You’d be forgiven for thinking PropTech was on a rocket ship. Flashy demos. AI-powered everything. A conference circuit full of optimism and matching lanyards. And yet, behind the scenes, the UK PropTech sector is beginning to show signs of fatigue. Not a dramatic collapse, but a slow, quiet unravelling that’s easy to miss if you’re only scanning the headlines.

Take the recent demise of Tract, a London-based AI startup that aimed to rewire the UK’s clunky planning system. With a strong founding team, nearly £750k in early-stage funding, and a compelling product, it looked like a rising star. But by April 2025, Tract shut down, citing poor financial management, premature scaling, and, perhaps most tellingly, a market that wasn’t ready to pay for what it was building. The failure wasn’t due to lack of vision. It was death by a thousand operational paper cuts in a slow-moving, risk-averse ecosystem.

Zooming out, it’s not just Tract. In Q1 of 2025, tech sector insolvencies across the UK reached 2,000 - a 9% year-on-year increase, with mid-sized tech firms especially affected. At the same time, the real estate sector recorded tens of thousands of businesses in ‘critical financial distress’, according to Begbies Traynor. PropTech, by nature, straddles both. And it seems to be inheriting the worst traits of each: the burn rate of tech, and the glacial adoption cycles of property.

But perhaps the most telling indicator isn’t financial, it’s cultural. In too many cases, PropTech firms are solving technically interesting problems that landlords and asset managers simply aren’t prioritising. The enthusiasm of developers is met with a shrug from the people writing the cheques. It’s not a lack of need - there’s a clear appetite for better data, smoother operations, and ESG-aligned insights. But fragmented legacy systems, siloed teams, and "good enough" thinking continue to block adoption at scale.

Perhaps some of the disgraceful selling tactics out there have simply put buyers off. One industry contact told me that those selling PropTech are “worse than used car salesmen”.

Investors are taking note. After peaking in 2021, UK PropTech funding is firmly in retreat. Beauhurst reports that investment into the sector fell to £174 million across 98 deals in 2024, its lowest level since 2016. Compare that to the £527 million raised in 2021, and the trend becomes difficult to ignore. Smart money is circling fewer firms, with more scrutiny, less FOMO.

Another problem lies in the data or lack thereof. A recent report by Warwick Business School pointed to poor-quality and inaccessible data as a key handbrake on innovation in UK PropTech. It’s hard to train intelligent systems when your inputs are incomplete, inaccurate, or buried in PDFs from 1997. Without foundational reform in how the property sector stores and shares data, many of the most promising AI-enabled tools simply can’t function.

And then there’s the exit problem. For a sector that loves talking about scale, there’s precious little discussion about where PropTechs actually go. The pool of potential acquirers is shallow, IPOs are off the table, and VCs are growing wary of funding businesses whose customers are allergic to speed. Without clear pathways to liquidity, founders and investors alike are starting to ask harder questions.

This isn’t a eulogy for PropTech. Far from it. There are brilliant companies still emerging, especially in retrofit analytics, visitor experience, and operational decarbonisation. But the sheen has worn off. The sector now has to earn its place, not with hype decks, but with grounded, resilient, commercially sound propositions that deliver something buyers will actually pay for. And preferably without an AI-scented avatar that masks a lack of features.

The PropTech reckoning isn’t loud. It’s quiet, polite, and very British. But it’s happening.

In Dr Marson’s monthly column, he’ll be chronicling his thoughts and opinions on the latest developments, trends, and challenges in the Smart Buildings industry and the wider world of construction. Whether you're a seasoned pro or just starting out, you're sure to find something of interest here.

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About the author:

Matthew Marson is an experienced leader, working at the intersection of technology, sustainability, and the built environment. He was recognised by the Royal Academy of Engineering as Young Engineer of the Year for his contributions to the global Smart Buildings industry. Having worked on some of the world’s leading smart buildings and cities projects, Matthew is a keynote speaker at international industry events related to emerging technology, net zero design and lessons from projects. He is author of The Smart Building Advantage and is published in a variety of journals, earning a doctorate in Smart Buildings.