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Canada builders, investors driven to adopt sustainable proptech: report

Industry saw $2.2 billion in funding from 2023 to 2002

From left, Deena Pantalone and Joanna Creed, co-founders of Sustainable Proptech and executives at Venturon. (Courtesy Venturon)

The Canadian real estate industry is being pushed by regulations and trends toward operating more sustainable buildings, addressing embodied carbon and opportunities for affordable housing, according to a report from Sustainable Proptech.

These winds are driving builders and investors to adopt sustainable proptech solutions – technology that applies real estate information toward sustainability.

Sustainable Proptech is a Toronto-based group, co-founded by Deena Pantalone and Joanna Creed, that connects the real estate industry to developments in Canadian proptech and sustainability. Pantalone is a founder and managing partner of Venturon, while Creed is the director of operations and general counsel at the firm.

Venturon is a Concord, Ont.-based investment group with a focus on sustainable proptech.

The 2023 Sustainable Protech Canada Report, partly authored by Pantalone and Creed, is the organization’s second report on the Canadian sustainable proptech industry. Its thesis is the contrast between fiscal value versus environmental values.

“Change to the industry is critical and happening, and it’s happening all over the world,” Pantalone told SustainableBiz. “Those leaders that are starting to adopt these types of technologies are far ahead of the rest of the pack and will be the ones that see those returns in their portfolios.”

Where Canada stands on sustainable proptech

The report found almost $2.2 billion was invested in the industry from 2002 to 2023, up from approximately $1.5 billion between 2005 to 2022.

Sustainable proptech is finding an audience because it boosts energy efficiency, generates potential revenue streams and adds both to the bottom-line value and tenant or occupier experience, Creed said.

There are also rapidly changing regulations, according to Pantalone. Canada’s carbon pricing affects the bottom line and investors must care. Stakeholders and tenants are increasingly demanding to know whether a home is net-zero, or about the greenhouse gas emissions of an industrial building, she continued.

Funding was divided across four categories: sustainable construction, smart cities, asset management and analytics/research.

Despite sustainable construction being the fastest-growing category in the last five years, over half of the funding went to smart cities.

Creed explained this was because the smart city category accounts for companies that lead the energy transition and electric vehicle charging, which are receiving disproportionate funding. These include top-10 funded companies like Amp, Hydrostor, GoBolt and Peak Power.

She expects sustainable construction to catch up because of rising labour and material costs causing a disruption in the industry, which will reach a tipping point to bring more housing supply and finish the projects.

Almost 60 per cent of the funding flows to Ontario, which Creed said should not be surprising given its population and economy.

There has been a substantial increase in proptech companies listed by the group, with 68 in 2022 growing to 116 in 2023.

Creed said Canada can lead globally in sustainable proptech with its educated population, tech industry base in Kitchener-Waterloo, relatively clean electrical grid and a large real estate industry.

What is driving proptech in real estate?

Since the previous Sustainable Proptech report, it has identified three themes shaping the real estate industry.

The first is the idea of "better buildings," which are decarbonizing and becoming energy efficient with the aid of sustainable proptech.

“These buildings that are surrounding us today are going to follow us into the future for the decades to come. We need to decarbonize them. The only way to do that with any sort of immediacy is to embrace technology that allows us to decarbonize,” Creed said.

An example is Subterra Renewables, a Toronto-based geothermal utility that provides low-carbon heating and cooling services to commercial and large-scale residential buildings.

Embodied carbon is a rising concern in the industry, with people demanding to understand a building’s life-cycle emissions from shovels in the ground and its component materials, to operations and demolition, Creed said.

Carbonhound offers a software platform for asset owners to calculate their own carbon emissions. Concrete home printer nidus3D and TAS, which is tackling embodied carbon at 2 Tecumseth St. in Toronto, are highlighted as companies acting on embodied carbon.

The final theme is the opportunity of affordable housing. Pantalone said addressing this problem will require “significant improvement with public policy” on development industry taxes and long permitting periods.

This means involving stakeholders, the private sector and policymakers to break red tape, and adopting proptech to bring more sustainable units to the market quicker. The report names Sidewalk R.E.D, a Halifax-based company that sustainably redevelops neighbourhoods, as an example.

But the real estate industry is based on bricks and mortar which impedes rapid adoption of technology unlike fintech or healthtech, Pantalone added.

Creed said sustainable proptech companies are reaching an inflection point where costs for technology are decreasing while the need is rising. She expects scaling-up to happen soon, with Canada on the precipice of growth.

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