AI Proptech's Rapid Growth Won't Form A Bubble, But It's Likely To Create Winners And Losers Anyway

The continuing artificial intelligence surge across the tech industry and broader economy has spilled into the proptech market, as a new cohort of startups seeks to sell AI-native apps across the commercial real estate landscape. 

With proptech investment growing by billions of dollars year-over-year, the specter of a bubble has formed. But analysts believe that while AI-fueled proptech won’t crash and burn, it will reshape the startup market and lead to consolidation and market dominance by a handful of players.

“It definitely feels like in the last six months, there have been more rounds raised as a result of companies telling an AI story,” AppFolio Vice President of Product Cat Allday said. “People are starting to ride the AI train. Are the valuations crazy? Probably.” 

Globally, proptech companies raised roughly $15B in 2024, according to Center for Real Estate Technology & Innovation Managing Director Ashkán Zandieh. The market is broadly dominated by the U.S. and may double in 2025, and the percentage devoted to AI-focused firms may grow from 20% to somewhere between 30% and 50%. 

JLL Spark found that 700 of the roughly 7,000 global proptech firms it is tracking “use AI as part of their tech stack,” and 83% are generating revenues or making profits, "signaling a long-term potential for the market.” 

Investment bank Houlihan Lokey has tracked rising amounts of merger activity and growth capital applied to the proptech markets during the first half of 2025, as investor activity trends back toward the boom days of 2021 and 2022. These shifts have led Fifth Wall CEO and Chief Investment Officer Brendan Wallace to declare the proptech winter is over. 

“Every firm should have AI at the core of its operations and strategic growth at this point,” said Era Ventures founder and Managing Partner Clelia Warburg Peters. “You really shouldn’t be getting venture funding at all if you’re not using AI.” 

But the increased centrality of AI to proptech fundraising, growth and success doesn’t mean the market is without its challenges, pitfalls and potential bubbles. Analysts see AI accelerating what could become a sharply delineated market. A divide will form between AI-native startups and services and those trying to graft AI on to existing offerings. 

There will also be a split between firms with expansive reach and customer distribution and new firms trying to seize an opportunity to gain market share in the competitive, relatively decentralized worlds of construction, property operations and asset management. 

Artificial intelligence, and the efficiency it can bring to early-stage growth and programming tasks, can help small startups rapidly scale, and make early investments go further. 

“AI is going to allow people to build companies a lot cheaper,” Peters said. “Company building is going to be able to be done in a much lighter touch, lower-cost way.”

But with so much of the success of programs riding on access to data, and with large platform providers that can use existing data already seeking to lock in customers, it can be harder for the little guys to get access and a leg up. AI won’t crash and burn, but it may widen the gulf between the haves and have-nots much more rapidly. 

“There’s a compounding nature to progress with AI and technology,” said Dom Beveridge, principal at multifamily consultancy 20for20. “If I’m showing up late to multifamily AI technology, I just don’t get how I get a serious foothold in the market anymore.” 

That suggests a coming wave of consolidation, with many smaller startups struggling to find a viable path forward without being acquired, as larger players gain distribution advantages. 

But analysts who spoke to Bisnow see it more as part of the traditional cycle of tech growth after the embrace of a new technology, not a sign that the wider AI boom and potential bubble will impact the proptech world.

Investors and startups in the last few years have focused more on profitability and paths to investor exits in reaction to the declining interest rate environment, Wallace said.

Key parts of the recent string of big funding rounds or financial successes, such as ServiceTitan’s successful December 2024 IPO and CBRE’s acquisition of coworking firm Industrious in January, would have happened with or without AI, Wallace said.

“The funding in the broader economy that’s going towards AI and large-language models and data centers, that seems bubbly to me,” he said. “None of that is really proptech-based. Proptech benefits from the commuting power [of the AI boom] but there’s no direct contagion.”

That’s not to say AI-focused or AI-native firms haven’t also had a great 2025. EliseAI, a leader in multifamily that helps operators and owners communicate with tenants, raised $250M in August, a prime example of a dominant player extending its lead in the space, according to Beveridge and others. 

Houlihan Lokey found there’s a “growing adoption of AI and predictive analytics across real estate workflows.” The firm also noted renter reward program Bilt’s $250M capital raise, Blackstone’s $200M investment in multifamily operation system Entrata and AIA Contract Docs’ sale to WCAS as other big deals this year. Runwise, a smart operating system for buildings, completed a $55M Series B fund-raise.

Going forward, analysts predict more growth before consolidation truly hits next year or in 2027. Wallace believes a new cohort of proptech and fintech firms will thrive around assisting with the friction of buying and selling assets. Zandieh sees sectors like insurability and construction and job site safety as big focuses of investors. 

“If you're a chat-based company, you're a commodity,” said Zandieh. “You're worth zero. It's a matter of fact, you're worth nothing.”

For Beveridge, the multifamily market will likely be dominated by players like Yardi, EliseAI and RealPage, which have a large lead in their install base. 

It’s difficult for someone who raises a small seed round to catch up, he said. Once a client has a larger AI operating system established and starts benefiting from data analysis that can, for instance, show the connection between increased maintenance schedules and a reduction in delinquency, they’ll likely be locked in.

This may be the model for other subsectors of proptech, as categories start blurring and larger platforms try to add functionality. 

“A lot of these markets or software are overcrowded, so I don’t see how we don’t end up having a lot of consolidation,” Beveridge said.