The following article appeared in the digital version of the National Real Estate Investor 2019 Market Outlook.
Technology advancements and changes in consumer behavior are impacting and disrupting the commercial real estate (CRE) industry as we know it. The digitization of the workplace, the growing role of robotics, the Internet of everything, our gig economy, the introduction of automation and AI are all creating a biosphere of promise and challenge. On the brokerage side, access to information will make it easier for buyers and sellers to make more informed decisions. As a result, brokers will no longer control the conversation.
The reality is that a broker’s role will never truly go away, but there will be radical changes. While we won’t see an AirBnB or Uber-like company disintermediate CRE soon, technological enhancements will disrupt the traditional brokerage model that has already minimized much of the need for human touch. By revolutionizing data ubiquity and transparency, whether it’s through the blockchain or other means, brokers will need to provide more advisory information to clients.
What does this mean for brokers? Three things:
- There will be no room for “C” players who hoard information and simply serve as connectors. In the future, information will be more readily available to clients and transparency will rule the day. We will see that the matching of a particular property in a particular asset class to a particular client can and will be done by AI. In fact, we are already seeing this being tested in CRE tech companies. In short, the obvious will be automated, whereas specialization and adding cerebral value to a transaction in an advisory capacity will be demanded and rewarded.
- Double-ending deals with a finite group of clients will be rendered obsolete. Every day new and unlikely buyers are entering the market. In the past this meant international buyers in Gateway markets. Today we see not just international buyers entering into secondary markets, but we also see family offices, previously local investors expanding out of market, and even crowdfunding. These new investors are more sophisticated, expect real-time information and access to all data. As a result, landlords are going to demand that their brokers make their properties available to the entire brokerage industry in order to drive value.
- There will be no more secrets in CRE. As real estate becomes more commoditized, data more readily available, clients more sophisticated, and the basics automated, the industry will be forced to operate with an open playbook. Fees will need to be clearly stated and they will be earned through creativity and adding value to the process. Those who built their businesses through obfuscation will no longer have an advantage and may in fact be relegated to “C” player status.
The reality is that the service that too many brokers in our industry offer clients today is simply not good enough. Changes in CRE client behavior, coupled with emerging technologies will radically change both the way in which transactions are facilitated, and the industry functions as a whole. This creates new opportunities for skilled participants. Those who lead and adapt today will sit in the pole position; those who seek to maintain the status quo are at risk of being disintermediated.
Kevin Maggiacomo is the CEO and President of SVN International Corp., a commercial real estate franchisor with over 200 offices and 1600 advisors and staff, located in 8 countries and expanding.