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Seeing is Believing:
Commercial real estate firms value videoconferencing

In the commercial real estate world, a new brand of face time is triggering a shift in how business is done. As travel costs climb, technology improves and green initiatives sprout, commercial real estate companies are joining the growing movement toward videoconferencing and away from traditional face-to-face meetings.

From New York to Tokyo and beyond, commercial real estate companies increasingly are conducting business over videoconferencing equipment, rather than in person, to save time, money and energy associated with domestic and overseas trips. Helping spur this trend is so-called telepresence technology, which in many cases can make you feel like you're in the same room with someone who's actually thousands of miles away. One research report suggests telepresence equipment enjoys use at least four times greater than that of its older counterparts.

Andrew Florance, founder, president and CEO of commercial real estate data provider CoStar Group Inc., estimates the Bethesda, Md.-based company saves $5 million a year on travel expenses thanks to videoconferencing. About 30 CoStar sites around the world are equipped with videoconferencing gear from Polycom Inc. to carry out board meetings, executive discussions, job interviews and other business matters.

CoStar already has installed several telepresence systems, as well as technology that's a slight step down — high-definition videoconferencing equipment. Florance says this advanced gear allows meeting participants to accurately gauge nonverbal communication, such as body language and eye contact.

At CoStar, videoconferencing even comes into play in dealmaking. Last year, key executives at CoStar and commercial real estate services company CB Richard Ellis Group Inc. held several videoconferences, as well as in-person meetings, to iron out a contract worth more than $100 million, according to Florance.

"We're so sold on the communication benefits of it that we'll push it throughout the organization. We've really made videoconferencing a cornerstone of how we operate as a company," Florance says.

Technology takes off
On any given workday, roughly 40 to 50 videoconferences are happening somewhere within CoStar, according to Florance. Eventually, videoconferencing capabilities will be rolled out to remote workers at CoStar so they can participate in virtual meetings on their laptop computers, he says.

"CoStar is an anomaly; they're not the norm. In videoconferencing use, they're way out in front of the pack," says Joan Vandermate, vice president of marketing for Polycom's Video Solutions Group.

The same cannot be said for some of CoStar's commercial real estate compatriots, however. Experts say the industry has been slow to embrace videoconferencing technology due to its cost — some systems can run more than $300,000 each — and to its outdated reputation for producing fuzzy, grainy on-screen images.

Yet the laggards in commercial real estate likely will join the march toward videoconferencing as the quality and affordability of the technology continues to improve. "It's still not widespread, but we're getting there," says Hank Zupnick, chief information officer at GE Real Estate.

As business travelers vent frustration about the less-than-friendly skies and airlines bump up fares, videoconferencing promises to catch on within the commercial real estate industry and could well become a greater threat to the airlines.

The worldwide market for videoconferencing systems totaled $1.42 billion in 2007, up 32 percent from the previous year, according to an estimate from research firm Frost & Sullivan Inc. Research firm Gartner Inc. predicts the worldwide videoconferencing market will reach $12.8 billion by 2011.

A 2006 report from Howard Lichtman, president and founder of the Human Productivity Lab research firm, predicted that nearly every Global 5000 company would adopt telepresence technology over the following decade. Telepresence, the latest advancement in videoconferencing, enables meeting participants to appear life-size, with fluid motions, accurate flesh tones and high-quality video, the report says. During a telepresence meeting, minuscule details of spreadsheets, PowerPoint slides, documents and objects can be viewed, the report says.

"Soon enough, executives and the affluent will equip their homes with telepresence capabilities, while everyone else will be able to rent a telepresence system in a hotel, mall, restaurant or pub," the report says.

Some of CoStar's major clients also are enjoying the benefits of videoconferencing; Florance says several of them borrow equipment at CoStar's offices. If one study is any indication, some of those clients may be shopping for their own equipment. A 2007 report from Nemertes Research Group Inc. found that nearly half of the information technology executives surveyed said their companies were evaluating or installing high-definition or telepresence capabilities.

Moreover, The Human Productivity Lab report indicated use of traditional videoconferencing systems averaged 15 hours a month, while use of telepresence systems ranged from 60 to 275 hours a month.

Competitive advantage
Some companies consider videoconferencing "a competitive differentiator," according to Polycom's Vandermate. For instance, she says, the technology permits companies to enter new markets, speed up decision-making and better manage offshore operations.

As prices for videoconferencing systems drop — a room now can be equipped with high-definition technology for less than $5,000 — and operating expenses decline as a result of the move toward cheaper IP-based connections, the popularity of videoconferencing is expected to jump and that competitive differentiation will diminish. In 2007, the videoconferencing industry set a record by shipping nearly 213,000 systems, up 30 percent from the previous year, according to market research firm Wainhouse Research.

Traditionally, the U.S. market has led in the use of videoconferencing technology, says Roopam Jain, an analyst at Frost & Sullivan. However, the European Union and the Asia-Pacific region are bridging the gap, Jain says.

Although the videoconferencing market is thriving, according to Frost & Sullivan, "some existing bottlenecks need to be addressed. The lack of awareness, the difficulty in measuring return on investment (ROI), and the skeptical attitude of users regarding the benefits of videoconferencing are the major roadblocks for service providers."

After some initial skepticism, Jordanian real estate investment firm United Arab Investors Co. PLC installed videoconferencing equipment from a supplier called Aethra in 2006. United Arab Investors soon became a videoconferencing convert, and even found that some potential investors were insisting the company use videoconferencing technology to do business.

GE Real Estate's Zupnick believes the advent of telepresence, which he calls "a technological breakthrough," will help erase skepticism about videoconferencing that commercial real estate players like United Arab Investors have felt.

"It's one of these things where you have to see it to believe it," Zupnick says. "You use it once, and you're won over."

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