AND THE BIG FUTURE WINNERS IN CRE TECH WILL BE…
- Michael Beckerman
I read a fascinating article this week about how the big five (Apple, Alphabet, Facebook, Amazon, Microsoft) are dominating the world of tech. Obviously, it wasn`t always this way. But as I reflect on the trends over the last few decades in tech, it`s clear that this is where the landscape has settled for now and into the foreseeable future. The authors conclusion - there was an era where startups reigned supreme only to be supplanted now by a few behemoths.
I have always been fascinated by market cycles. How they evolve. When they happen. Who wins and who loses. In all industries. And now that I am on the tech side of the commercial real estate business, I pay very close attention to the market cycles that this young industry is trending towards.
My own "lab" is my constant array of meetings and connections with as many people in the commercial real estate tech space as I can connect with. Startups, Angel investors and VC`s, landlords, developers, brokers and contractors. I talk to them all, all the time and I ask a lot of questions and do a lot of listening. My objective is to discover as much as I can about what they are seeing in the CRE tech landscape and then I can more easily, and accurately, paint a picture of where we are and where we are heading with this blog or the other forms of content we product at CRE // Tech. And I also use my 25 plus years in the commercial real estate business on the media/marketing side to really understand the unique dynamics of this industry.
So in thinking about the article I referenced earlier about how a few giants are dominating the tech sector overall, my conclusion is that the CRE tech market will at some point emerge from this current "startup" phase and follow the path that Silicon Valley is experiencing today. And while it may take many, many years to emerge, I also think one day down the road there will be five giants that emerge as the dominant forces that shape the lives of everyone in the commercial real estate industry.
And my thought is that the big five will be...
(Of course there are many others that could challenge them like NAI Global, Marcus & Millichap, HFF, Coldwell Banker Commercial, SVN, Lee & Associates, TCN Worldwide, Transwestern, Kidder Mathews, etc…)
Because no one has the resources, the built-in customer base and the incentive to dominate tech in the commercial real estate sector more than they do. And they will dominate. One day. I am fairly certain of that.
I believe that we are only in the first inning of these giant firms getting their tech shit together and really formulating their strategies of how to embrace a new model for their business. To not only create greater efficiencies within their organizations, but to better serve their customers and as a result, differentiate themselves from their competition. If you look at FinTech for instance, the really successful financial institutions today are the ones that are indeed embracing tech more than their competition. Even a global powerhouse like Goldman Sachs has been embracing tech for years and has been able to cut their headcount while increasing market share and profits. Read this amazing article to understand how they cut their Equity Trader headcount from 600 to 2 using AI.
Of all the sectors in the commercial real estate industry, the brokerage firms are destined for the most profound change in the years ahead. The firms on the right side of this trend recognize that leasing velocity will eventually be transformed as tenants increasingly embrace tech to cut occupancy and overhead costs. (Here is a good read on just how law firms are cutting their space occupancy)
They also understand that the impact of millennials as the next-gen of business leaders leasing office, industrial and retail space will be much different than the generation before them. So as their client base embraces tech, employs less people and occupies less space in the future, so will brokerage firms follow suit or they will risk getting crushed by the competition. Just look at how the retail sector has been decimated by tech as an example of how profound these changes can be if you are not prepared. I also believe that the brokerage firms will most likely be the acquirers of many of the dynamic startups on the scene today, in addition to developing their own tech solutions in house, which many already are.
And while everyone talks about an alternative to CoStar, I honestly think the only viable solution in building their rival will come from their customers… the brokerage firms themselves.
In the future, I think you will see these giant brokerage firms reposition themselves as leaders in technology. They will brand themselves as using a myriad of tech solutions to help companies manage, plan and occupy space with the greatest of efficiencies. And that is where the great opportunity will present itself for brokerage and advisory companies to race to brand themselves as tech first, brokerage second.
I remember there was a time where every brokerage firm used virtually the same positioning with the variation of the global/local theme. Don`t be surprised if one day soon the word "tech" starts to appear in their branding!
To me, that`s where the next cycle is heading.
I welcome others thoughts as this is just one guy`s perspective sitting here up in the cheap bleacher seats…
(Oh, and here`s shameless plug... If you want to see all of the big five brokerage firms on one stage at one time talking tech here is your chance)