A version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future editions, straight to your inbox.

As with much of the real estate industry, property technology, generally defined as the use of tech and software to make real estate and property management more efficient, took a big hit in recent years.

Higher interest rates, a capital market retraction and a push by almost all venture capital into artificial intelligence collectively hit property tech hard. While there is, of course, some AI in property tech, it hasn’t been enough to really drive interest in a sector that has historically been extremely slow to modernize.

“I’d say we just lived through probably the most challenging three years that certainly I’ve ever experienced,” said Brendan Wallace, co-founder and CEO of Fifth Wall. “You saw a lot of companies and new businesses and venture funds die. We just lived through an extinction event.”

Fifth Wall is a venture capital fund managing over $3 billion in capital, the largest investment firm focused on technology for the built environment.

Wallace said the winter is over for property tech, citing last year’s IPO of ServiceTitana cloud-based field service management software for trades such as HVAC, plumbing, electrical and landscaping. The company raised about $625 million in its initial public offering, and shares jumped 42% in their Nasdaq debut.

Wallace also noted new unicorns, such as Juniper Square and Bilt, which bode well for the future of property tech investing. Bilt, a platform offering loyalty rewards for housing, raised $250 million in July at a $10.75 billion valuation in a funding round led by General Catalyst and GID, including a strategic investment from United Wholesale Mortgage.

“The amount of enterprise value destruction that happened to prop tech was unprecedented from 2022 to 2024, but the amount of enterprise value creation that has just happened in the last 15 months has also been unprecedented,” Wallace said.

That is not the case, however, in climate-related property tech. That space is becoming increasingly challenged due to the political winds in the U.S. that have shifted dramatically away from sustainability and climate resilience, not to mention climate science overall. As a result, the entire climate tech ecosystem in real estate is suffering.

Again, real estate has always been slow to modernize and was particularly slow to decarbonize. It got a huge boost, however, from President Joe Biden’s administration and billions of dollars in public funding, much of which went to decarbonizing real estate overall. Then, Wallace said, the world shifted under its feet.

“Many climate funds are struggling to raise. Many real estate owners are deprioritizing sustainability, decarbonization and ESG (environmental, social and governance), and there is a palpable, negative sentiment shift that has set on climate-related prop tech,” Wallace explained. “And so what that means is we’re still supporting our companies. We’re actually still seeing lots of good progress, but the sentiment is negative.”

Despite the shift, he said he is optimistic about the sector for one powerful reason: While national policy may be anti-climate, local governments are not. Cities are running out of money, and carbon taxes are a very attractive way of raising capital. New York City is a prime example. It is not only moving much further left in its politics, but it has consistently been more environmentally progressive.

Fifth Wall, one of the biggest investors in this space, is taking the long-term play, investing while the negative “halo” around climate persists because valuations are attractive.

“My view is the real estate industry is still responsible for 40% of carbon emissions. It’s still this industry that has shirked its responsibility for years, and it’s going to cost a lot to decarbonize. It’s a lot of money, and capital is going to flow into that space … which is one of the reasons why we’re still deploying capital, because we’re the only ones,” Wallace said.