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The world of commercial real estate (CRE) is filled with misunderstandings and myths, especially in light of new technology startups that are poised to shift the status quo. To date, three ideas about new CRE tech remain especially pervasive across the industry, yet do little more than conjure fear about tech solutions that are sure to help the industry flourish.
Myth 1: CRE is fundamentally driven by relationships, and few aspects of it will ever be replaced by technology.
CRE transactions are anything but simple — they are often complex and entirely unique and have historically relied on long-standing relationships. But this doesn’t mean that relationships are a fundamental driver of the CRE industry writ large, especially when it comes to inefficient aspects of transactions or operations, such as office leasing, property management or securing CRE debt.
In the case of office leasing, new tech can aggregate data and match potential lessees with the most appropriate options, all while streamlining transactions from start to finish. For property management, new tech can display various points of property data in real time to provide clear and accurate infrastructure overviews. And when it comes to CRE debt, new tech can use data to match relevant parties to ensure the highest possibility that a transaction will close.
While relationships are quite valuable in CRE transactions, we shouldn’t ignore the role new CRE tech will play toward driving an increasingly efficient marketplace in the near and distant future. This is because data is essential for efficiency, and new tech is the tool to collect it. Furthermore, while new tech may seem to exist outside relationship-based transactions, it actually stands to add data-driven insights whose application will define winners and losers in the years to come.
Myth 2: New CRE tech is only useful for ‘small’ deals (say, $2 million and under), and new tech adds little to no value for large transactions (such as those $5 million and up).
New CRE tech is poised to disrupt inefficiencies across the industry while moving the market toward increased reliance on data-driven insights — making new tech useful for deals of all sizes. And in contrast to the statement above about small deals, larger deals (say those $25 million and up) actually stand to benefit most from new CRE tech, where shifts in just a few basis points can translate into millions of dollars saved.
In the case of CRE lending, large players have admitted in confidence that they’re prepared to leave money on the table in order to increase the certainty that a deal will close. Questions at this point inevitably move toward how much one is willing to lose, which is never short of multiple millions. In previous years, these conversations have been troubling given the emergent and often static status of new tech in CRE, which is slowly eroding as new platforms become increasingly useful and usable.
Myth 3: New CRE tech is deliberately poised to replace brokers.
New CRE tech is not deliberately designed to replace anyone in the CRE industry — especially not brokers, who are essential throughout the transaction process. On the contrary: New CRE tech is deliberately designed to drive efficiency and competition in the marketplace, which will only refine transaction processes in their current form and, if anything, enhance the role of brokers in the CRE industry.
The idea that new tech will replace brokers seems to (incorrectly) assume that brokers are only providers of access rather than service, which is nothing more than a misunderstanding of the broker profession. Brokers are inherently professionals and providers of service — and those who embrace new tech will have the luxury to focus on this key aspect of their business. In other words, new tech is easing access and, consequently, allowing brokers to focus on their role as service professionals.
Moving Away From Myths Of The Past
As with anything rooted in mythological thinking, knowledge is essential for progression beyond harmful ways of the past. The CRE industry is poised to benefit from virtually all new technologies that will only continue to harness the power of the data-driven insights that are essential for increased efficiency and productivity. In this light, those who embrace new tech will stand to reap its benefits as they’re continually refined over time, while those who choose to refrain will be left scrambling to catch up in the years to come.