Commercial real estate looks like an attractive target for major software companies in search of new markets. So, they're snapping up independent software companies that have the technology to serve the industry.

“The trend today is for traditional software companies, like Intuit, Oracle and PeopleSoft to seek acquisition opportunities in the industry,” says Todd Zeldin, founder and president of ACG Professionals Inc., an Atlanta-based financial services and technology consultant. “They view commercial real estate as an attractive vertical market.”

For example, Intuit Inc.'s purchase of Cleveland-based Management Reports Inc. (MRI) for $92 million in July was the company's third real estate acquisition since 2001. Intuit, based in Mountain View, Calif., acquired Omware Inc., a provider of business management solutions for the construction industry, in November 2001. It also acquired American Fundware Inc. in May of this year.

“For the first time in the history of commercial real estate, we are seeing major players from outside the industry, such as Intuit and Oracle, looking seriously at this space,” says Jim Young, CEO of the Carlsbad, Calif.-based Jamesan Group, a real estate technology services firm. Young agrees with the assessment of the buyers that the industry has been slow to automate and is a ripe opportunity for the major software companies.

These larger players are entering the market after more than a year of retrenchment in the commercial real estate software industry, a period when a lot of small companies have simply come and gone. According to Zeldin, his firm tracked about 265 software firms in the commercial real estate industry three years ago. That number is now down to 52.

And that's a good thing, according to Don MacKinnon, president and CEO of REALM Business Solutions Inc. The New York-based company started the consolidation trend in early 2000 with its acquisition of Argus Financial Software, B.J. Murray, CTI Ltd., Dyna Software and NewStar Solutions.

“What we are seeing is a number of larger players providing technology to the commercial real estate industry, which is something that should definitely benefit the end-user over the long term,” adds MacKinnon.

“These better-capitalized players are able to put a lot of R&D dollars into their products. Hopefully, the end result will be better applications that enable workflow — and cost savings — within the commercial real estate industry.”