Technology, social media, coworking and CRE
All of us in commercial real estate love to talk about technology. Our industry has a reputation of being late adopters. And maybe that’s not such a bad thing since the commercial real estate industry doesn’t jump to adopt every shiny new technology as soon as it is introduced before it is proven to be a valuable tool.
Regardless, rapid advancements in technology are impacting corporate real estate in many ways: the tools we use to serve our clients, how we market ourselves, how much office space we use and where and when we work, to mention just a few.
When I think about technology, I like to think about how reacting to these rapid advancements can help me be of more value to my clients — whether that is a more effective transaction, keeping clients better informed or showing them how to create a more effective and profitable workplace.
Technology and disruption in CRE
There are some great new commercial real estate technology companies out there bringing new services and products to the marketplace. A few will become huge success stories, and many will fall by the wayside. That is the startup storyline in most industries.
The reality is that many of these new companies are giving us great new tools that bring efficiency to marketing and managing the process of transacting commercial real estate. However, none of these companies are on the verge of fundamentally changing the commercial real estate business.
Looking back over the last 20 years or so, CoStar and LoopNet are the two technology companies — ironically now just one — that have had the biggest impact on the industry. While they certainly changed how we research and market commercial real estate, they didn’t fundamentally change the commercial real estate business. Throwing the term disruption out there is easy to do, but actually achieving that elusive goal is another.
CRE is much too complex to be significantly simplified with algorithms or lines of code. Disrupting CRE will require changing consumer habits. So, I am not worried about my job, but I am always looking for better tools that help me serve my clients in a more effective and efficient way.
Social media, content marketing and CRE
There is no question that social media today is a more widely accepted tool for commercial real estate brokerage professionals than it was five years ago. The medium should continue to gain more acceptance as a younger generation of brokers establish themselves in the industry. I can straight-up state for me personally that social media and content marketing have been both directly and indirectly responsible for a significant amount of new business and commission income. However, for most brokers — particularly the seasoned brokers who today dominate the industry — they never have and never will. In reality, these brokers don’t need it. A few gave it a shot, but their efforts lacked consistency. In order to be effective with social media, you must consistently create and share interesting and valuable content.
What I have noticed is that over the last couple of years is that the biggest commercial real estate brands have embraced social media and content marketing. These firms have recognized that the commercial real estate media landscape has changed. They understand the importance of a strong digital presence. Digital savvy millennials are now the largest sector of the workforce, and it won’t be long before they ascend to the C-suite, if they are not already there. Younger brokers moving up the ranks should pay attention and think about who their clients are going to be over the next 20 years.
Corporate real estate and the coworking model
This is one of the workplace trends I find most intriguing. Every year, I find myself working less and less from my office and in places where I can get an Internet connection — whether that be my home, a Starbucks or even my car. Technology is changing where and when we work, and creating new workplace alternatives such as coworking operations.
The coworking trend is a fairly new one and first gained popularity particularly in tech-centric markets. But coworking is now popping up regularly in major cities nationwide. WeWork, a provider of trendy office space to freelancing millennial workers and startups, is now estimated to be worth $10 billion after its latest round of private funding.
Despite all the buzz, a coworking space is essentially a real estate company that earns a profit on the margin between what it pays in rent payments to the landlord and what it charges for rent to user-members. Didn’t we used to call these executive suites?
I don’t think it is unreasonable to question the long-term viability of this financial model, given the inherent slim profit margins of reletting office space. Economies of scale, efficiency and bargaining power with landlords might limit real success in this vertical to a few big players. Further, what is to prevent commercial property owners from moving into this business?
While coworking spaces certainly have a place as an alternative work environment for employees, the long-term viability of these operations may very well depend on the extent corporates embrace this workplace option as a perk to employees. I believe coworking operations are here to stay, but they may look very different in 5 years compared to what they look like today.
Staying ahead of the technology curve
Just the other day I was visiting with a doctor about listing his medical office building for sale. I asked when he purchased the property. He couldn’t remember exactly. I already knew the answer when I asked the question because the CRE app on my iPad right in front of me said so. He didn’t know the asking price of the vacant medical office building next door either. But I told him. The reason I was at the meeting to begin with was that he was looking for a CRE broker with healthcare experience, and he found me on the Internet.
After the meeting, I headed home to work several more hours — not to my office 35 miles away but to my home 5 miles away. My garage apartment-turned-home office isn’t exactly a coorking space, but you get my drift!
Coy Davidson is Senior Vice President of Colliers International in Houston. He publishes The Tenant Advisor blog.