The commercial real estate industry is behind the times tech-wise — here’s why that’s slowly changing
Something we hear a lot from our podcast guests, on conference panels, and talking to LeaseUp users is some version of this: CRE as an industry is generally resistant to technological change. The mindset of “we have a way of doing things and it works” is more entrenched here than other industries, many of which have already widely adopted tech platforms that have in turn transformed their businesses.
Commercial real estate has a fundamentally different relationship with technology when compared to industries that went digital long ago. There are innate aspects of the industry that have made CRE historically slow to adopt new tech. Over the years, this has created an impression that commercial real estate is “tech-resistant” and inherently skeptical of adopting new tech.
We think this outlook is outdated, but there’s no denying that CRE has a unique relationship with technology. Here are five reasons the commercial real estate industry has lagged behind the times on picking up new technology — and why that’s slowly changing.
Personal relationships built over years – like those between broker and landlord, or broker and tenant – are very important and the key driver of business. CRE is a resilient and robust industry in large part because it’s built on a foundation of personal relationships like that between a broker and landlord or tenant.
The crucial data is often between the lines, something that can't be expressed in a database but has to be known through local relationships and personal knowledge.
Brokers deal in offline space. Other industries, like banking, can deal more readily in abstractions, because money is already an abstraction of value. Online shopping relies heavily on offline infrastructure — delivery vehicles, cold chain refrigeration for perishable goods — but the product is delivered to the end user.
Commercial real estate works differently. Brokers are often required to “walk a building” from the ground up as a routine part of their job. Changes and developments in the built environment happen gradually, so getting to know a place or space over a long period of time is a requirement of the job. The product brokerage teams sell is this slowly changing real estate space itself.
Nearly every deal requires an in-person tour, a built-in offline component. In other words, an essential part of the CRE transaction process can’t be easily digitized or automated. Virtual reality or augmented reality may claim to be able to replace tours, but when a tenant is going to be paying to occupy any given piece of real estate, they’ll most likely want to see it in person first.
While there are some big firms doing large volumes of sales, CRE is a wide field with many smaller companies and organizations involved. This is a barrier to new technologies gaining traction, since they need to be adopted by a sufficient number of brokers spread across different markets and working in different ways across different offices.
Brokers like reliable technology that’s worked for decades. Many still use a rolodex and other tech that pre-dates the internet, even mobile phones.
On a recent episode of our CRE tech and innovation podcast, The Shift, veteran south Florida broker Tere Blanca put it like this: “When I started in the business, early on in my career, I heard repeatedly that the services industry from a brokerage standpoint would be obsolete. And that was many moons ago, in the late '80s/early '90s. I don't feel that we're at risk in any respect. You need human interaction for what we do.”
Despite these factors, the tech transformation is coming, and CRE firms that fail to adopt tech platforms will be left behind. Artificial intelligence, augmented reality, metaverse real estate – even after you subtract the empty hype, it’s clear that we’re in a period of rapid, technology-driven change.
This technological shift is driven by a combination of internal and external factors, including the need for greater efficiency and flexibility in how CRE deals get done, changing client demands and expectations, and the evolving broker-client relationship.
The best approach is identifying where in your process technology can be helpful, and where you might not need it. Brokerage teams using LeaseUp are transforming how they collaborate and work with clients by streamlining the repetitive, time-consuming parts of the process, and freeing up more time for the intangible, relationship-based parts.
We talk to tech-forward brokers all the time about leveraging digital tools to gain a business edge. “Not every technology is gonna work,” Ra’eesa Motala of Rokos Advisors said in an episode of The Shift. “We try things all the time, we take it on, sometimes it's a home run and sometimes it's just not the right fit for us.”
Tere Blanca, while acknowledging that the human touch in CRE is still an integral part of the business, adds: “I think that there is a segment of our industry… that can be accomplished in a more efficient and streamlined basis. And I think we're headed in that direction, with some of the technologies and the platforms in development and already in existence.”
Ken Ashley from Cushman & Wakefield, whose influential CRE influencers list has evolved into the three-day CREi summit, reiterates that the way forward for CRE as tech changes is to keep the best parts of the human-to-human relationships while picking up the right tools to streamline deals and enhance client experience. “It’s a relationship business, but the way we make relationships is fundamentally changing to involve more tech and social media touchpoints,” he told LeaseUp for this article.
In the end, it’s not about commercial real estate being “tech-phobic” or “tech-averse,” but about recognizing the need for technology to keep up with the times and stay competitive in a rapidly changing industry.
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