I started my career in commercial real estate in 2004. When I attended my first national sales meeting as a broker soon after, “disintermediation” was a popular topic of discussion. Many people seemed to be saying that at some point in the near future technology would obviate the need for brokers altogether.
Fast forward a few years, and I’m out of brokerage and on the tech side of commercial real estate. The first industry panel I sat on as a company founder raised the specter of disintermediation. And last year, it was covered yet again at several other conferences I attended.
The thing is, it’s just not going to happen.
Technology has changed the role of the broker in some ways, it’s true. But after the first wave of innovation—CoStar and LoopNet, in particular—progress stalled out for about a decade. And now that it’s picking up again, we’re not seeing anything like disintermediation. Instead, brokers are finally enjoying the benefits of workflow efficiency that other industries saw many years ago. Technology isn’t replacing brokers, but empowering them to be more productive and enabling them to focus on the human side of the commercial real estate business.
How the First Wave Affected Brokers
Consider the history of the commercial broker value proposition and how their day-to-day has changed over the past decade or so. In the ’80s and ’90s, brokers were the only ones with access to property information, so they had to find and build relationships with everyone and know their market—and its inventory—cold.
Then came CoStar and LoopNet, which made that information more broadly available. With them, the first wave of concern about disintermediation arrived. People worried about what other technology was going to pop up and disrupt the role of the broker. Of course, brokers soon realized that by sharing information they could do more deals, rather than fewer, and do them faster as a result of enhanced technology.
Then commercial real estate tech stopped evolving for a while. I suspect for a few reasons: completing a commercial real estate transaction is a time-intensive, complex process involving many people and a lot of moving parts. It’s not an easy workflow to simplify, and the customer base for that technology wasn’t big enough to attract the interest of many investors outside the industry. Then there’s the fact that commercial real estate practitioners haven’t had to invest much in technology because they’ve been able to make good money without it. That meant there was less intra-industry motivation to advance technology.
Meanwhile, residential real estate technology advanced faster and more continuously. Mapping technology to suit the residential process is easier because houses are more homogeneous than commercial property, and residential transactions are generally simpler. Other residential technology drivers have been the sheer number of residential transactions, and the fact that the business is consumer-facing and, arguably, even more competitive than commercial in some respects.
During the lull in commercial tech innovation, the brokers who succeeded were able to manage workflow and data mostly through sheer will and manual labor. They continued to make the best of often crude old-school tools, with results that were sometimes pretty ugly.
What’s Changed in Recent Years
About five years ago, the commercial tech landscape began to shift again, and that’s where it gets interesting. Notably, a bunch of young, hungry brokers got tired of inefficient processes and decided to do something about it. Innovators and entrepreneurs came out of commercial real estate—CompStak’s Michael Mandel, Nic Romito and Ryan Masiello at VTS, Hightower founder Brandon Weber, Jonathan Wasserstrum of SquareFoot, Transcend CRE’s Patrick Braswell, and yours truly—and decided it was time to take technology further and make it simpler so commercial brokers would be willing to get over their fears and doubts and the learning curve of implementation. These people said, “Enough is enough. It’s time to move commercial real estate tech forward.”
Their visions were made possible in large part by the cloud computing revolution, which lowered the cost and reduced other impediments to deliver modern technology to the commercial real estate world.
Then, in response—and in acknowledgement that the time was right—new technologies were adopted by tech-forward brokers, many of whom happened to be on the younger side. They saw some success and started to pressure their more established colleagues to adopt those technologies. And that brings us to today.
Something’s Happening, But It Isn’t Disintermediation
We’re currently observing a dramatic shift in commercial real estate. But it’s not about replacing the broker. It’s about work processes and how they’re shifting.
Today, a commercial broker can use data to prospect for clients and manage transactions in ways that were unimaginable even five years ago. Two examples:
- Cutting-edge CRM systems integrate data on tenants, buildings, submarkets, lease expiration dates and more, so that when a broker calls a prospect or client, he or she has a treasure trove of information on one computer screen while talking to that contact. The same data can be shared by all members of the broker’s team so that everyone is in the loop. Duplicative, redundant tasks are eliminated.
- Today’s technology also allows brokers to track and manage transactions entirely online from start to finish. Online deal books provide total visibility to brokers as they pursue an assignment, source leads, negotiate deals, review documents, and close. Every detail is electronically trackable, and the technology actually prompts brokers to advance transactions. No more spreadsheets. Goodbye, Gantt charts. Time to repurpose the whiteboard!
These days, other industries are talking about disruption via machine learning and artificial intelligence, but I suspect that’s a ways off for commercial real estate. Still, the technology is further along than we might think. Companies like Reonomy and Leverton are already leveraging tech in ways that not long ago we would have thought impossible by building tools for reading leases and piercing the corporate veil to find those pesky owners. In the future, I see a machine’s ability to read human emotion as something that could enhance brokers’ historical relationship-building value.
In the meantime, technology will continue to simplify the lives of brokers and their support staffs by optimizing workflow and making it easier for brokers to build relationships, maintain market expertise, and help their clients find and procure great properties. The commercial real estate broker isn’t going away, just adapting to a new future with technology that is light years ahead of where it was just a short time ago.