The traditional world of real estate has begun to embrace the new technology that is transforming the whole industry
Real estate has been around as long as commerce,” begins David Solomon, chief information officer at Cushman & Wakefield in New York. “And it’s always been a relationship business. Relationships are guarded very closely. The internet has the ability to take that completely apart.”
The property industry is therefore having to form new relationships. Surveying firms and developers are shelling out cash to get stakes in technology companies which will have a material affect on the industry. Insignia Richard Ellis has already invested $12.4m in nine property-related e-commerce companies including Property First.com and Onsite Access.
Jones Lang LaSalle is expected to follow suit with between $15m and $25m earmarked for internet investment this year, which would include spending on the company’s own site.
Other link-ups are already well established. LoopNet – set up in 1995 and considered the grandfather of property web firms – has signed deals with brokers who will use LoopNet to show their properties. LoopNet has signed up Cushman & Wakefield, Grubb & Ellis, Coldwell Banker, Colliers International and Oncor International among others, receiving more than $19bn worth of properties for sale and more than 27.9m m2 of commercial space for lease every month.
Such investments seem the best way for property players to survive and profit from this wave of new technology. Firms are facing the reality that the forum approach such as Loopnet is saving everyone time, money and security. And investments into service companies such as Onsite Access, which provides communication services for buildings, guarantees a stake in the sector’s new income streams.
The transformation has also not escaped the quoted sector in the US. Analysts at JP Morgan have recommended caution since spring 1998 on real estate stocks in the US, but in its report Real Estate and Technology, it starts to get excited at the possibilities the internet brings for new services and new income for the sector. “We see two ways that technology could positively affect real estate stocks:
1. Increasing revenue, primarily through selling new services like telecommunications; and
2. Lower costs either through operating efficiencies or by altering the ways the real estate companies operate.”
TrizecHahn is one company that has recognised the benefits. The Toronto-based company has already made several investments in technology firms such as Allied Riser Communications, OnSite Access, Broadband Office and Cypress Communications. SamZell’s Equity Office Properties is using third-party providers to generate revenues from tenants through business products and services.
It is a new world for the real estate business, as Soloman says: “We’re a suit-and-tie kind of company. You can imagine how people like us feel when a 22-year-old with a safety pin through his lip arrives and says he’s going to turn your business inside out. You look at each other and say you’re not sure you understand each other.”
Other companies admit that nervousness about the internet age could be an age problem. “Their attitude may be generational as most of the people who run big European companies are in their fifties and sixties and may not welcome radical change at this stage in their careers,” says a Healey & Baker report.
There is a certain wariness in the voices of those who have most to lose. “We’re not willing to go public; the last thing we would want to do is alert our peer group”, says Chris Peacock, president and chief operating officer at JLL.
It seems uncharacteristically coy for an international agency to be so guarded, but as Solomon points out, technology companies do not have a track record in the sector. “You’re now dealing with people who are very different, with almost no experience of the real estate business.”
He also makes the observation that investing in internet companies can have its negative aspects. “You have to strike a balance between the positive nature of an affiliation and the negative connotations.
“If we were to affiliate with an auction company, there might be a perception that we had a sweet spot for them. The questions could be asked, is this the best way to market a property, should we not consider other sites?”
For JLL there does seem to be good sense in making investments. “We believe we can aggregate and produce meaningful discounts,” says Peacock. “There are certainly gains to be made in terms of speed to the market and delivery processes.”
With the medium’s increasing sophistication, it seems more and more aspects of a property transaction will take place electronically. “In some parts of the market you can do just about everything except exchange contracts,” says Ian Kissane, property data manager at Insignia Richard Ellis. He sees the wave of US internet companies which have come over to the UK to market themselves using London as a springboard to mainland Europe. “But in some cases they haven’t yet realised how diverse the Continent is.”
