NREI takes a look at commercial real estate's use of the Internet Are you more tech savvy now than you were four years ago? Of course you are, but National Real Estate Investor wanted to know to what extent. So, we asked 717 commercial real estate professionals how - and how much - they use the Internet and for what purposes.
More than 60% of respondents represented the developer/owner/manager or brokerage side of the industry, followed by finance/investment (16%), corporate real estate (12%) and firms that offer multiple services (5%). Nearly half of the respondents were either chairman, president, owner or CEO of their company, and the average industry experience for all respondents totaled nearly 20 years. As far as geographic scope, 33% of respondents were from regional firms, 23% from national firms, 14% from international firms and 29% from local firms.
So how are we doing? Respondents spend an average of 7.1 hours each week on the Internet for business purposes - 35% spend three to five hours per week, 25% six to 10 hours per week - and 3.8 hours per week on the `Net for personal activities, with 28% highly confident in their ability to use the Internet (Figure 1). Respondents younger than 35 were more likely to be highly confident (41%) than those who were over 55 (13%).
While the levels of connectivity and confidence of those surveyed were relatively high, some are still taking dirt roads rather than the autobahn on the road to e-business.
Jim Young, president of The Jamesan Group, Carlsbad, Calif., speaks at dozens of real estate and technology conferences every year and finds that many real estate pros are still using 56K modems to connect to the Internet, which is incomprehensible to Young in an age of T-1, T-3 and even faster Internet connections. Still, the industry has come a long way in the past two years, he says.
"The door has been opened, and there is legitimate value in automating this $4 trillion industry," Young says. "We are not going back to three-by-five cards and metal file cabinets. This is not the beginning of the end - it is the end of the beginning.
"This year, I think we'll eliminate the hype and really get down to business. I'm more excited than ever," Young adds.
When asked what respondents use the Internet for, we received a deluge of responses ranging from external e-mail (88%) to obtaining financing for projects (9%). Respondents also rely on the Internet for research (76%), industry news (65%), intra-company communications (49%), to schedule travel plans (48%), to track or trade stocks (46%), site selection (42%), to list available properties (32%), to generate sales leads (28%), for visual tours of available properties (23%) and as an advertising medium (19%).
Still, traditional means take precedence over the Internet when it comes to looking for property information or trying to obtain financing. Nearly 60% of respondents consult a broker first when looking for property information, while 14% begin the process online. On the finance side, 79% first consult a lender or mortgage broker directly, while only 3% start off online.
The reliability of online property listing information drew a tepid response, with 20% of respondents finding such information highly reliable. More than half considered the Internet a highly reliable source for news, and nearly half considered the Internet a highly reliable source of product information.
A vast majority (71%) of respondents indicated that the Internet increases their productivity - 24% said it greatly increases productivity and 47% said the Internet slightly increases productivity. Only 1% said the Internet slightly decreases productivity, and 24% reported no change.
How does the Internet increase productivity? As a source of timely information, 80% of respondents gave the Internet a thumbs up, while 64% noted the `Net's time efficiencies and 41% noted cost efficiencies. Some 40% of respondents also pointed to quality information as one of the Internet's benefits. Respondents from the finance sector were more likely than developers to believe the Internet offers time efficiencies (77% to 55%), and financiers also spend more time each week using the Internet for business purposes - 8.1 hours per week vs. 7.1 hours per week overall.
On the adoption curve, respondents have mixed feelings. Only 4% thought that commercial real estate is a leading industry when it comes to adopting new technology, but 29% indicated that the industry was above average and 45% felt the industry is average when it comes to tech adoption. Still, 20% worried that commercial real estate lags behind other industries in tech adoption (Figure 2). Respondents under 35 (30%) were more likely to see the industry as a laggard than those over 55 (17%). Executives from financial firms (28%) were most likely to believe the industry trails other sectors of the economy.
Respondents were evenly split regarding the number of online sites they believed commercial real estate can support. When asked about online lending and project management sites, 33% of respondents thought the industry can support more than 10 project management sites, and 40% said the industry could support more than 10 online lending sites. More than one-fourth, 28%, indicated that the industry can support more than 10 listings sites. The largest percentage, 36%, believed that the industry can support three to five online listings sites, while 26% said the industry could support three to five project management sites and 21% thought the industry can support three to five lending sites.
Looking ahead to tech consolidation, 52% of respondents expected a moderate amount of consolidation, with 64% expecting traditional real estate companies to merge with online real estate firms. Consolidation received strong reviews, with 40% calling it positive for the industry and 35% taking a neutral stance. Only 9% rated consolidation a negative.
Still, the success of real estate technology ventures comes down to two factors: adoption and traction.
"Adoption remains the greatest challenge faced by new Internet-based real estate services," says Peter Pike, president of San Francisco-based PikeNet. "This cultural challenge is far more difficult than technological change, which means that strong leadership skills will be needed. Effective personal relationships will continue to drive the real estate industry.
"We've got a long road ahead of us, but it will be a tremendously exciting journey of exploration," Pike concludes.