– Written by Andrew Miles, Co-Founder of Realla
In the last thirty years, commercial real estate has evolved from a “mom and pop” operation to one of the largest institutional asset classes, rising from 4.5% of institutional investment portfolios in 2000 to nearly 10%, according to research by NAIOP.
As a result of this growth, there’s a lot of interest in making the business of commercial real estate more efficient.
Proptech has had a big impact on the residential side, and is now making its presence felt on the commercial side too. Most of the companies we speak to cite faster time-to-market and higher lead generation as a reason to adopt new technology platforms.
Leading agents, CIOs and CTOs at large commercial property agencies have shared with us some of their frustrations about adopting new digital technology platforms with us.
We’ve noticed that leaders in technology adoption recognise deeply which are the high-value parts of their job which only a human can do – for example, running a complex disposal with multiple parties, building competitive tension, peacemaking within a transaction, providing strategic advice. These are the elements that drive true value-creation. They then ruthlessly apply technology and automation to the laborious, process-driven parts.
Adopting new software
Leaders also recognise the ability to save time on laborious, process-driven task like preparing marketing collateral, managing high volumes of leads and reporting to clients as well as using the power of online to gain more exposure for deals – thereby ensuring successful digital transformations of business and operating models.
The process needs to start with building a business case for using new tech, something which nearly all of the businesses that we work with have done at some level. This can be as simple as “we only need to do one more deal each year across a team of eight fee earners to pay for it” to a full ROI appraisal. The very best businesses that we work with, however, have been disciplined about measuring the benefits of adopting new software against the stated business case throughout the roll-out of the program.
For example, one of our clients uses our software to track every single lead they generate across hundreds of transactions to understand the effectiveness of their different marketing channels from their own website to the Realla portal to social media and direct enquiries from their own network.
All the companies that we speak with note that digital disruption will involve significant changes to their operating model. Even those who anticipated the need for changes say that they have been unprepared for the scale and the transformation. Many companies try and solve new problems using legacy systems and processes – this is retrofitting the problem to the solution, and not appropriate. The best companies seem to take a systematic and highly proactive approach to adopting new technologies.
In the late 1990s to 2000s, Goldman Sachs made a strategic decision to partner, invest in, buy and hire the best FinTech companies and talent that it could, recognising that the next wave was coming. They were prolific. Goldman took the time to assess and then invested in new technologies and mindsets, arguably becoming the largest FinTech company in the world.
We are now hitting an inflexion point: in many ways, the train has already left the station, but over the next four to five years progress will surely accelerate. Commercial property CTOs and team heads will continue to feel the pressure to adopt new technology platforms as the industry continues to experience digital disruption. Those that take the cue from the industry’s digital leaders can take advantage of the change at the expense of their peers, and avoid the threat of disintermediation.