Commercial Real Estate:
A Study of the Effects of Technology Removing the Human Aspect
University of South Alabama
This paper was prepared for IST-350 taught by Frank Ard
The commercial real estate industry has seen exponential change in the previous decade due to technology and this change will continue to disrupt the industry in the coming years. Technology is attempting to remove the human aspect of commercial real estate in an effort to streamline and make the industry more efficient. This shift is happening in a number of ways including; recent investment into commercial real estate technology, artificial intelligence, the removal of the human element of transactions, automation of jobs once held by humans, and streamlined business operations through integration in daily workflow. While these factors are effecting the entire economy, they are leaving the commercial real estate industry scrambling to not only adapt through internal operations but also adapt to customer's needs. Industry professionals are in a race with time to prove that the human aspect and rational cannot be automated by technology.
The world's economy has been and will continue with its fourth industrial revolution, this time focused around advanced technology. The last industrial revolution was focused around the assembly line and since then technology has been on a fast track to take over most human related tasks. “Throughout history, disruptive technologies such as steam power have fueled major shifts in the United States' economy.” (Krumhansl, Zikakis, 2012) The commercial real estate industry and the real estate industry in general is feeling a lot of pressure from technology to remove the human aspect. This is most notably being driven by the investment into real estate related technologies. “Real estate tech research and marketing agency Re:Tech reported that $12.6 billion was invested in real estate tech in 2017, continuing the year over year growth in this department. With several billion being invested in the final quarter of 2017 alone, it seems the market is doubling down on this sense of urgency.” (Fraser, 2018) This amount of investment has helped put the development of real estate related technologies into overdrive. What was once a stagnant sector of the technology industry has now leaped far and beyond expectations.
Artificial Intelligence is not a new concept. Robots have been replacing the work of humans for over forty-years. Dating all the way back to World War II when the use of the Turing Machines helped decrypt Nazi correspondence. (Coval, 2018) While that was a very simplified version of artificial intelligence it stemmed the further development of automation. In today's world artificial intelligence is vastly more efficient and has made great strides to eliminate jobs held by humans that were once very time consuming. Artificial Intelligence is the future no matter how much certain people try to avoid the inevitable. “According to a global study in The Economist, '75 percent of more than 200 business executives surveyed said AI will be actively implemented in their companies within the next three years.” (Coval, 2018) Even the businesses that have no directly implemented artificial intelligence into their daily operations have already indirectly implemented artificial intelligence through outside resources. “AI is already baked into everything we touch in our daily lives, in real-time. Think: Siri, Alexa, traffic and map apps, online shopping, music selection, sending chocolate-covered strawberries to Mom and fraud-alert notices from banks.” (Coval, 2018) Artificial Intelligence is important to consider when evaluating the shift in commercial real estate. Roles that were once held by humans are no longer needed. The title and escrow process can now be controlled through programs that log and evaluate a property's past title history. Brokers within a real estate transaction could no longer be needed to help guide an investor toward a specific property. Artificial Intelligence can determine an investors taste by their history and future plans to provide them with an informed suggestion, essentially removing any possibility of human bias from a broker.
The advancements in technology are not something that is new to the world. A publication of the Cornell Real Estate Review, discusses Commercial Real Estate in the Digital Economy. “Throughout history, disruptive technologies such as steam power have fueled major shifts in the United States' economy. Their impact has not always been entirely positive in the short term. For example, technological advances and automation played a major role in one the biggest economic collapses in U.S. history” (Krumhansl, Zikakis, 2012) The authors go on to discuss how automation is not always positive for a specific industry or the economy as a whole, especially if the world is not ready for this technology. Commercial real estate professionals and all of humanity is already bracing for technologies that are going to completely reshape the way we operate, most notably with autonomous automobiles. These autonomous vehicles are just a few iterations away from taking over how humans travel. This has left commercial real estate professionals left scrambling to develop plans for traffic flow through retail centers and what to do with parking garages as they will not be a necessity in the not so distant future. As technology continues to improve manufacturing jobs are being replaced with robots that require less space. Commercial real estate professionals are forced to reexamine the space requirements needed for manufacturing along with, floor load, power usage per square foot and location for these factories as the need for proximity to labor is no longer needed.
A study performed by researchers found that the ability to read non-verbal cues from customers can make or break a deal. “The interpersonal nature of an interaction between customer and salesperson appears key to retail customer satisfaction… relationships enable rapport and allow the salesperson to be more responsive to the customer, resulting in greater customer satisfaction.” (Puccinelli, Andrzejewski, Markos, Noga, Motyka, 2013) This study found a clear connection between interpersonal interaction and client satisfaction that can be directly applied to a commercial real estate transaction, especially one where a large sum of money is on the line. But, that is not stopping technology innovation from attempting to take over the ever so important human element. Gary Keller, co-founder and chief executive officer of Keller Williams Realty, has been an outspoken critic of this shift, but he also recognizes that industry professionals must imbrace this shift. “Keller is absolutely correct that technology is rewriting all of the rules, all the job descriptions, reimagining businesses, creating new industries and eliminating others. He's not wrong that we're in the age of ‘Always on, always learning, always thinking.'” (Hahn, 2018) The creation of new listing programs such as Loopnet, Ten-X, and CoStar, have afforded individuals to by-pass brokers and to look for their next commercial property on their own schedule. Commercial real estate's biggest advantage in avoiding the complete takeover of technology is the psychological side of being reassured by a trustworthy professional. This comes with a catch as companies and industries that are unable to provide superior customer service will forfeit the race with technology as trust will be lost.
Commercial real estate has always been a slow tip-toeing giant when it comes to technology integration and acceptance. “Right or wrong, deservedly or not, commercial real estate has had a long-standing reputation of being technologically averse. One what was once called the information superhighway, real estate could be seen chugging along in the slow lane, trailing a paper spreadsheet out the back window.” (Buildings, 2018, Pg. 44) This new technology is incorporating artificial intelligence to take over tasks that once required an enormous amount of resources, such as; lease, contracts and transactional processes. Artificial intelligence is also reshaping the way companies interact with their clients, by giving property management companies predictive suggestions when it comes to client's needs (Buildings, 2018). Commercial real estate companies have always seemed to struggle when it comes to technology integration. “Unfortunately, businesses have often spent too much time and money on this technology, failing to properly integrate strategic positioning and change management issues with technology expansion.” (Christy, Muldavin, 2001, Pg. 69-70) Technology in itself is an expensive investment and companies are pouring out millions in order to stay relevant. The unfortunate fact of these investments is that too many commercial real estate companies have not taken the necessary time or resources needed in order to take full advantage of this technology that they are purchasing. This lack of integration effectiveness stems all the way from management. “Results of a recent survey of more than 400 top CEOs in this country found that the majority said they promote the benefits of e-commerce publicly to appear ‘with it' and technologically competitive, that it doesn't really impact them personally day to day.” (Christy, Muldavin, 2001, Pg. 70) It is clear that technology integration is no longer an option. Those who do not embrace technology and take an aggressive, but intelligent well thought out approach to integration will be left behind.
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