Looking at the past, present and future of information technology in the real estate industry is like combining a Greek tragedy with an episode of the Jetsons.
While the industry has lagged behind in using and developing state-of-the-art technology solutions, today's needs demand IT solutions that will increase connectivity, reduce data entry requirements, and increase data reliability while simultaneously providing instant access to increased information.
The reasons for this lag are numerous. Among a legacy of small fragmented independent property owners with little money to spend on technology solutions, the real estate industry has failed to attract the attention of major software developers. The products available catered to different market segments and different aspects of the information flow system.
As a result, many companies developed their own in-house proprietary systems. Each component of the real estate information universe including accounting, property management, lease administration, cash flow forecasting and valuation, require different levels of details.
Finally, the variety of product types from residential to commercial properties, each with unique income and expense structure could not be consistently modeled in a single product.
Several important factors are driving the need for more sophisticated information technology solutions. One of these is the pace of consolidation in the real estate industry.
The largest REITs have market caps exceeding $7 billion with many institutional real estate owners growing their portfolios to similar size. The performance reporting demands of Wall Street (through publicly traded companies such as REITs,and conduit lending) on the real estate industry have increased the amount of information that must be collected, analyzed and reported on and has created the need for industry consistency.
Increased velocity in the acquisition and disposition of real estate as well as the globalization of many real estate organizations is driving the necessity for a worldwide gauge in financial analysis, valuation methodologies and data compatibility. Heightened competitiveness is forcing real estate companies to maximize efficiency.
Finally, the entry of large software vendors such as SS&C and SAP seeking to develop enterprise wide solutions and the increased use of consulting firms are serving as a further catalyst for change.
Where is the industry now? The development of open-database products that allow easy electronic transfer and update of data from one system to another, combined with data warehouse concepts, is revolutionizing the industry.
These data warehouses can also facilitate the generation of custom reports designed specifically for individual users. While many software vendors would suggest that their products already provide a seamless transition, the reality is that there are no enterprise wide solutions available.
However, there is evidence of change. The use of the Internet and intranets to link satellite offices, buyers,, sellers and real estate users is changing the way information is accessed.
Subscriber-based online real estate and financial information services and distributive processing are two examples of how this technology is being used today.
Consolidation in real estate software vendors, such as the recent acquisition of DYNA by Argus and Quantra by SS&C, as well as the coordination between vendors to create links between their software platforms, highlights the industry's thirst for integration.
This is an exciting time in the real estate technology industry. System integration is the hot topic of discussion. Problems to solve, such as the way to link sources of data required for the calculation of FFO for REITs, remain unresolved.
Although there are many hurdles to overcome, with the proper coordination between software developers and real estate leaders the industry should eventually have the ability to compete with ease, efficiency and accuracy on an integrated system.