Technology is threatening to disrupt the real estate industry in almost every way imaginable and commercial real estate is no exception. Companies like CoStar, Ten-X, and LoopNet are making plenty of technological advancements to help brokers manage their transactions.
Despite the rising utility of technology throughout the real estate industry, commercial brokers won’t be replaced anytime soon. Commercial real estate transactions are often too challenging and complex for a single program. Technology has nibbled at the edges of improving commercial transactions but has yet to threaten the jobs of commercial brokers.
- Commercial real estate transactions have too many variables for a single program
- There are too many subtle variables in standardizing a sale/lease and property valuation
- Technology has improved aspects of the process of searching for properties, auctioning properties, and automating marketing and execution
- New tech is advancing fast because billions of dollars are at stake for the company that builds technology to replace brokers
The question I explore today is “will we be replaced by technology?” My simple opinion is: not in the immediate future. Please indulge me while I share my reasoning.
Reasons why not
No two parcels of commercial real estate are the same. You could have two industrial buildings with similar square footage in the same city that have far differing values. A long-term, under-market lease can cause a declination in worth. Boost the electrical service into a building and you can sell for more.
Commercial real estate firms share data differently. We provide information on our listings to data aggregators such as CoStar, Catylist, the Association of Commercial Real Estate and LoopNet. Subscriptions to these services then bake our listings into a searchable format for brokers. The only consumer-facing service is LoopNet.
Commercial real estate transactions are complex. Standardizing a sale or lease is challenging as there are so many variables to consider: contingency periods, financing, tenancy, city permitting, title issues, tenant improvements, environmental evaluation. Ten-X has done a decent job automating the marketing and execution process of a sale but still requires a listing broker be involved. I am unaware of a service that has automated lease marketing – leases account for approximately 75 percent of all commercial real estate deals.
Billions of dollars are at stake. The company who cracks the code to the walled garden and figures out a way to eliminate brokers will rake in billions.
CoStar revolutionized the way in which brokers search for property. Once precluded from doing deals in other locales — because we didn’t have access to the available inventory — we can now trade around the world. LoopNet has given us a portal — albeit a small one — to consumers. Ten-X, formerly Auction.com, piloted the disposition of hundreds of distressed or bank-owned assets through their auction platform.
View the original article at The OC Register