If the Internet is such a great source of information, why does it take a lifetime to get to the information you want? NREI's New Media Editor tells how top commercial real estate professionals are getting the most out of what the Internet has to offer.
Does it sometimes seem that we in commercial real estate have missed the Internet boat? Or is it rather that our ship simply hasn't yet come in? Top real estate professionals who themselves actively utilize the Internet agree with the latter.
The Internet, which includes the World Wide Web, electronic mail (e-mail) and much, much more, has been something of a disappointment for commercial real estate professionals to date. The reason often given as the cause for such disappointment lies in the simple fact that no company in our industry is making any significant amount of money off of its website. Yet.
Why is that? Why, with all the money and time that we in the industry are dedicating to the development of websites and our use of the Net, is there nothing green coming back our way? A combination of reasons accounts for the non-responsiveness of the industry to each others' Net efforts. In equal parts, one must acknowledge web site content and user inexperience as two of the main obstacles to Internet success.
"It's too much work to go to the Internet to get someone giving you a commercial," says Gunnar Branson, director of communications at Stamford, Conn.-based GE Capital's Commercial Real Estate Financing & Services. Top real estate professionals, when addressing the question of what the Web currently has to offer, consistently indicate that they want less of a "sales job" and more useful content that will help them to better perform their jobs. However, gathering information on the competition as well as on current and potential clients is one of the most-often cited uses of the Web by commercial real estate professionals.
A second obstacle to the Web's profitability at present is the lack of exposure and experience that its intended audience currently has under its belt. According to Bill Millichap, president of Palo Alto, Calif.-based Marcus & Millichap and a long-time Internet proponent: "The problem is that most of [our] clients are 50 years old and up, and they're simply not on the Internet. Some of them don't even know what it is, as bizarre as that may seem." If that is currently the case, it won't be for long. "The Internet is accelerating at a rate that everybody had better wake up and figure out some Internet strategy," continues Millichap.
What have you done for me lately? The question remains, what has the Internet and its World Wide Web done for the real estate professional lately? "The Internet gives me easy access to information when I want it -- which is often after business hours -- in formats that I've become accustomed to," says Richard Ortwein, president of Irvine, Calif.-based Koll Real Estate Group. E-mail is perhaps the most commonly used sector of the Net. The industry's acceptance of this new means of communication is evidenced by the fact that e-mail is no longer the exception among commercial real estate professionals; it is a necessity. But the buck does not stop here.
Although it is by no means perfected at this time, the Net's ability to disseminate information is key. The real estate professionals contacted for this article consistently cited news services specifically aimed at commercial real estate professionals as one of the most useful aspects of the Web. Sites consistently mentioned included PointCast (www.pointcast.com), Inman News (www.inman.com) and Internet Review Online (www.InternetReview.com).
Top real estate professionals such as Lee Arnold, chairman and CEO of Clearwater, Fla.-based Colliers Arnold, were almost uniformly impressed by and willing to accept push technology (whereby information providers "push" particular information directly to a user's desktop), as long as the individual user retains control over who is doing the pushing and what is sent.
Although PikeNet is a directory rather than a news service per se (www.pikenet.com), it was often mentioned as an indispensable aid to accessing commercial real estate-related information on the Web, and it seems to be an answer to the problem of directing inexperienced users to the information that they seek.
Now, this is certainly not to say that there is no money to be made on the Web. Brokers across the country whose websites include listings of their properties have closed deals (which were initiated through the Net) that have paid for the cost of developing their sites "many times over."
The key is not to stop there, but rather to keep the ball rolling, if only to see what the industry can come up with. For example, the idea of a common national listing site has long been the dream of many. "If there was some way of encouraging a large enough group of brokers to participate in one common site, and if there was some way that the site could be policed, it would have real value," says Millichap.
Other current money makers -- not to mention good sites -- on the Net include a variety of regional property listing services, such as Realty Information Group (www.rig.com), and Ernst & Young's Ernie (see sidebar). In addition, sites such as the Securities and Exchange Commission's EDGAR (www.sec.gov/edgarhp.htm) and the U.S. Census Bureau (www.census.gov) provide invaluable information on topics from SEC filings to demographic trends.
What do we want it to do? So now that we know what the Web currently does for us, the question becomes what do we want it to do? The resounding answer to this question without exception included words like "easier," "faster" and "quality control." People are tired of being unable to find information that they know in their gut is available on the Web. They are sick of finally getting to a site only to find that the information presented is outdated. They want to rip their hair out when they are mysteriously disconnected from their ISP (Internet service provider). And they know that the answer to many of these frustrations lies in the passage of time and the advancements and innovation (not to mention increased operator skills) that will come with it.
Although the Internet is a mass media tool at present, it has been moving in the right direction over the last six months. According to Lee Arnold: "The big difference has been the amount of e-mail traffic that is 'real business' as opposed to people just surfing [our] site. There's an incredible amount of straight business real estate activity coming across my personal exchange mailbox." So the industry-wide desire for the Internet to bring new buyers and new players to the table is finally starting to become reality.
You get what you pay for Now, we all like "free," but we also, for the most part, realize that we get what we pay for. As a result, it is likely that commercial real estate industry professionals will jump on the subscription-based website bandwagon. It seems that brokers in particular are undecided as to whether it would best serve all sides of the industry to produce a centralized listing site or whether to continue and expand on individual companies' current branding efforts by establishing their own subscription-based sites. If the goal is to satisfy users' needs for easily accessible, quality information, it would seem that the centralized listing database is the ticket, whether based on a subscription model or not.
Imagination is the bottom line The bottom line is that it all comes down to imagination. As a group, we don't know what we want the Internet to do for us (in specific terms) because we can't imagine the possibilities, and that's a little scary. If the Internet gets too efficient, what will happen to us?
"I think [the Web] will be one of the top two or three methods of marketing investment real estate sometime in the future, just not right now," says Millichap. "The Internet will increase in its effectiveness and will become [a more actively used] medium for exchanging information and, in fact, making deals. But in terms of replacing brokers, that isn't going to happen. What it will do is replace the marginal real estate professional, because the market will become more efficient."
Although the phenomenon is not yet widespread, commercial real estate transactions are being initiated through and brought to closure via the World Wide Web. It's true, we promise! As evidence, below we offer two success stories, both from Palo Alto, Calif.-based Marcus & Millichap.
Earle Hyman, a senior investment associate at the company's Los Angeles office, closed a deal on a 39,543 gross sq. ft. office property located just west of the Harbor Freeway in downtown Los Angeles. According to Hyman, the buyer was an existing client who had never indicated that he was interested in diversifying his multifamily-based portfolio to include office properties. The client saw the listing for the $995,000 property on the Net while surfing one weekend, and the deal closed within five weeks.
Brian Smuckler, out of the company's Phoenix office, describes a transaction that closed in January 1997: "Here is an example of a buyer that I never would have gotten in touch with had it not been for our website. He's an apartment owner in Portland, Ore., who uses the Internet to find properties on a regular basis." This buyer located a 22-unit apartment building on Marcus & Millichap's site and contacted Smuckler directly. Initially the client decided against the property, but when he saw it online at a reduced price three months later, he just couldn't let the opportunity pass him by.
Ernie, Ernst & Young's online consulting service (www.ernie.ey.com), was launched in May of 1996 to serve as an accessible, affordable consulting service for emerging growth businesses. The basic idea behind the project is that clients submit questions to Ernie which are then routed to the most appropriate member of E&Y's immense consulting staff. The query is then researched and/or clarified (if necessary), and a reply is sent within two business days.
"If I have a question, I can go right to the top and ask it, and I know that it will be directed to the right people," says Steve Switaj, chief financial officer of Cleveland, Ohio-based 3-D Metal and an Ernie subscriber since early 1996.
Since its inception, Ernie has answered more than 3,000 questions from clients on topics ranging from corporate finance to real estate/construction, information technology and human resources, all of which are catalogued and awaiting perusal in an area known as TrendWatch. The current rate of original inquiries is about 50 to 60 inquiries per week, 3% to 5% of which are specifically commercial real estate-related.
Ernie also features a Technologies Web StoreFront, at which one can purchase the latest software products after researching them via Ernie's Software Selection AdvisorSM, an additional service available for a fee through Ernie. Farcast News, Ernie's push technology news clipping service, delivers headlines of news articles and press releases via e-mail according to parameters set by the user. Ernst & Young continues to add new components, some fee-based, as the need for such services are identified by Ernie's users by way of their questions.