SwissPropTech Report 2024 English Version

SwissPropTech Report 2024 The annual PropTech Survey

Swiss PropTechs remains unimpressed by the interest rate turnaround Building a customer base as biggest challenge

Pubisher SwissPropTech GmbH Hinterdorfstrasse 21 8314 Kyburg T 044 931 20 24 info@swissproptech.ch www.swissproptech.ch

Data collection Survey of companies in the PropTech sector in Switzerland between March and May 2024. Sent to around 420 companies. 54 people took part in the survey, the response rate was 12,9 %.

Market research institute AmPuls Market Research AG Am Mattenhof 16a 6010 Kriens T 041 612 14 14 info@ampuls.ch www.ampuls.ch

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Content Inhalt Inhalt Inhalt

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Management…summary 2………… Management…Summary 2………… Management…Summary 2…………

Management…Summary 3…………

Market…trends 3………… Marktentwicklung 3………… Marktentwicklung 3…………

Marktentwicklung 9…………

Financing…&…challenges 9………… Finanzierung…&…Herausforderungen 9………… Finanzierung…&…Herausforderungen 9…………

Finanzierung…&…Herausforderungen 13… ……

Trends…&…AI 13… …… Trends…&…KI 13… …… Trends…&…KI 13… ……

Trends…&…KI 16… ……

SwissPropTech:…Member…benefits 16… …… SwissPropTech:…Membervorteile 16… …… SwissPropTech:…Membervorteile 16… ……

SwissPropTech:…Membervorteile

Enterprise Member thefreundlicher kind support of: Mit freundlicher MitUnterstützung freundlicherWith Unterstützung von: Mit von: Unterstützung von:

Management Summary

Lars Sommerer Managing Director SwissPropTech

You are now holding the seventh edition of the SwissPropTech Report in your hands. This annual survey was initiated in 2017 and is used to determine the status quo and take the pulse of the Swiss PropTech scene. This year, the report is published by SwissPropTech. We would like to express our sincere thanks to the responsible people at UBS (formerly Credit Suisse), who have been responsible for this publication in previous years.

This year‘s edition shows a fundamentally positive picture of the Swiss PropTech scene. Local players are unimpressed by the interest rate turnaround and seem to be growing unstoppably. This positive attitude is reflected in the creative approaches and ideas with which Swiss PropTechs are entering the market. PropTechs continue to be founded and new offerings launched. In addition, the PropTech

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companies surveyed will continue to hire new staff in 2024. However, it is not only staff numbers that are growing, but also actual and forecast sales.

However, the path to a digital future is not free of obstacles. PropTech companies will have to face a number of challenges. This applies in particular to the recruitment of key people for their own team. This insight was already gained from last year‘s study.

What is surprising, however, is that financing the companies has become less urgent, which we interpret as evidence of a strong and self-confident Swiss PropTech scene.

This bold and confident attitude also reflects the mega topic of artificial intelligence (AI). Swiss PropTechs agree that AI will be a booster for their company. The benefits of this

new technology are primarily expected to be internal to the company, for example in the form of increased efficiency and automation.

The SwissPropTech Report provides players in the Swiss real estate industry with information from inside the PropTech scene. We are confident that it will provide a valuable basis for business decisions relating to digitalization and new technologies. Swiss PropTechs will continue to make waves in the future and accompany the Swiss real estate and construction industry on its path to a successful and digital future.

I hope you enjoy reading this report and would like to thank all the PropTechs and experts who contributed to our SwissPropTech Report 2024.

Market trends

429 active Swiss PropTechs

46 % of PropTechs are still in the scaling phase

85 % of PropTechs expect an increase in sales in the current year

+ 47 % more companies in the category Construction

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Swiss PropTechs remain unimpressed by the interest rate turnaround

The Swiss PropTech scene is bucking the general mood in the Swiss real estate and construction industry and is climbing to a new high with 429 active Swiss PropTechs (as of July 2024, Figure 1). The growth trend line has only known one direction for years: upwards.

Growth in Germany too But the Swiss PropTech scene is not alone in this. A look beyond Switzerland‘s borders confirms these findings. The German PropTech scene recorded growth of 14 % last year, reaching a total of 895 active PropTech start-ups in Germany (source: Blackprint, 2023). This figure may be higher in absolute terms than that of Switzerland. However, if the number of PropTechs in Germany is set in relation to the number of inhabitants of a country, there is a large relative advantage over Germany.

Digitization of the industry is lagging behind However, although the number of Swiss PropTechs has increased again, digitalization as a whole is still lagging behind: the Swiss real estate and construction industry‘s digitalization score is between 4 and 5 out of 10 (source: Digital Real Estate, Pom+, 2024).

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Break-even mostly not … yet reached A closer look at the various phases in which the Swiss PropTech scene finds itself confirms that the majority of Swiss PropTechs are still in the scaling phase. This phase accounts for around 46 % of all responses. A look at the expansion plans of Swiss PropTechs confirms the implicit assumption that downstream expansion is not yet a high priority for most PropTechs. The majority of the Swiss PropTech scene is therefore still dependent on financing and has not yet reached break-even. The impression is that good ideas and interesting solutions are perhaps not being marketed and sold enough.

Increase in construction and smart building A look at the Swiss PropTech categories (Figure 2) shows that the category «Services» continues to lead the field by some distance. It includes all service providers that cannot be assigned to any of the other categories.

In second place and with growth of 47 % compared to the previous year is the category «Construction», closely followed by the category «Smart Building», which has grown by 19 %.

Both categories have seen strong growth recently. This may also be

due to general conditions that have changed over time. For example, it is only a matter of time before the EU‘s taxonomy targets also affect the Swiss real estate and construction industry.

The category with the largest recorded decline is «Rental», which has shrunk by 19 %. One possible reason for this decline is the fact that some prominent PropTechs in this category no longer exist.

Figure 1: Development of PropTech companies 2016 until 2024 PropTech Map Switzerland 450 400 Growth leap thanks to newly listed ConTech companies

350 300 250

06/22: Removal of certain real estate agents who no longer qualify as PropTech 03/23: Adjustment for PropTechs that are no longer on the market

200 150 100 50

12/23

06/23

12/22

06/22

12/21

06/21

12/20

06/20

12/19

06/19

12/18

06/18

12/17

06/17

12/16

0

Source: proptechnews.ch

Figure 2: Development of the PropTech categories 2023 / 2024 140 123 116

120

100

80 63 +47% 60

37 30 -19%

40 27 26 20

44 +19%

48 49

43 29 30

12 14 3

37

36 36

Smart Building

Software

9 9

5

0 Asset Blockchain Construction Management

Finance

Floorplan Marketplace 2023

Rental

Sale

Services

2024

Source: proptechnews.ch

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Regional structure: Expansion within Switzerland is preferred

Swiss PropTechs prefer to expand in their own country rather than internationally. Even though some Swiss PropTechs have already had a taste of international business, the majority continue to operate nationally and are expanding into other cantons or language regions (Figure 3).

More than half of all Swiss PropTechs are already active in another language area. Even if there were concrete growth potential, national demand is currently sufficient to keep Swiss PropTechs busy.

Proximity to universities … is crucial Geographically speaking, Zurich is the beating heart of the Swiss PropTech scene: the majority of all PropTechs are based here. The region around Lausanne ranks a distant second. One reason for these two top positions may be the proximity to the two national technical universities and the good universities in general.

This centralization can also be seen in other nearby countries. In Austria, for example, there is a strong

focus on the capital city of Vienna: around 70 % of all PropTechs have their headquarters in the imperial city (source: Austrian PropTech Report, 2023). The situation is similar in Germany: just under 25 % of German PropTechs are based in Berlin and around 20 % in Bavaria (source: Blackprint PropTech Report, 2023).

Figure 3: Current Operating Environment 100%

100%

91%

80% 57%

60%

40% 26%

26% 20% 6%

11%

11%

0% Rest of world Rest of Europe

Austria

Germany

Switzerland

Where are you currently operating in? Statistical basis: 2024 n = 54

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German part French part (incl.

Romansh part)

Italian part

Figure 4: Number of employees in the next 12 months

Increased

2024

Decreased

No change

No answer

72%

0%

20%

26%

40%

60%

2%

80%

100%

Will the number of employees in the next 12 months increase or decrease? Please provide an estimation in % (full time equivalent). Statistical basis: 2024 n = 54

Figure 5: Recruiting staff – most needed skills Programming/technology skills 60%

40%

Sales skills

Marketing/communication skills

Management skills

Other

56%

33%

20% 6%

4%

2%

0% 2024

Regarding recruiting staff, what skills are needed the most? Shown is the frequency of the skill ranked first.

Statistical basis: 2024 n = 54

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Recruiting: Swiss PropTechs are actively looking for personnel

Swiss PropTechs are keen to hire and, according to their own statements, the majority would like to employ more staff in the next six months (Figure 4). Nevertheless, they are cautious when it comes to staff increases and are keeping personnel growth at low percentages. This may also have to do with the high fixed costs associated with a high headcount. It is clear that the demand for specialists will continue to rise and PropTechs will not be exempt from this.

entrepreneurial challenge. In view of this, it might be appropriate to focus employee skills more on marketing and sales.

Are Swiss PropTechs in love with technology?

The question about the most soughtafter skills in Swiss PropTechs leaves no room for doubt (Figure 5): Programming skills and technological skills in general are the most soughtafter. This suggests that the priorities of Swiss PropTechs lie more in technological product development and less in actively selling their own solution. This statement contrasts ­directly with the most frequently cited challenges of Swiss PropTechs: 28 % of Swiss PropTechs state that expanding the customer base is the biggest

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«Many thanks to the editors for sticking with it - it‘s great that the SwissPropTech Report is being continued. The report is the only annual publication that deals exclusively with PropTechs. Together with the weekly articles on proptechnews.ch and the SwissPropTech Bi-Weekly, it provides the real estate industry and PropTechs with guidance in the jungle of digitalization. The Swiss PropTech scene is large and robust, even in comparison with other countries. This is confirmed by the entries on the PropTech Map Switzerland. However, growth is flattening out in traditional areas such as process automation and virtual worlds. In general, PropTech risks being overtaken by new areas such as ClimateTech – ESG sends its regards. This would have a particularly negative impact on further financing rounds.

The money simply flows to where the wind is blowing - or where the ambitions are greater, for example in terms of internationalization.»

Heinz M. Schwyter, PropTech News

Financing & challenges

70 % of PropTechs were able to increase their sales last year

28 % of PropTechs see building a customer base as the biggest challenge

More than half of all Swiss PropTechs are financed from their own resources

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Surprisingly positive picture for financing

The Swiss PropTech scene is tending to generate more turnover than a year ago. This is also reflected in the characteristics of the individual categories into which turnover is divided. However, the majority of all PropTechs are still generating modest turnover and have not yet reached a phase in which they have actually broken even. They are therefore still «burning money». Half of Swiss PropTechs do not generate more than CHF 500 000 in revenue per year. Only a few Swiss PropTechs were able to set themselves apart and confirm their leading position. These are individual outliers that are characterized either by strong organic growth, successful investor acquisition and / or a low cost structure. Nevertheless, 70 % of Swiss PropTechs were able to increase their turnover compared to 2023 (Figure 6). The forecast for revenue development for the current year is particularly encouraging: no fewer than 85 % expect revenue to be higher than in 2023 (Figure 7).

Swiss PropTechs are mostly… self-sustaining For the majority of Swiss PropTechs, the challenge of «financing» has become less important than in previous years (Figure 7). A comparison of this statement with turnover and sources of financing reveals a surprisingly positive picture in terms of financing.

For example, a significant proportion

state that they are financed either with their own funds or with the founders‘ original capital pools. Strategic investors and venture capitalists make up a smaller proportion. The situation is different for planned expansions: Here, a larger proportion of Swiss PropTechs rely on cooperation with venture capitalists.

«PropTechs have become more mature and professional. They are still very selfconfident, but no longer as playful and in love with their product as they were in the early days. This was necessary ­because PropTechs have to hold their own in a fast-moving and competitive environment, grow quickly and still keep an eye on costs at all times. They therefore deserve my full respect for every year they survive. Not all of them succeed equally well, as the disappearance of some well-known names proves. Today, PropTech managers are increasingly at the helm rather than CTOs. The focus must be on customer benefit and nothing else, because the shakeout is not yet over and money is no longer so loose. However, the proximity to PropTechs is worthwhile for every real estate company, because it is mainly PropTechs that consistently use new technologies and provide innovative solutions.»

Fredy Hasenmaile, Chief economist Raiffeisen Switzerland

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Figure 6: Change of annual revenue Increased

Decreased

No change

Company did not yet exist in the previous year*

No answer 103%

2024

70%

4%

20%

2023

71%

5%

11%

6%

25%

0%

20%

40%

60%

13%

80%

2024 increased

100%

2024 decreased

How has the annual revenue 2023 changed compared to 2022? Please provide an estimation in %.

Statistical basis: 2024 n = 54, 2023: n = 56; * not asked in 2024; right: increased n = 39, decreased n = 1

Figure 7: Expected sales development for 2024 Increase

Decrease

No change

No answer 114%

2024

85%

2023

13%

91%

0%

20%

40%

2%

4% 6%

60%

80%

100%

2024 increase

How do you expect sales to develop in 2024 compared to 2023? Please provide an estimation in %.

Statistical basis: 2024 n = 54, 2023 n = 55

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Challenges: Specialists and building up the customer base

Although the majority of Swiss PropTech companies are optimistic, they face numerous challenges. The biggest challenge identified by respondents is building up a customer base (Figure 8). For many, this is not happening fast enough. Recruiting key personnel for the company (management staff, C-level representatives) is also a major challenge. The shortage of skilled workers was already an issue in the previous year and was viewed critically; how­ever, the problem

has become even more acute due to market developments in the past year. According to the Swiss PropTechs themselves, the focus when hiring new staff is primarily on people with technological skills. For example, experts in application development are in high demand. The search for new capital or new financing only appears in fifth place among the greatest challenges and in this sense has become less important for some PropTechs.

Furthermore, Swiss PropTechs will continue to struggle in 2024 with the fact that customers have long decision-making cycles and it takes months, if not years, for a solution to be implemented. In addition, standardized solutions often have to be adapted to individual customer requirements, which requires additional ­financial and human resources.

Figure 8: Main challenges Enlarge client base (sales) fast enough Recruiting key people for the core team Long decision-making processes at our customers Adaption of own product to individual customer needs at reasonable cost Secure financing Lack of awareness of our solution in the market Adapt organisation to fast growth Tough competitors Other

40% 28%

20%

19% 15%

13% 7%

6%

6%

4%

4%

0% 2024

Which main challenges are you currently facing? Shown is the frequency of the main challenge ranked first.

Statistical basis: 2024 n = 54

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Trends & AI

79 % see the benefits of AI primarily in internal optimizations

Lack of expertise is given as the main reason why AI is not yet used in their own company

54 % see AI as the biggest current trend in the PropTech scene

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Artificial intelligence is also affecting the Swiss PropTech scene

The buzzword of the moment, artificial intelligence (AI), has now also arrived in the Swiss PropTech scene.

More than 50 % of survey participants state that AI is currently the biggest trend in their market (Figure 9).

With regard to this finding, it should be taken into account that the focus of recruitment is on programmers and technologically skilled personnel, as shown above. AI has even overtaken the strong trend towards sustainability. This may also be due to the fact that ESG is still understood in very different and less standardized ways. It is still unclear how big an impact AI will have on future personnel requirements. At best, the tense personnel situation will ease somewhat thanks to this technology.

By contrast, the «metaverse» trend that was highly touted a few years ago has now completely disappeared from the consciousness of the Swiss PropTech scene.

Potential in internal … optimizations PropTechs are currently very optimistic about the use of AI. The majority of survey participants believe that artificial intelligence will primarily improve the efficiency of companies. (Figure 11).

The effects of AI are therefore primarily seen in the internal area; in particular, it is hoped that it will optimize internal processes. Solutions for customers, on the other hand, are still hardly seen. Accordingly, AI is still rarely used to offer customer solutions.

«Artificial intelligence (AI) has been with us for some time now. Advanced maturity and connectivity of models have facilitated access to users and expanded the potential for use cases. PropTechs play an important role in the transformation of services in the construction and real estate industry using AI and can turn existing business models upside down. Quick wins can be found in efficiency improvements, complex analytics and customer engagement. Establishing sustainable AI customer solutions is likely to take some time. In addition to the challenge of data availability, other factors are decisive for success. In addition to the quantitative benefits, these are the security, transparency, integrity and reliability of the AI solution. A key driver of success for PropTechs with AI offerings is therefore the relationship of trust with customers.»

Beat Seger, Chief Digital Officer KPMG Switzerland

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Figure 9: Trends in PropTech Artificial Intelligence (AI) 60%

Sustainability / ESG

54%

Decarbonization Big data 40%

Metaverse 28%

Other No answer

20% 7%

4%

4%

2%

2%

0% 2024

What are the biggest trends in PropTech right now? Shown is the frequency of the biggest trend ranked first.

Statistical basis: 2024 n = 54

Figure 10: Challenges of AI Lack of knowledge Finding the right technology supplier Difficulties in financing

60%

Low customer acceptance Other 40%

37%

None Not using AI

20%

No answer

19% 7%

7%

11% 4%

7%

7%

0% What challenges do you face when using AI in your business? Shown is the frequency of the challenge ranked first.

Statistical basis: 2024 n = 54

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Figure 11: Opportunity of AI Increased efficiency Higher customer satisfaction Lower costs Improved corporate image 80%

Higher employee satisfaction

74%

Other No answer

60% 40% 17%

20%

7%

2%

0% 2024

How do you plan on benefiting from AI? Shown is the frequency of the opportunity ranked first.

Statistical basis: 2024 n = 54

Figure 12: Threats of AI Machine replacement Technological dependability Pressure to higher financial investments Ethical and/or moral problems Employee resistance Other 40%

No answer 33% 22%

20% 9%

13% 7%

7%

0% 2024

How could AI threaten your business? Shown is the frequency of the threat ranked first.

Statistical basis: 2024 n = 54

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7%

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