Brendan Wallace, the co-founder and CEO of Fifth Wall, recently addressed the current state of the property technology industry during a discussion on its future. Change will take some time. Fifth Wall currently manages more than $3 billion in capital. It is the largest investment manager focused exclusively on technology for the built environment. Although the industry has faced significant headwinds in recent years, Wallace said he was hopeful the sector would bounce back and grow in the future.
In closing, Wallace pointed out that Fifth Wall was able to raise around $625 million in their first public offering. This accomplishment is a tremendous base milestone for the firm. Fifth Wall’s shares opened 42% higher on their Nasdaq debut, an impressive first-day pop that underscored investor demand. This encouraging trend comes on the heels of a growing wave of new unicorns in the prop-tech sector. Firms like Juniper Square and Bilt are already blazing that trail. Real estate loyalty rewards platform Bilt, which allows renters to earn rewards on rent and other housing payments, raised $250 million last July at a $10.75 billion valuation.
“My view is the real estate industry is still responsible for 40% of carbon emissions,” Wallace remarked. He noted that the industry has abdicated its leadership when it comes to sustainability and decarbonization for too long. Reducing these emissions is incredibly costly. Nonetheless, Wallace is optimistic that the smart dollars will someday flood into this important sector. “It’s a lot of money, and capital is going to flow into that space … which is one of the reasons why we’re still deploying capital, because we’re the only ones,” he added.
Wallace acknowledged a troubling trend: many real estate owners are deprioritizing sustainability initiatives and environmental, social, and governance (ESG) investments. He pointed to the “palpable, negative sentiment shift” that has descended on all things climate-tech-adjacent, including proptech to support climate goals. This paradigm shift brings unprecedented challenges to the climate funds. Most of these funds face a very uphill challenge just finding the capital themselves in that very challenging environment.
Wallace reflected on the past few years, stating, “I’d say we just lived through probably the most challenging three years that certainly I’ve ever experienced.” For the property technology sector, the last six months have been challenging at best. As a result, between 2022 and 2024, it has gone through a historic wipe out of enterprise value. He claimed that the level of enterprise value creation over the past 15 months has been equally unprecedented.
Even with these headwinds, the property tech industry continues to show resilience. Wallace highlighted the recent IPO of ServiceTitan as a bullish signal for property technology investments. This cloud-based field service management software company is leading the way for an exciting year to come. More on the positive side, he’s encouraged by the sector’s direction and notes local governments are still investing in sustainability and climate resilience work.
As Fifth Wall continues to make its way through these sometimes thorny dynamics, Wallace is clear that he wants to deploy capital smartly. He thinks taking a deeper look at the systemic racism that’s baked into the real estate industry is key to lasting change.