“Proptech is no longer niche; it is now one of the largest categories of venture capital and is transforming the real estate industry,” claimed Brendan Wallace, one of the three co-founders of proptech firm Fifth Wall, in an announcement late last month.

The announcement related to Canadian investor Ivanhoé Cambridge’s investment in the firm, making it Fifth Wall’s biggest shareholder. It was one of three announcements in the past couple of weeks about blue-chip institutions investing in Fifth Wall or one of its funds; the other two were from PGIM, the asset management arm of American life insurance company Prudential Financial, and Knight Frank, the London-based property services firm.

They are among 65 limited partners from 15 countries to have backed Fifth Wall in one or more funds to the aggregate tune of $1.7 billion.

Ivanhoé Cambridge, one of institutional private real estate’s heavyweight investors, is subscribed to a total of $85 million now across four Fifth Wall funds. Other institutional investors or managers backing the firm include GLP, Hines and MetLife Investment Management.

With support like that, it is unsurprising the firm sits atop PERE’s inaugural Proptech 20 ranking of managers by capital raised in the last five years, published this week. But at $1.4 billion of the ranking’s combined $5.52 billion, it is notable Fifth Wall accounts for a quarter of the private capital raised for direct investments in the technologies expected to shape the transformation of the real estate sector through these next, pivotal years.

Private real estate’s newest capital markets frontier might be no more than five years old, but already it has determined a heavyweight champion. There is a sense of déjà vu about this. Ostensibly at least, real estate businesses keen to advance their technological capabilities have flocked to a leading brand in a similar vein to how institutional investors have become almost obliged to support private real estate’s heavyweight Blackstone. Indeed, one consultant told PERE earlier this year how an institutional real estate portfolio often starts with a ticket to a Blackstone vehicle before other managers are considered. It is hard to believe a similar theme is not already playing out in proptech.

Notably, Fifth Wall’s co-founders have significant history with the New York giant. Wallace formerly was a Blackstone real estate executive; Brad Greiwe previously co-founded Invitation Homes, the single-family rental business heavily backed by Blackstone. While at UBS, Greiwe was also a lender to one of Blackstone’s biggest real estate transactions, Hilton Hotels.

Whether the personnel connection is coincidental or instrumental in Fifth Wall’s early traction with private capital markets, the parallel of polarized market dominated by an 800-pound gorilla is hard to ignore. Blackstone has led PERE’s signature list of private real estate managers by capital raised since the ranking’s inception, having raised $64.9 billion of the ranking’s aggregate $494.5 billion – 13 percent of the total.

Debate remains as to the health of a sector quite so polarized. For sure, Blackstone has justified a top billing with since-inception, cumulative IRRs of 15 percent and an equity multiple of 1.9x. That can be argued as justification enough for institutional groupthink. Unequivocally, investors in Blackstone funds can attest to making a profit.

Sustained and meaningful returns are, however, yet to be chalked in proptech, including by Fifth Wall, which has yet to publicly confirm a full-circle commingled vehicle. Can private capital markets really justify polarizing the sector so soon? Assessing the downside to doing so would be an interesting exercise.

According to PERE’s cover story on proptech’s capital markets, investment in technologies focused on the built environment increased from $9.1 billion in 2015 to $24.6 billion in 2019. There was a covid-dip to $23.8 billion last year, but these numbers are expected to be left behind in the years to come. Early claims on market share will go some way to determining who benefits most from this growth.