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Adapt. Disruption is coming to commercial real estate brokerage. Are you ready?

Posted by Jeff Finn on Apr 27, 2020 12:04:22 PM

We had a fantastic session in the ongoing RealNex Webinar Series this last week as RealNex CEO Jeff Finn hosted Blaine Strickland, CCIM. The webinar focused on the findings of Blaine’s new top selling book Adapt. Disruption is coming to Commercial Real Estate Brokerage. Are you Ready? It was a thought provoking and perhaps intimidating hour as Blaine focused on the 9 forces that are forever changing the commercial real estate brokerage sector. Nothing to do with COVID-19 or external forces dramatically and coincidentally changing the world and how all businesses are done, this insightful book homes in on the unique drivers of change in the commercial real estate industry.

While unable to drill down into each and every aspect, we took a high-level overview of what the future of the commercial real estate industry might look like based on three primary factors that will inevitably and inexorably transform the landscape

  • The transformation of our Clients
  • The activities of the biggest players in the arena
  • The demographic evolution of our work force

When Blaine speaks about disruption, he is not talking about subtle changes in how business gets done, not a brief impact and a return to how we always went about things, but rather it is about a whole new way of doing business. With an industry with little diversity, an average age of 60 and a dearth of talent clamoring to enter an archaic market, we are clearly ripe for disruption. The question is, can the existing industry leaders actually be the disrupters and transform a stodgy industry into a technology lead efficient market or will it stand by and watch as external forces change the paradigm.

The discussion put a spotlight on several market dynamics and how the commercial industry needs to evolve, “adapt” and transform rather than face the fate of markets that have been eviscerated by external forces.

Will the industry face the fate of the Travel Agents that were once indispensable and whose ranks have been cut in half and roles have changed from booking tickets, rooms and seats to tour guides ands destination planners? Or, Stock Brokers who at one time had “seats” that controlled what shares were bought and sold for huge fees only to lose share to free on-line trading. The traditional Stock Broker has been replaced by much more sophisticated financial advisors and wealth managers that don’t process orders but rather construct and manage diversified portfolios.

These changes have been driven by ubiquitous access to information where the consumer has taken control and markets have become transparent. It used to be that commercial real estate agents added value because they knew what space was available, all the detailed attributes, were good at “showing space” and influential in negotiating deals. The best brokers were not only great at matching buyers and sellers in opaque markets but also sophisticated orchestra leaders that were able to coordinate myriad parties and actions needed to affect a trade. Today the bar has risen and the value proposition to yield success far higher.

Markets are no longer opaque, or they are at least much more transparent. And, with the Gig economy upon us, virtually any task or service can be easily accessed, evaluated, consumed and paid for by the client directly.

What about platforms and splits? Do agents need big houses when all the services they need from data, technology and support are readily accessible. Or, does the house provide a level of brand, support, infrastructure and service that enables agents to be more effectively complete, more efficiently operate and in the end deliver service more profitably?

How does the advent of global behemoths like Amazon turn the industry upside down as they are able to create bidding wars for every city across the land to attract the jobs they can deliver?

And, what about the economics? Why would the best and brightest want to enter an industry that is old, tired and lacks diversity, whose fees are being pressured and whose best players can hope to create enterprise value of 1x revenue while tech companies that trade at upwards of 10x revenue! And, speaking of Ten-X, what about more efficient trading models and markets. How will technology  enable and lead the industry’s transformation?

The next generation of commercial real estate brokers will emerge into companies, whether boutiques or behemoths that know who to recruit, train and provide the highest level of advisory services from process-oriented deal management, investment analysis, space optimization, transaction structuring and capital formation. They will likely be more fully diversified as asset managers, property managers, owners and operators, with legal, financial and facility expertise. They will not do business as usual. They will adapt. They will disrupt and they will lead this massive industry into one that is efficient, dynamic, exciting and rewarding.

Companies like RealNex and other emerging Prop Tech firms will work with the industry to foster this quantum leap forward by delivering the tools and platforms for commercial real estate professionals to be the agents of their own change. To adapt, the commercial real estate broker of tomorrow will need to lead the disruption, to deliver service in new ways. To not go the way of the Travel Agent, but rather to elevate the game by delivering the best advice, the next generation of market leaders will provide the most efficient processes, a consistency of quality process and service at a value that will ensure external market forces will not be able to effectively disintermediate.

These are clearly exciting and challenging times for the commercial real estate industry. Are you ready to adapt?

To learn more about this thought provoking outlook of the future of the commercial real estate industry, Click the link to access the playback of the webinar and presentation deck.

Topics: RealNex Webinar Series

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