
2023E
0%
5%
10%
15%
20%
0
2,000,000
4,000,000
6,000,000
8,000,000
1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019
Resales New Sales Average 30-Year Mortgage Rate
the biggest difference from other large
consumer markets, which do not have
In addition, when considering today’s
interest rates, and the business cycle—
it is often the case that more assets
become available during economic
downturns, offering value to home
buyers who can afford to wait and to
investors who have been watching from
the sidelines waiting for opportunities
like these.
sector today. First, there is an obvious
need for structural and process
improvements. The U.S. real estate
market has always been fragmented
and focused on local and regional
solutions rather than a broader,
national approach. For both buyers and
sellers, this means that too much time
and effort are spent on process and
logistics, a major source of complaints
from all constituents. Looking at the
real estate industry as a whole, this
geographic fragmentation comprises
Considering these factors, the real
estate market is ripe for consolidation.
The market needs a one-stop shop
platform that addresses all critical
customer pain points and feature
requirements within a single integrated
technology platform. Data science is
also a corollary to this platform and to
the broader innovation needs of the
today have focused on harnessing data
buying, and managing properties.
Residential Real Estate Technology – Market Map
13
The PropTech sector features a multitude of point solutions addressing various parts of the residential real estate value
chain. Looking ahead, we believe value lies in combining disparate platforms into one cohesive customer experience.
13. William Blair. For illustrative purposes only.
Find the Property
Listings & Marketplaces Rental Marketplaces Tech-Enabled Brokerages Agent Tools
Finance the Property
Digital Brokers & Lender Lead Gen Digital Lenders Down Payment Assistance / Equity Alternative Financing
Close on the Property
Property Data & Appraisal Home & Rental Insurance Title & Escrow Transaction Management
Manage the Loan & Property
Capital Markets & Servicing Liquidity & Refinancing Maintenance & Improvement Rental Management
Sell the Property / iBuyers
Mortgage Lender Software
Loan Application & Docs Loan Origination & Closing
Other
Back-Office Management Investor Education
3
residential real estate?
When considering where capital will
identify two major trends that
are emerging:
Real estate agents require better
leads and supporting technologies:
Within brokerages and agencies,
agents need ways to acquire leads
with high likelihood to transact. They
need to then nurture these leads with
superior supporting technologies.
Given that agents typically spend a
substantial percentage of their time
on lead generation, there is strong
demand for improved ways to generate
high-quality leads and manage buyer
and seller prospects. With the housing
boom, almost 200,000 agents have
entered the industry over the past two
to three years.
14
When a downturn
eventually arrives, there likely will
agents and new players, while high
producers will gain market share.
for the top producers, including
better marketing, lead generation,
and CRM, will be especially valuable
in the years to come. Examples of
companies creating technologies for
better agent/brokerage performance
include Boomtown, Elm Street
Technology, Inside Real Estate, Lone
Wolf, MoxiWorks, Perchwell, Reapit,
and Ylopo. A substantial amount of
top of the funnel will drive more sales
Similarly, agents and downstream
constituents also require accurate,
real-time property-level data to drive
differentiated insights and streamlined
providing this level of granular data
include Attom Data, AirDNA, CoreLogic,
and Placer.ai.
Need for a broader consumer
experience with a streamlined, all-
in-one platform: On the consumer
side, the space is currently dominated
by online services including Zillow,
to the regional real estate boards
accessible to agents only. But each
platform has serious pain points. There
is strong demand for homebuyer-
focused offerings, which can provide
a broad consumer experience with a
streamlined, all-in-one platform. The
so-called “power buyers”—such as
Orchard, Homeward, and Fly Homes—
are well positioned because they are
streamlining the consumer experience
and getting very high attach rates
(20%-30% or more) as a result. Such
with a tremendous amount of venture
capital invested in this space, and we
believe there will be consolidation
among these buyers, especially as
some players like Reali leave the
system. The real disruption and
opportunity to create outsized value
will come from combining disparate
platforms into one cohesive customer
experience.
Evaluating the investment landscape,
venture capital and private equity
in the real estate sector since 2018.
companies over typical investment
between 2023–2025 as private equity
the real estate market, which should
lead to tremendous opportunities for
those with differentiated insights and
comprehensive solution sets.
Recent transactions highlight
PropTech M&A trends
William Blair has led a number of
sector in the last two years. These
transactions demonstrate some of the
innovative ways investors are accessing
the sector today.
• RealManage receives growth
investment from American
Securities: William Blair acted
RealManage in connection with its
growth investment from American
Securities. RealManage is the
largest homeowner association
and condominium management
company in the United States,
serving over 3,000 communities
across 19 states using a technology-
community management
companies, expanding its operations
in Southeast Florida, Colorado,
and Arizona. Communities and
community association managers
are supported by CiraConnect,
RealManage’s central services group
that includes all of its software,
management, collections, and
disclosure functions.
• HomeVestors acquired by Bayview
Asset Management: William Blair
HomeVestors, a portfolio company
of Levine Leichtman Capital
Partners, in its sale to Bayview
Asset Management. HomeVestors
is a leading real estate investment
franchisor, providing services and
education to franchisees seeking
to operate their own independent,
residential real estate investment
businesses. The company generates
proprietary real estate investment
opportunities through advertising
campaigns that utilize the “We
Buy Ugly Houses
®
” national brand.
HomeVestors was founded in
1996 and is based in Dallas, Texas.
• Building Engines acquired by
JLL: William Blair acted as exclusive
Engines, a portfolio company of
Wavecrest Growth Partners, in
connection with its sale to JLL
(NYSE: JLL). Building Engines seeks
to improve net operating income for
commercial real estate portfolios.
Building Engines helps its customers
increase revenue, improve the
occupant experience, and reduce
operating costs with an innovative
building operations platform. Today,
more than 1,000 customers rely on
Building Engines to manage critical
operational needs across more than
3 billion square feet and 35,000
properties worldwide.
• Zego acquired by Global
Payments: William Blair acted as
portfolio company of Vista Equity
Partners, in connection with its
acquisition by Global Payments
(NYSE: GPN). Zego (Powered by
PayLease) is a property technology
company that frees management
companies and community
associations to better serve residents
through resident experience
management solutions. Zego enables
operators in the residential real
estate industry to modernize their
resident experience, seeking to
boost satisfaction and operational
integrated property management
back-end system covering payments
and utilities to communications and
smart devices.
14. National Association of Realtors, “Membership Count by Month - 1910 to Current,” July 2022.
4
December 2021
has been acquired by
Not Disclosed
®
2022
investment from
has received a growth
Not Disclosed
2020
has received an investment from
Not Disclosed
2021
has been acquired by
$315,000,000
2020
Initial Public Offering
$3,830,000,108
May 2021
has been acquired by
Not Disclosed
December 2019
has been acquired by
$580,000,000
2021
has been acquired by
$925,000,000
2021
investment from
has received a majority
Not Disclosed
Select William Blair Transactions
tenant insurance, payments, and
the industry’s largest storage
marketplace through one integrated
solution that is designed to help
enhance occupancy, and improve
• Airbnb goes public via initial
public offering: William Blair acted
as an advisor to Airbnb (NasdaqGS:
ABNB) on its IPO, which raised
$3,830,000,108 in December
2020. The deal priced at $68, well
above the initial range of $44-$50.
Airbnb operates a platform that
enables hosts to offer stays and
experiences to guests worldwide.
The marketplace model connects
hosts and guests online and through
mobile devices to book spaces and
experiences. Airbnb was founded in
2007 and is based in San Francisco,
California.
• Hyphen Solutions receives
significant equity investment
from GreyLion Capital and Stone
Point Capital: William Blair acted
Hyphen Solutions in connection
with its investment from GreyLion
Capital and Stone Point Capital.
• Grace Hill acquired by Aurora
Capital Partners: William Blair
advisor to Grace Hill, a portfolio
company of Stone Point Capital,
in connection with its sale to
Aurora Capital Partners. Grace
Hill provides technology-enabled
talent performance solutions that
help owners and operators of real
estate properties increase property
performance, reduce operating
risk, and grow talent. Its solutions
cover policy, training, assessment,
and data-driven insights. Today,
more than 500,000 real estate
professionals from more than
1,700 companies rely on talent
performance solutions from
Grace Hill.
• Storable receives majority
investment from EQT: William Blair
to Storable, a portfolio company of
Cove Hill Partners, in connection
with a majority investment from
EQT alongside existing investors,
Cove Hill Partners, and the Storable
management team. Based in Austin,
Texas, Storable delivers management
software, marketing websites,
Hyphen Solutions is the leading
provider of cloud-based residential
construction management software,
providing over 70,000 builders,
installers, and manufacturers with
industry-leading supply chain
scheduling, procurement, and
collaboration solutions for North
America’s top homebuilders and
their suppliers. The company’s
SaaS applications deliver greater
operational control, better
communications, and increased
productivity. The Hyphen Network
services over 500 builder divisions,
which built approximately 300,000
new homes in 2019.
• Buildium acquired by RealPage:
William Blair acted as exclusive
connection with its sale to RealPage.
Buildium’s platform serves
association management, student
housing, residential properties,
tenants, and vendors by providing
solutions for leasing, advertising,
tenant screening, document storage,
collecting deposits, accounting,
rental portals, and signing leases.
Buildium services over 15,000
customers in 46 countries, totaling
over 1 million residential units.
Buildium was founded in 2004 and
is based in Boston, Massachusetts.
To learn more about trends and
opportunities in the PropTech sector,
reach out to William Blair’s technology
investment banking team.
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