The recent emergence of data-driven tools has transformed the way that commercial real estate firms of all sizes approach their operations.
As buzzy a term as “disruption” may be, there’s no denying that the ongoing Fourth Industrial Revolution has already managed to redefine the mechanics of many well-established industries. Nowhere is this truer than commercial real estate.
One of the most significant disruptions of the industry status quo has come from the emergence of platforms that have forced commercial real estate professionals to reevaluate the ways in which they access and analyze market data. Digital technologies have not so much introduced new data into the commercial real estate equation—cost of capital, demographic shifts, workforce trends and so on will always form the core of commercial real estate—as it’s democratized existing data that’s historically been controlled by giant brokerages and other traditional gatekeepers.
An unbalanced status quo
Traditionally, commercial real estate brokers working at small “mom and pop” shops could only get their hands on market research in one of two ways: dedicate substantial time and resources to collecting, organizing, and interpreting publicly available property records containing ownership histories, zoning regulations and owner contact information, or wait until a large firm published its quarterly market reports. Both options placed smaller-scale brokers at a significant disadvantage by delaying their access to information until their larger competitors had already pounced on the most lucrative opportunities. With the introduction of powerful commercial real estate data integration platforms, this is finally beginning to change.
This newfound access is afforded to just about any broker, meaning market research is no longer the biggest differentiating factor between success and failure in this business. Data-driven commercial real estate platforms have functioned as a great equalizer, but this democratization of information has resulted in a new premium being placed on the efficiency of a broker’s operations.
Expanding one’s reach
Within this new paradigm, brokers who embrace technology with open arms and learn how (and how not) to leverage it will be best-positioned to establish a foothold in their market of choice.
In practice, brokers can approach this imperative in one of two ways. On the one hand, brokers can use a data aggregation platform to diversify their portfolios and expand their geographic reach beyond what was previously possible. Cutting-edge commercial real estate tools featuring predictive analytics and/or machine learning capabilities are able to process untold volumes of data and pick out potential opportunities that would have previously remained hidden.
Refining one’s expertise
On the other hand, many brokers are finding that crafting a hyperlocal focus is the key to commercial real estate success in the era of democratized data. Since everyone has access to more or less the same information—and more and more brokers are figuring out how to leverage it effectively—there’s a strong argument to be made that niche expertise is the only way to stand out from the crowd.
Fortunately, most data aggregation platforms offer a battery of filters that enable brokers to explore market data with an unparalleled degree of precision. Regardless of the nature of the niche a broker is attempting to master—expertise can be “hyperlocal” to a specific industry, building type, price bracket or square footage range, in addition to being strictly geographic—commercial real estate technology is the perfect mechanism with which to parse the seemingly infinite amount of market data at their fingertips.
The bottom line
Ultimately, the leveling of the industry playing field represents a tremendous opportunity for smaller firms and upstart brokers, but only if they find ways to adapt to the new landscape that has formed in the wake of the industry’s technology-driven tectonic shifts. Commercial real estate will be a different game tomorrow than it was yesterday, meaning those who are most willing to evolve their playbook will be more likely to come out on top.
Richard Sarkis is the CEO of Reonomy, a provider of commercial real estate property data.