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The Three Forces That Will Accelerate the Pace of Change in Commercial Real Estate

A lot has been written and said about the future of commercial real estate. There seem to be two main narratives to these stories. One I will call, ‘death of the CRE broker’ and the other ‘CRE is a dinosaur.’ Both of these headlines are thought provoking, albeit mildly insulting to anyone in the industry, and highly clickable. But, it turns out that those themes are now wrong and outdated according to Vishu Ramanathan, the founder and CEO of CRE marketing automation technology Buildout, as he explained during his talk at our LIVE seminar last week in New York City.

Vishu obviously thinks that the industry is ready for change and is about to change a lot in the near future. In his mind, there are three main reasons there will be an inflow of new technology to commercial real estate.

Data integration

Every broker gets into the commercial the same way, by collecting data. They are told to go canvas an area and become an expert. The problem with this introduction to the industry is that it, “messes with your brain,” according to Vishu. “You think you have all the knowledge and you are told that you are in the business of information, so you hold onto it.”

Everyone keeping such a tight grip on their information does a few things. It creates a bias for how brokers see the market. They assume that their info is representative of the market, even if they are only viewing the world through a relatively small sample size. Also, it creates an opportunity for Andy Florence of CoStar to create his proprietary database of listings to sell back to the brokers that fight so hard to keep their information secret.

“But this is changing,” says Vishu. “There are new approaches to data that are starting to occur”, he explained. Companies like RealMassive, Xceligent, CompStak and many more are opening up their data for others to see and use. Now innovation can build on what has been collected, rather than having to start from scratch with every new technology.

The streamlining of development

Creating technology is time consuming and expensive. So much so that there have been a number of companies that have seen huge success in making the process easier like Zendesk, Github, Twilio and even Slack. Now, guys like Vishu are more easily able to create a new software faster and more cost effectively. So, even the small problems the industry faces will start to see tech solutions.

Generational shift

Commercial real estate is made up largely of baby boomers. As this huge swath of the industry retires there will be a vacuum for deals that will likely be picked up by a smaller number of younger brokers. The technology that the next generation of deal makers will have will allow them to do more deals in less time, so the demand for this type of tech will only increase.

Vishu uses some developer terminology to define the forces effecting tech integration in CRE. He differentiates between inherent complexity and incidental complexity. The inherent complexity is the obvious difficulties that arise from trying to build a complex piece of software that is useful and easy enough to use to be adopted. Incidental complexity is represented by all the other factors that can affect the pace of change like government regulation, litigious competition and cultural forces. According to him, the inherent complexity has always been surmountable, but now we are finally starting to see a solution to all of the incidental problems that have been plaguing the industry for some time now.

Editor and Co-Founder
  1. Though the idea of open data platforms is exciting, the reality of these coming to fruition are many years out. I know this from deep experience in the industry. Companies cannot force brokers to share data and companies do an absolute horrible job of tracking and maintaining their own data. Most large companies rely on 3rd party vendors to aggregate their data. As you well know, garbage in, garbage out.

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