Swiss PropTech: ecosystems, the magic formula

Credit Suisse publishes its “Swiss PropTech Report 2022”.

Despite impressive growth in employment and turnover, as well as solid business creation momentum, PropTech players face more difficulties than in previous years. Rising rates and heightened economic uncertainty are expected to make it difficult to raise funds and sustain revenue growth. These players, however, remain optimistic. To increase their sales, most seek their salvation in building ecosystems. The latter are also of great interest to real estate companies, insurance companies or well-established banks.

PropTech companies are leading the digital transformation of the real estate industry. As they present the best growth prospects, they have drawn the attention of this sector and investors to their potential.

Against the current economic situation

Rising rates, market volatility and general economic uncertainty have affected PropTech companies in recent months. In stock markets around the world, their valuations showed extraordinary corrections. However, encouraging signs can be seen: last year, investments in European PropTech reached all-time highs and the sector weathered the difficult conditions relatively well, also in Q1 2022. According to a sector-specific global confidence index, investors had the highest level of confidence on record at the end of 2021. On the other hand, CEOs of PropTech startups were somewhat less confident, feeling that venture capital could be allocated more selectively in the future.

PropTech’s changing Swiss landscape

The PropTech landscape in Switzerland continues to transform. 40 new companies have been created since the previous year, bringing their total number to 360 today. According to the answers given during the survey, the creation of companies in this sector was also numerous in 2020. The pandemic does not seem to have mitigated the trend. Quite the contrary: the digital transition, also triggered in the real estate sector by the health crisis, has further increased the emergence of PropTech companies. The new players contribute to the rejuvenation of the sector, which is reflected in the results, as more than half of the respondents are still in the growth phase.

PropTech companies see themselves as part of ecosystems

PropTech’s rapid growth has clouded the service offering. Customers want fewer standalone solutions and the tightest possible integration of PropTech’s offerings into their value chains. The term “ecosystem” is often mentioned in this context, as a magic formula. An ecosystem can be defined as a low-level collaboration between different market players that, by constituting a vast value-creation network, offers customers more advantages than the sum of individual offers. To improve interactions between their products, encompass a more extensive value creation chain, and ultimately generate better turnover, the vast majority of PropTech players are increasingly organizing themselves into ecosystems: 46% of companies surveyed indicate that are part of an already established ecosystem, and 26% of an ecosystem in the process of formation. At the same time, nearly 28% of respondents plan to integrate an ecosystem in the future. None of these companies are turning their backs on this formula (see chart).

Ecosystems are also suitable for other sectors

Ecosystems are also on the rise globally. The consultancy McKinsey estimates that all habitat ecosystems will generate annual revenues of US$ 3.8 billion internationally by 2025. According to an analysis by Credit Switzerland, the term “ecosystem” is mentioned in 80% of company management reports. real estate, banks and insurance companies. Ecosystems aim to accompany the end customer throughout their journey, without interruption. They are based on the customer loyalty business model, making life as easy as possible and occupying or, at best, monopolizing the customer interface.

Ecosystems: Blessing or Curse?

In Switzerland, several housing ecosystems have emerged, usually under the aegis of insurance companies or banks, and the main offer of many of them is mortgage brokerage. But some have also trained in the sale and purchase of residential or rental properties. As the PropTech companies believe that the opportunities of such ecosystems far outweigh the risks, the risks should not be overlooked. Ecosystems seek to become market leaders in their respective fields. Consequently, their pursuit can induce a winner-take-all situation and lead to oligopoly, or even monopoly. For the end customer, ecosystems can become a curse rather than a blessing.

Graphic: PropTech companies see their salvation in their participation in an ecosystem*

Respondents’ response to the question: “To what extent are you part of an ecosystem?”

* Definition of an ecosystem: low-level collaboration between various market players who, through a series of common value creation chains (value creation network), present a unique value proposition that offers customers more benefits than the sum of the individual offers. Source: Credit Suisse PropTech Survey 2022

The “Swiss PropTech Report 2022” is available (in English) at Click here.

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