The wave of artificial intelligence sweeping through the global economy has now fully infiltrated the proptech sector, where a new generation of AI-native startups is racing to transform commercial real estate. With global proptech investment reaching $15 billion in 2024 and likely to double in 2025, AI has become the center of gravity for new products, funding rounds, and market strategy, according to BisNow.
But while the hype is real, so are the growing pains.
Proptech firms are increasingly pitching AI-first platforms for everything from tenant communication to construction oversight. According to JLL Spark, about 700 of 7,000 tracked proptech companies now use AI, and the vast majority are already generating revenue or profits. Investors are responding in kind: a significant share of capital is now flowing toward startups built with AI at their core, and that share could rise from 20% to as much as 50% in the coming year.
But as interest and funding surge, questions about sustainability and market saturation are rising. Analysts expect the sector to avoid a total crash, but consolidation is inevitable. With AI helping early-stage startups do more with less, the barrier to entry has dropped. At the same time, success often hinges on access to large datasets, which entrenched players already control. This creates a widening gap between incumbents and newcomers, setting the stage for a shakeout.
Startups that fail to scale quickly enough—or cannot offer truly differentiated value—are likely to be absorbed or pushed out. The efficiencies AI provides in product development and customer service aren’t enough to overcome the distribution advantages and data ecosystems of larger firms like Yardi, EliseAI, and RealPage, especially in tightly competitive markets like multifamily housing.
The market is already moving in this direction. In 2025 alone, major AI-fueled proptech funding events included EliseAI’s $250M raise, Bilt’s $250M capital injection, and Entrata’s $200M investment from Blackstone. Meanwhile, smart building platform Runwise completed a $55M Series B. Analysts see these large investments as early indicators of dominance by a few key players—while smaller, undifferentiated AI startups risk becoming commodities.
Still, insiders don’t see the AI surge in proptech as part of the more speculative froth affecting broader AI markets, like LLMs and data center infrastructure. Instead, they view this as a traditional tech cycle playing out—rapid growth followed by inevitable market sorting.
Looking ahead, areas like construction safety, insurance, and transaction management are expected to attract more attention, especially for startups that can prove value beyond flashy chatbot interfaces. But for the many companies now adding “AI” to their pitch decks, the message is clear: without strong distribution, unique data access, or real ROI, you’re unlikely to survive the next wave.
