As a junior member of my region’s most active 10- to 120-unit multifamily investment sales team, much of my time from day to day is organized around processes. I spend countless hours in front of a computer and on the phone prospecting leads, evaluating buildings, marketing properties, and closing deals. Despite how much these steps might differ from transaction to transaction, and for all that our competitive (and natural, down here in Tucson, AZ) landscape might seem like the Wild West, each of these processes is, at its core, a highly-repeatable workflow with a number of perennial time sinks for my entire team.
Process-based business like this offers a range of positives and negatives. On the plus side, I have found that by prepping my day ahead of time, it is easy to enter that elusive state of flow we are all chasing. I’ve become able to identify those time sinks that can be spun off to an intern or addressed in the early morning before we start to hit the phones. And as a group, we’ve been able to hand tasks off to one another with smoothness and efficiency.
As far as downsides go, the pieces of workflow that take up a lot for my time have been difficult or impossible to speed up. With so few shortcuts, the roadblocks that my team hits can become major hassles when multiple opportunities come in at once. When this happens, and it always seems to be by surprise, a substantial portion of our team’s manpower needs to be reallocated to performing the evaluation through closing processes, leaving little bandwidth available for prospecting – a critically important task for ensuring a sustainable long-term deal pipeline.
But frustrating though some of these challenges may be, it has always been reassuring to remind myself that my team and I are far from alone. Brokerages around the world face the same problems every day, as do property management teams, investment shops, developers, residential agents, appraisers, and everyone else involved in the industry. And it isn’t just industry leaders that are recognizing these issues, either. A wide range of tech experts have also noticed the problems our industry is facing. Regardless of background, a diverse crop of tech-focused startups has risen to the challenge of reducing the pain points and busy work so prevalent all across the business. Their weapon of choice? Automation.
According to Brendan Canny, North American Managing Director for Open Box, a company developing automated tools for the real estate industry, “It’s one of those things where if you’re not running alongside the train now, you’re only just now thinking about it, it’s almost too late…it’s going to be the companies that have done nothing that’ll be one step behind.”
Automation in action
There was a time not too long ago when Microsoft Excel was the new kid on the block — a disruptor in a world of analog models and paper copies. Around the same time, in the early 1980s, specialized programs like Argus and Yardi helped increase productivity even further by making human tasks, whether performing lease analysis or underwriting a property portfolio, simpler and easier to repeat. But just as the feathered dinosaurs gradually replaced their scaly brethren, so too are we witnessing a new dawn in real estate tech.
The task now at hand isn’t simply to streamline human work, it is to eliminate it entirely. Michael Mullin, CEO of property and construction management software company Integrated Business Systems, put it this way, “Recent investments into more than 4,000 property technology startups by real estate firms nationwide have virtually eliminated many of the bottlenecks that have plagued the industry for decades. This includes taking full advantage of an increasingly mobile and interconnected world to provide a comprehensive suite of features that address nearly all property and tenant management tasks.”
Today, automation is here. Salesforce, used by over three million, includes automation functionality built into their platform. IFTTT, a popular consumer automation app and website, has been automating common household productivity tasks since 2011. Zapier, a more business-oriented platform, launched the same year. Within real estate, automation still abounds despite the popular impression of the field as resistant to tech development. ProspectNow advertises that it can tell brokers when clients are likely to sell. Bowery is using computers to appraise buildings. Physical robots have plenty of uses, companies are using drones to photograph buildings, and hotels are delivering goods and services to guests via Star Wars-like bots.
On the building side, things are even more exciting. According to Yishai Lerner, Co-CEO of JLL Spark, the real estate giant’s tech venture team, “Buildings generate a huge amount of transactional and operational data, and we are just starting to be able to tap into these data sets to make meaningful insights and take impactful actions. Many of our portfolio companies are already using AI, machine learning and big data techniques in novel and fruitful ways. VergeSense for instance, uses AI-powered deep learning vision sensors to accurately measure occupancy in ways not possible before. We use their technology to help our occupiers optimize office layout and lease commitments.”
Automation has the potential to affect every facet of the real estate business. While I’ve been on the ownership and development side before, my frame of reference is closest to that of a broker. With that in mind, I’d like to share a field guide to automation and its impacts, through the example of my own partially-automated brokerage workflows.
The prospecting process is the engine that drives my brokerage business pipeline. While the principal on my team has a very established network and therefore brings us a lot of repeat business and inbound calls based on his stellar regional reputation, I am still at a career stage where most of the value I add is through outbound calls and emails. I realized early on that to be successful in that, the biggest and most important factor is an accurate database of properties and owners in my market. Consequently, building out this database of names and addresses has been the biggest and most time consuming part of my job.
In general, it goes something like this:
1) Identify an apartment building in our geographic market via our GIS platform and CoStar
2) Determine current ownership through review of local assessor records
3) Gather owner contact info through LexisNexis.
When it works, it works well – we add dozens of new properties to our database in a week, and uncover plenty of properties that would have otherwise remained “underground”.
The roadblocks in this process all relate to data access. CoStar frequently has incorrect property details, the local assessor’s data is often out of date, and LexisNexis commonly turns up bad data — disconnected phone numbers and email addresses that bounce, particularly when ownership entities are hidden behind LLCs. As commercial brokerage CRM Apto’s founder and board chairman Tanner McGraw told me in a recent interview, “You’ve got an old school legacy $11 billion player that’s largely protectionist, keeps their walls up, doesn’t play well with others, that has the data that [brokers] want to use, and would be the easiest…to partner with that don’t seem to be interested.”
Since the rest of our business process follows from good data, these are serious issues with no easy solution. A few companies have offered CRM systems or data viewers that claim to make this a simpler process. I might be very excited about ProspectNow’s use of predictive analytics, but the system is unable to see behind the matryoshka doll layers of LLCs so common in commercial properties.
For their part, Apto aims to take the grunt work out of the prospecting process by telling brokers exactly who they have to call and when, based on user-defined call lists and frequency preferences. While Apto shows social media profiles based on the contact information the user uploads, and highlights real estate news articles relevant to a property’s particular area, at its core the platform is a streamlined environment into which my team added our own data.
One in perhaps thirty prospected owners will want to receive a full property evaluation. This involves generating a Broker’s Opinion of Value (BOV) complete with a detailed financial analysis, sales and rent comparables report, and neighborhood economic overview. This is an area where plenty of automation technologies can shine. Enodo is a good example of companies innovating in this space. They use an algorithm to automate the financial underwriting process, something that can take a ton of labor even by the most efficient worker.
The factor that makes this stage, as well as the next one, particularly suited to automation is that so little of its workflow is reliant on people outside my team. In fact, for us, the only outside input we require at this stage is for the property owner to share their rent roll and property financials with us so there is very little outside friction.
This is the other step within which automation appears to have the most room to grow: the process of listing the property online, producing various outreach materials and advertisements, and then giving tours to interested buyers. One firm working to automate this step is Buildout, a company that uses electronic forms to rapidly develop bunches of white-labeled, custom-designed marketing collateral at once. Other firms have approached this step by automating lead response. At its simplest, a program like Zapier could be used to automatically save inbound email addresses to a mailing list stored as an Excel document.
Automation has the potential to affect every facet of the real estate business.
The closing process is simultaneously the most straightforward (the hard work is done) and tedious (all that’s left to do is screw up the transaction) step in the entire property sales process. For us, my team’s role becomes that of a mediator, ensuring that our clients have all the due diligence and contract documents they need while working with the escrow team to smooth over any rough spots in the transaction. With so much of this step revolving around direct communication, there isn’t much room for automation at present. Amongst owners and investors, many people might choose to use a deal management platform such as Dealpath to navigate the closing process and host various documents in a collaborative cloud environment. For us, we keep things simple with DropBox.
The automation platforms that aim to empower each of these processes are impacting the business in ways that might have been inconceivable just five or ten years ago. Take Enodo; the hours saved by automating the property underwriting process could add up to an enormous productivity gain for funds and firms engaged in the acquisition process. No longer would teams need to spend hours combing through P&L statements, rent rolls, and other documents. Or look at the case of Buildout. By creating customized, white-labelled marketing collateral with ample graphics and perfectly-formatted layouts every time, the company is already streamlining the OM (offering memorandum) writing process. But while the impacts of automation on teams like mine seem to be easy to understand, the fact is that the arrival of the automators promises massive change for the real estate world as a whole.
But for all the waves these platforms have been making, the dialogue around their impacts almost invariably ends up focusing on the most gut-wrenching question: “Will a robot take my job?”
The answer to that question is usually presented as never or not yet, depending on your role. But what hyperfocusing on that big-ticket question misses is the nuances and realities of adapting to an automated real estate world, for those of us who remain with our jobs more or less intact. The reality is that there will be many amongst us who are not automated out of a job, but still find themselves with such an unoptimized, poorly-automated team that they are rendered de facto irrelevant in the marketplace.
Some of the most notable impacts will be in terms of education and team structure. “I think it’s going to be much more analysis of the data, and it’s going to be much more honing those relationships and really delivering value through your presence in the industry and the network you’ve built,” said Marc Rutzen, CEO of Enodo. Over the coming decade, I estimate that many teams will consolidate and streamline their rosters in order to move away from “single purpose” employees focused on marketing, underwriting, or business development. Going hand in hand with that, the Wall Street-like emphasis on modeling skills so prevalent at many real estate firms will likely fade, just like the situation that has already impacted the financial exchanges. Why hire an “analog expert” when an algorithm is faster and more predictably successful? This applies to outsourced labor, too. Brendan added that “If you look at something like lease abstraction, currently there are tons of companies that will have someone go through your leases and abstract for you but most real estate companies have a very specific way that they like things processed. [If] you spend all that time teaching your guy how to do it, and then that person moves on and someone else joins the team – you have no control over that – and then you have to re-teach [your method].”
In place of the modelers, marketers, abstracters, and others of their ilk, I expect to see a rise in the demand for talented multitaskers, people capable of speaking the languages of modeling, marketing, management, and more. In other words, the sort of all-in-one skill set you might already expect to see at a developer. These employees will increasingly be judged on the power of their humanism: their networks and connections, as well as their abilities to create entirely new networks of their own. And of course, as time goes on the ability to perform at least basic coding projects will probably become as essential as modeling is today.
One area I am excited to watch is the comparative fortunes of smaller and larger firms. Where in the past, smaller brokerages have made names for themselves through niche focus, pedigree, or M&A activity, in the future we may see standout, tech-savvy small teams begin to gain an edge over their larger and more cumbersome competitors. Speaking long term, I foresee a rise in the importance of principal name over firm name, as superstar brokers, managers, and investors leverage automation to increase their market penetration while reducing overhead needs and startup costs for striking out on their own.
In my mind, the biggest high-level impact of automation technology will be a rise in the level of aggressive competition. There will be many winners and many more losers, within teams as well as between them. In many cases, these roles have already been determined. The future of automation technology in the real estate world will be a crystallizing force in the market, a disruptive technology that will set a minimum expectation for quality that clients and customers will come to expect. As a result, teams will need to begin to differentiate themselves in new and innovative ways. The outcome of this will be a new landscape of winners and losers. Firms, and even teams within them, that either sink or swim in the automated future.
Think of it like this. In early 2019, enough teams have yet to adopt automation tools that it remains optional for anyone in the business to decide to use them. Perhaps a team has had a hard time retaining marketing talent, or finds a particular roadblock in the financial modeling process, or has a member with a particularly strong tech background — all reasons why an organization would introduce these tools to their inventory.
In the near future, however, things will be different. As the automators become more advanced, flexible, and accessible, and as competition in the industry helps the best rise to the surface, the benefits of this new technology will become impossible to ignore. And here’s where the shift happens: The teams that embrace automation will begin to benefit from the fruits of their innovation. For these teams, processes like the ones I described above will become easier and less labor-intensive at every step of the way. Meanwhile, the firms that resist, stick to their existing workflows, or otherwise ignore the writing on the wall will be left in the dust. Brendan added that “you are going to need to be able to show the value that you bring, and that’s the important thing: if you can show that, automation and RPA [Robotic Process Automation] means that you are going to be spending your time doing that work as opposed to copy and pasting.”
This is because the arrival of the automators will precipitate an expectation of quality that 100% human firms will never truly be able to keep up with. Take it on a platform-by-platform basis. Even the best team of modelers will be unable to compete with a computer that can analyze a dozen properties in the blink of an eye. The best marketing specialists will always be less efficient than an automated system of templates and inputs – and I say this as a guy who loves to get his hands dirty in Adobe. The most engaged, on-the-ball property managers will inevitably find themselves outmaneuvered by a management program that can instantly schedule service calls and monitor an array of cameras and sensors 24 hours a day, seven days a week. When the bits and bytes of automated dust finally settle, we will be left with a stark truth: Faced with ever-increasing efficiencies and economies of scale from their tech-enabled rivals, and armed only with yesterday’s best practices, the firms that fail to embrace automation will gradually fade away into irrelevance.
And so, like a thermometer adjusting to a higher temperature, the client expectation of quality will rise as the most successful firms exert an upward pressure on average service experiences. A company utilizing Buildout, for example, will never produce subpar marketing collateral. When everyone is using Buildout or its contemporaries in different areas of business, our clients, no matter our roles, will come to expect that level of polish in everything we do. We can all think of a few competitor firms who produce ancient-looking marketing materials or perform shoddy work, skating by on the reputation of a superstar principal or a handful of valuable relationships. These firms will remain relevant only so long as those reputations or relationships last. Developing business in the future, in a market full of automation-optimized competition, will be like fighting fire with a squirt gun.
The flip side of this rising quality expectation will be an increased emphasis on market differentiation from firm to firm. When every broker is producing grade-A marketing materials, every fund leveraging automation to underwrite property after property, and every management firm utilizing an automated, IoT-driven model to increase owner returns and tenant satisfaction, it’ll take a lot more to stand out to customers and clients.
Differentiation for your firm, at the end of the day, is really just another way to say that your team has a strong and unique value proposition. Are you a broker that can connect buyers with a range of off-market transactions, or are you only good for CoStar comps and a half-hearted valuation here or there? Does your property management team turn units in days and build a brand, or do they just collect rent checks? At the end of the day, this is the difference between winners and losers in the new automated dawn: those who use their skills and network to connect with a global market, and those who are avatars for a computer.
“I think that the thing that you’re really buying as a user of [a real estate] agent is somebody who can understand your problem and the business of real estate and make sure that you’re making the right decision”, said Vishu Ramanathan, CEO of Buildout. Whether in brokerage, management, operations, or whatever else, no two client situations will ever be exactly the same. The irreducible value that humans have and that computers (at least for the foreseeable future) don’t is in being able to pair a holistic analysis of a complex situation with clear communication and adaptability. The best valuation model in the world cannot yet tell an owner that a property should be held until the big road widening project is done in three years, nor could it couch that recommendation within an understanding of the owner’s life goals and personal situation.
If there is a takeaway from this article that I consider most important, it is that automation will most generously reward those who are able to put their own real estate data to work. For brokers, this could be digitizing that enormous Excel prospect list. For managers, the value might be in tracking tenant use of space and amenities. Yishai added that “as industry needs evolve, so will the public-private solutions to connect data sets and the biggest opportunities will come from the intelligence built on top of these data sets. That said, I don’t expect the evolution to feel easy, and there will be lots of barriers to break down.” By harnessing the power of automation, feeding it a steady supply of data, and adding their own unique value propositions, real estate professionals can position themselves to weather the storm brewing with the rise of the automators – a storm coming to every city, even here in sunny Arizona.