Adapt or Die
Four tech experts weigh in on innovation and its impact on all sectors of commercial real estate.
Amazon isn't just an online book retailer, just as IBM was never solely about keyboards and microchips. These companies leveraged innovation to become global giants that changed everyday life for billions. With technology affecting commercial real estate - from multifamily to industrial - the success stories of tomorrow are dependent on making the right decisions today.
While no one can predict the future, some have spent years studying technology and its impact on commercial real estate. To gauge what's ahead for the industry, we talked to four tech experts in commercial real estate: Michael Beckerman, CEO of CREtech; Gary Beasley, CEO of
online marketplace Roofstock; Noah Isaacs, co-CEO at Bowery Valuation; and Nate Loewentheil, senior associate at venture capital firm Camber Creek.
Predicting an Uncertain Future
Though much of the corporate world shudders when they hear the word disruption, Beckerman, CEO of CREtech, a leading event, data, and content platform focused on tech in commercial real estate, sees it in less turbulent terms. “I don't use words like 'disruption' because I don't think that's what is happening,” he says. “I prefer to use language like 'tech enhancement' because that is truly the biproduct of technology's impact on CRE.”
Viewing technology's role in commercial real estate, Beckerman believes it's not how tech developments change the nature of business; it's about who prepares to succeed in a digitally advanced marketplace. “It's going to be a tale of two types of professionals - those who embrace tech and those who do not,” he says. “Every segment in the industry will be affected by technology, resulting in increased efficiency, enhanced transparency, and greater access to data. Those who embrace tech will emerge with greater market share and profits. Those who don't will be the laggards.”
New means of communication can change how business is conducted, says Beasley, CEO of Roofstock, an online marketplace created for investing in single-family rental homes. “Real estate used to be solely relationship-driven,” he says. “Twenty years ago, most brokers didn't even have a website; now everyone does. Instead of fighting the current, be an early adopter and use it to get an advantage over those who resist change.” Beasely's online platform allows buyers to access vetted homes and related data, while sellers can market homes without disrupting tenants. The personal, handshake-based way of doing business isn't the only way to do business, though communication remains an integral part of the equation.
Commercial real estate, in particular, may seem like an industry hesitant to change, especially when so many potential advancements could disrupt the industry, whether it's drone delivery, artificial intelligence, or increasing last-mile delivery demands. Not every “next big thing” turns out to be a winner, so resistance is a reality across the industry.
“When you look at the real estate industry as a whole, it has been slow to adopt new technologies due to its sheer size, coupled with the fact that it has been a highly profitable industry,” says Isaacs, co-CEO at Bowery Valuation, a tech-focused, vertically integrated appraisal startup. “The term, 'if it ain't broke, don't fix it,' comes up a lot. It's hard to convince someone who has been making money hand over fist that there's a better way to do what they're doing.”
But new tools available to those in data analysis and real estate, along with an interest from capital markets, may hasten the industry's reaction time. “Data aggregation has certainly been helpful, but I think more than anything that access to venture capital has made what we're doing feasible,” Isaacs says. “To truly revolutionize something like real estate valuation, you have to rebuild from the ground up. You have to be able to take a step backward to take 10 leaps forward, and capital allows us to take a long view as opposed to optimizing profitability each quarter at the explicit expense of innovation and future topline and efficiency growth.”
Who's on the Chopping Block?
Automation strikes fear into the hearts of many when it comes to large-scale job losses. Self-driving vehicles have the potential to wipe out truck driving as a profession - never mind the countless gas stations and restaurants who support those individuals. Likewise, radiologists wonder if machine learning can be quicker and more precise in detecting abnormalities. But not every industry is facing a Chicken Little scenario - and that includes real estate.
Loewentheil, senior associate at Camber Creek, a venture capital firm focused on real estate tech, predicts some uncertainty in the overall job market. But it's nothing the industry hasn't dealt with before. “We don't see a lot of examples of technologies that are directly eliminating jobs,” he says. “In most cases, technology helps people do their jobs better and faster. Over the long term, technology will certainly help some CRE firms streamline operations and, in turn, make some jobs obsolete. But at the same time, technology is creating new jobs. For example, there are a host of new tech-enabled amenities that commercial and multifamily buildings are offering, like concierge service. This creates new service jobs.”
Beckerman points to the financial services industry as a case study that shows how disruptive technology can reshape the labor market without eradicating it.
“Fears of job losses are real, and people should be concerned,” he says. “But tech is going to also create jobs, empower those who embrace it, and clearly separate the field into winners and laggards. If you look at a company like Goldman Sachs that has aggressively embraced tech, it is a perfect example of what the CRE sector can anticipate - large-scale job losses of traders, bankers, and brokers and massive hiring of engineers and people that can understand what all of their new data pools mean for clients. For Goldman, the ranks of investment bankers might have been cut, but those that are using data to advise clients are making more than ever before.”
Isaacs points to his experience building a new model for valuation, one that combined engineering teams with those focused on traditional methods of appraisal. “Our [product, design, and tech] team exists to alleviate pain points for our appraisers and to increase their efficiency,” he says. “Having our appraisers work under the same roof as the people building the software for them [produces] an extremely tight feedback loop, which allows us to iterate on the software much faster than most tech companies.”
Get in Position for Future Success
According to a Harvard Business Review survey of 672 business and tech leaders, those working with pioneering companies - those that readily harnessed new technology - were also more likely to grow in comparison to companies hesitant to embrace innovation.
This association, Isaacs says, is apparent in real estate. “I think a lot of CRE professionals can be hesitant to adopt technology or work with tech-enabled vendors because it's new and different,” Isaacs says. “But the truth is, if technology is implemented properly, it makes everyone's lives so much better. … New technology may seem scary, but adoption is a surefire way to get ahead.”
Being on the cutting edge of innovation sounds like great advice, but how, exactly, do you learn what the next big thing is before it's overtaking the industry? “Change your mind from fearing it to embracing it,” Beckerman says. “It's not an age thing. It's not a segment thing. It's going to impact everyone at every level in every job function. Those who embrace it early will emerge in the power position as tech gains more adoption.
“Go to a conference. Reach out to some startups and ask for demos. Talk to peers who are embracing tech. It's a straightforward and simple process - and if a 55-year-old like me can do, trust me, anyone can!”