In this week’s blog, we have guest writer Seamus Bailey. Seamus previously wrote about what he sees as future changes in Commercial Real Estate (CRE) that would benefit the industry. We asked Seamus to expand on his original answer and discuss what CRE needs now, the industry’s technology and how it will shape its future.
Commercial real estate is noticeably resistant to technological changes (or advancements).
There are two often-heard arguments in favour of this reluctance:
1. that the business is heavily relationship-based and tech devalues that aspect, and
2. the numerous privacy concerns relating to confidential data.
While there is some validity to these arguments, in my view, our resistance to technology stems from the length of tenure in many CRE positions. In other words, most key decision-makers in the CRE field are accomplished professionals who came up before technology was such an integral part of the real estate industry. Having this as a critical factor presents us with a unique opportunity within the industry.
As with all sectors, over the next 20 years, the guard will gradually change. Those who prioritize technology and its integrations will win the CRE overhaul. As we’ve seen in nearly every industry, technology has become not only an integral time-saving tool but also an expectation among consumers.
The technology our consumers need
Most of today’s consumers would expect a company to have a functioning website, a standard that is now often necessary for doing business. The modern consumer highly values information made available before a formal inquiry on a business’s product or service. Technology like this also facilitates a more efficient market for both the consumer and business, as most inbound leads are, to some extent, pre-qualified and educated on the product. In addition to qualification and education, transaction speed dramatically increases when a consumer is educated, benefiting all parties involved.
What CRE needs now
How does this all tie into the commercial real estate industry? I see technology impacting the industry in three ways: marketing, information flow, and transaction. Marketing is the most obvious of three ways technology will continue to change the sales process.
Arguably, digital marketing has become the most critical facet of the real estate top-of-funnel. Most available assets have a significant online presence, whether that be online listing platforms, purpose-built websites, or virtual walkthroughs, to name a few. While the industry still utilizes tools like signage or physical mail, it’s demonstrably true that digital marketing gives the most exposure to a property for sale or lease. The trend is clear that technology will continue to refine and consolidate all marketing tools.
Another example is virtual tours of properties which I expect to continue to develop until it is standard practice. Much of the industry already uses 3D models of properties. However, as technology improves, a consumer should be able to “walk” through the property anytime. At the same time, they should have instant access to vital technical specifications through a mobile user interface. Both agents and clients would benefit from other ways of immediately answering the same ten questions about every property they view.
Information flow and transaction processes
An area of the industry that is most in need of overhaul and optimization is information flow and transaction processes. Currently, information in CRE is shrouded in secrecy. The transaction processes themselves can be arduous and complex tasks. Information flow improvements will benefit from technology integration but would also require legislation updates to make effective changes. The gold standard of information flow would be standardized property information available to all potential consumers.
Companies like Zillow and Redfin on the residential side are trailblazing this in the industry. These companies make available a wealth of information on residential properties, even developing a pricing algorithm for unlisted properties. While the success of these specific platforms is debatable, it seems clear that’s the direction the real estate industry is heading. Consumer reception to their services has been overwhelmingly positive. This improved information flow also ties directly into the overall transaction process of real estate.
One optimization in real estate is smart contracts and a basic distributed property ledger. Implementing this kind of technology would remove the need for various levels of bureaucracy like title insurance and trust accounts and expedite transaction speed and liquidity. A ledger like this would facilitate information flow. Theoretically, essential property information would be available at the click of a button without requests from central administration while remaining fundamentally secure. See this link briefly explaining a distributed ledger and its functions.
A top tech tip
I discovered an interesting by-product of the technology mentioned above while writing this. As information flow and transaction processing are optimized, there will be exciting opportunities for smaller-scale investors: crowdfunding and fractional ownership.
To highlight these opportunities, imagine you go for dinner with some friends to a popular and presumably profitable restaurant. You could purchase a $200 share in the business and (or property) at the owner’s discretion on your smartphone. An investment opportunity that would not have otherwise been available to you. Alternatively, you could review a passion-driven development proposal that, by standard metrics, is unlikely to be highly profitable (e.g. an indoor dirt bike park). While this proposal may struggle to secure investment from traditional means, the proposer may find that many small investors would be willing to commit $500 to see the project move forward regardless of investment metrics. Additionally, any investor, regardless of their size, would have their stake in the project automatically generated based on a standardized smart contract.
The real estate industry is ripe for technological advancements in the coming years. Stakeholders within the sector should be accepting and even excited about future changes. It is in everyone’s best interest to intentionally explore and develop comfort within these new technological frameworks. Technology is here to stay and will only make us more effective at our jobs.
Guest Writer: Seamus Bailey
Seamus Bailey is a Vancouver-based broker that specializes in income-producing properties and development sites, along with the marketing of strata sales and leasing.Check Out Seamus' Pro Profile