It’s funny, every time I evaluate “Real Estate Technology” I almost always come away thinking “this other [non-real estate] system does that better.” There are a few exceptions – work order/maintenance management, lease administration, room booking – but those prove the rule as they deal with things that only real estate encounters historically.
Ironically, the new FASB rules will soon mean lease administration systems move from being real estate systems to corporate enterprise systems. Why would an organization choose a system that can only manage real estate leases when they will need to track every lease in the company to the same level of detail? This will soon be driven by finance and HR instead of real estate.
Some of the systems that are often touted as being bleeding edge for real estate include site selection/labor analytics, transaction/project management, energy management/smart building, CRM, and workplace forecasting. These aren’t everything but they are pretty representative. If we take a look through them:
- Site selection/labor analytics: This often gets put into the real estate bucket because it’s tied to the need to identify and select a new building. The reality is that the data used is largely publicly available and the analysis techniques are generic. The real owners of the need are operations who will be occupying the site that understand the type of office they require.
- Transaction/Project Management: There really isn’t anything so unique here that it has to be a real estate first tool. Sure, some of the data that needs to be managed will be real estate specific but budget/capital management applies just as well to IT, supply chain and some other operations groups. Systems like Slack, Asana and many more are building project coordination platforms that can work for real estate as well as they work for anyone else.
- Energy Management/Smart Building: Ultimately, carbon reporting is going to be owned outside of real estate at many organizations. This is one of those areas that real estate will always be a critical stakeholder but just as often won’t own the system/data themselves.
- CRM: This one always drives me up a wall. Brokers view their data as their own. It makes sense given the incentive model for 90% of brokers out there. There’s a lot of money to be made and the level of differentiation between any two brokers is relatively small. Most of the business comes down to owning relationships. SalesForce and others have built industry standard CRMs that stand on their own for every industry except Real Estate. Eventually, that will change because real estate will adopt standard tools more and more. But until then this is the best example of why real estate “technology” is often backward.
- Workplace Forecasting: On the surface, this is as straightforward real estate as it gets. If I need to calculate the amount of space I need and how the workplace should be designed, that’s what real estate is. But if you look above, as more and more of the data and decisions of real estate move to common platforms, this will as well. Workplace Forecasting is a perfect application of Big Data/AI decisions out of a corporate strategy team. The AI group would bring in forecasts around future revenue, the success of work-from-home/agile policies, cultural trends on space, and work requirements to come up with an ever evolving target of how much space a business or group needs in a market. This becomes a feed to the real estate team to develop a strategy to move from where things are today to where they need to be. But, here again, real estate is the stakeholder instead of the owner.
I’m bullish on the impact that technology is going to have on the real estate industry as a whole. I’m much less bullish on the ability of “real estate technology” companies to survive on their own in this niche. Any system they built will likely be applicable outside of the industry with a few tweaks and generalizations while finding a larger marketplace at the same time. This will squeeze the real estate specialized groups out over time.
It’s good to have a focus today on the niche because real estate is not well understood outside of the industry. The thinking and specialization may turn out something truly unique and special. But to date that hasn’t happened and I don’t see it happening.
For the next 5 to 10 years there will be a strong and robust market for these real estate specific solutions. It’s the longer term that looks bleak.