There’s been a relatively steady decline in the number of Canadian proptech startups since a peak of 57 in 2020, but Canada remains a global hub for real estate innovation according to Proptech Collective’s just-released Proptech in Canada report.
Toronto-based Proptech Collective is a non-profit founded in 2019 with a vision to drive innovation across the Canadian real estate and construction industries through events, educational content and community initiatives.
“Proptech experienced challenges because it was selling to the real estate industry, which has had its own struggles over the last few years regarding interest rates and other factors,” Alate Partners vice-president and report lead Stephanie Wood told RENX.
“But ultimately, I think we’re emerging stronger because the quality of companies that we’re seeing is just so much more impressive.”
Proptech startups are becoming increasingly focused on building sustainable businesses, shifting from a “growth at all costs” mentality earlier in the decade, according to Wood.
“There have been a lot of lessons learned in the proptech space over the last decade so I think people are looking at those lessons and thinking about what business models actually make sense. I think the industry is entering another phase of maturity compared to the last 10 years or so.
“It’s gone through a bit of a reset and now it’s graduating into its next phase, which is going to be marked by founders that are building stronger businesses that have good unit economics and that are more sustainable and that have scale.”
Growing role for artificial intelligence
Artificial intelligence (AI) holds great potential for transforming construction as well as residential and commercial real estate, but many solutions remain exploratory as industry leaders focus on establishing data governance standards and enhancing data structures and systems architecture.
“AI is unlocking possibilities and things that weren’t really possible before,” Wood explained. “AI inherently can process way more information and way more data.”
AI can help optimize the way buildings are designed while streamlining construction scheduling and creating more efficient and sustainable construction practices. It’s also hoped that it can speed up the zoning and permitting processes to eliminate bottlenecks in receiving development approvals.
AI should also be able to play a role in improving energy efficiency data summarization and decision-making for commercial real estate owners and their portfolios.
Other proptech trends
More scalable approaches are revolutionizing construction, addressing labour shortages and expediting building processes. By assembling components off-site in controlled environments, construction timelines are reduced, costs are more predictable and quality control is more efficient.
“Modular construction is really growing and there’s more appetite for it and more curiosity than I’ve previously seen on the developer side, especially as the construction labour force is shrinking in Canada,” Wood said.
While many institutional real estate firms have been investing in data centre strategies for years, this growth is only predicted to accelerate due to AI and increasing data consumption. These assets require substantial energy, which has highlighted the need for stronger grid infrastructure and more sustainable energy.
Proptech should be able to strengthen these systems, which will be critical in meeting future energy demands, optimizing building performance and advancing climate goals.
There’s been a growing focus on platforms that consolidate services like financing, insurance and transaction management in order to reduce friction and simplify the buying and selling experience.
The report also highlights two proptech sectors that have failed to gain the traction which was expected a few years ago:
- blockchain, where a decentralized database records transactions in blocks that are linked together;
- and the metaverse, where users are represented by avatars in virtual worlds and interact to purchase goods and services.
Challenges with fundraising
Canadian proptech startups faced a tough funding year in 2024, raising about $300 million across smaller rounds, though vacation rental software company Hostaway raised approximately $525 million to push the total over $800 million.
Wood said fundraising was down across the entire technology ecosystem and not just within proptech.
“It’s a really interesting and exciting time for the industry, even though it’s gone through this period that has been more challenging on the fundraising side,” Wood said.
“People were investing a ton of money in these businesses that ended up looking more like real estate businesses and had a different return profile and different margins than a tech company. Now people are being a little bit smarter by aligning the sources of capital with the uses of capital.”
Real estate companies have become more discerning since the early days of proptech, when they were interested in trying out a wide variety of different technologies. They now need to see returns on their investments.
Mergers and acquisitions are picking up
Consolidation and partnerships have accelerated as the industry has matured and 2025 is shaping up to be a landmark year for mergers and acquisitions.
While the proptech space has been flooded with tools that have driven innovation and solved specific problems, they’ve also added complexity and forced customers to rely on multiple platforms. The industry now demands simplicity and efficiency, which is driving the push for consolidation.
More than 15 global proptech merger and acquisition deals have already been announced this year.
“It’s been very active in the first few weeks of the year and I think that this year will continue to have a lot of M and A activity,” Wood predicted. She noted some companies may also be “looking to find a soft landing after a few tough years.”