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#CRETech Takeover. Guest Post James Milner.

madmentakeover

Is the typical #CRE broker going to become obsolete?  According to an article I found in the Austin Business Journal, published from a few months ago, this would be a concern that as #CRE brokers we are going to have to deal with.

If you haven’t heard or more importantly realized #CREtech is a reality.  It is a here and now thing; this is no longer a rumor or rumbling.  Companies are being started on a daily basis to solve the world’s #CRE problems.  Wait, I thought that’s what brokers were for?  Panels and conferences are being held to discuss this one subject.  Add to this reality that these #CREtech companies have access to capital, we brokers might be screwed.  Or will we?

So let’s discuss the issue at hand.

Let’s open Pandora’s Box.

Are brokers going to be replaced by a computer program, some complex algorithm that spits out a response and answer?  Remember the movie, Moneyball.  An analysis (sabermetrics) was used to find out who would be the best player that the team could acquire to help them win games.  This is no different, except substitute the word player for location and games for profitability or success.  The article stated that this one company can assist in the retail site selection using metrics to develop a risk score.  In layman’s terms, will your business survive at a certain location?  How do they do this, go back to the algorithm, plug in what they say to be 15,000 data sources and like pressing the send button on your email, an answer.

Immediate.

Now.

The article goes on to say that a brokerage (not named) charged a retailer $40,000 to do site selection and “that site is producing 20 percent of the company’s sales”.  First off, what brokerage charges $40,000, really seriously?  Secondly, who charges that kind of money and doesn’t do their homework?  CCIM members have been using this technology for decades, they teach an entire class basically on this one subject.  The class teaches what makes a site or location worthwhile of the investment.  Lastly, this company is offering their product or service at an affordable price point so that non-retail giants “mom and pops” can get this information.    

The small glimmer of hope, the +1 for brokers, the tipping in the pendulum in favor of brokers is that “the challenge is designing algorithms that authenticate the real estate process and training people how to read the data and effectively communicate what’s truly going on.  The people with the proper skills are just not there.”

Brokerage is and will always be about relationships.  Brokers will always have superior market knowledge over the computer.  More importantly, brokers will know about a deal or space that the computer doesn’t.  Fundamentally, a business owner (user) is better off for using the services of a reputable #CRE broker then trying to do the deal on their own.  The issue with technology is that it should be used in collaboration with a broker; to use it as a tool.  Technology is not a replacement of the commercial real estate broker.

Brokers are advocates.  We are fighters; we go into the ring wanting what our client wants.  We are competent and for the most part well educated.  Many of us have obtained professional designations; remember those four letters behind your name.  We have real world, here and now experience and that can’t be replaced by any program or service.  #CREtech should partner more with brokers to help vet the product or service that they have or are trying to bring out into the market.

This company is yet another example of the #CREtech takeover, not necessarily cutting out the broker but empowering users with tools and resources to do the deal differently.  If there is anything learned from the Google Loopnet study is that users are first and foremost going online to start the process and then they may or may not call you.  This is fact, so what can #CRE brokers do to change that?  If #CREtech keeps up at this pace the pendulum might just swing back in their favor.    

Thoughts or comments appreciated.

James Milner, CCIM is the Owner & President of Appalachian Commercial Real Estate, LLC, Boone, NC.  He provides brokerage, leasing and consulting services in Northwestern NC.

 

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  • Mike Foundos

    James you make some great points. Brokerage is too lucrative and too crucial to the ecosystem to go quietly into oblivion. Jason Ray posted an article on LI about tech enabling super agents versus “disruption” which is more of a realistic outcome. Coy, Barbi, Allen, and our beloved Duke are all great examples. Also, your line “Brokers are advocates” sums up a huge intangible value proposition that should me mentioned more often.

  • Herb Front

    Really great article James. When the best technology is matched with the best operators on ground, value is maximized (In revenue & results)

  • The key term is “typical”. The exceptional brokers will never be obsolete, but if people want to use typical brokers, yes, technology may be better than they are, but if you are good at what you do, you will embrace the tools and technology and be on the cutting edge of maximizing it and not saying it is taking away your business model. Today, technology is changing everything. Just like people said the Walmart destroyed small town America and Walmart is evil and now the small town centers are returning and reinventing themselves. Technology changes things, yes, but it does not change the underlying purpose or business and if you embrace it, you are a better broker or manager for it.

  • Lowell Peabody

    The discussion should not be about algorithms (or as I call them “Aneurysms”) and computers. It is not about retrieving details but taking advantage of open and real time communication. What information is most important to a tenant/buyer? From the broker perspective it is the proprietary information a broker can add about a property, the ownership, location, community, reputation, other tenants, shadow space, available space, negotiation history, what is important to the Landlord. Think about this possibility. Who else has this information? Tenants. Via social networks a tenant/buyer could easily get information and poll opinions regarding buildings, tenants, locations, communities, owners, reputation, available space, shadow space, leasing experiences, negotiation strategies, what was important to the Landlord, and more. Beyond general commentary direct connections are possible. This capability exists now, though it has not been exploited to date. Should this take root, then where is the value of a broker? Do we become “surrogate” negotiators for someone who already knows what they want and have a plan?