Will Technology Replace Commercial Real Estate Brokerage?

by | 08 March 2016

Uber, the ride sharing service, is not just a proper noun that has become synonymous with the collaborative economy. It has become a verb, where “Uber-ization” now refers to disruptive innovation that replaces conventional technology or gives rise to an entirely new industry. And the hit Broadway play for the collaborative generation will be called “Death of a Middleman.” But wait! We’re brokers. OMG! We’re middlemen!

Plus: Google’s David Krane talks about disrupting CRE | Will data transparency disrupt commercial real estate?

OK, now take a deep breath and relax. I don’t believe that the death of commercial real estate brokerage is eminent. The same is true for many other professions that offer specialized expertise and knowledge that add value to a business transaction. In fact, the collaborative economy will likely spur the growth of more specialized knowledge providers that deliver their services in increasingly varied and untraditional ways.

Also: Why diversity is essential to success | Four essentials for collaboration and innovation

In 1776, Adam Smith wrote in The Wealth of Nations that the “greatest improvement in the productive power of labour seems to have been the effects of the division of labour.” For most of human history, human families were a self-sufficient unit, supplying all they needed for survival. But as we began to voluntarily exchange goods, specialization grew. No longer did one person have to do a mediocre job of butchering, baking and candlestick making. A select few became expert butchers, bakers and candlestick makers, thereby freeing more people to specialize in what they were good at doing. Gains from trade encouraged further specialization, which encouraged more trade. Individuals were producing fewer things, but were also consuming more and prosperity spread to more people. Additionally, specialization incentivized innovation, driving increased gains in prosperity and wealth. And this virtuous cycle continued.

Enabled by smartphone and web applications, the collaborative economy appears to be the next step, possibly an exponential one, in the ongoing specialization of the economy. An ever-increasing variety of services will lead to greater prosperity for a greater number of people across the world, including poor countries where income is growing at a faster rate than the wealthier nations. According to the economic historian Deirdre McCloskey, the proportion of the world’s population living on $1.25 a day, adjusted for inflation, has fallen from 65% in 1960 to 21% today.

But back to the question at hand. Will commercial real estate brokerage be “Uber-ized?” It’s not likely in the near term. If specialization is the driver of wealth creation and prosperity, why would a business owner, who specializes in providing a unique service or product in a very competitive market, suddenly decide to go the DIY route? Why let a task such as finding new space or a building distract her from her primary source of income? Yes, there are a myriad of sources where one can find information for free and certainly some will still decide to go that route. But what does all this information mean? It’s a lot of noise, which needs to be analyzed and presented in a clear, concise manner taking into consideration the unique context of the end user’s circumstances. In other words, there’s a story behind all of the data that can lead to a more informed and appropriate decision.

We can tell the story and create value for our clients. We are specialists.

An architect turned broker turned researcher with a life-long curiosity about the built environment, Loren analyzes trends and data to provide insight to brokers and clients. He is passionate about making sense of the numbers and creating a value proposition through the story that they tell.