Innovation or Disruption?
Commercial Brokers can adopt, adapt, or abdicate their role as transaction leaders.
Rapid technological developments are upheaving traditional business models in almost every industry and marketplace. Commercial real estate is certainly no exception, as brokers and agents react and respond to the increasingly popular innovations of the recent decade (cell phones being the most obvious and life-changing, but there are countless others, technological, regulatory, geographic or generational). But innovation for many is often disruption for others – improving efficiency and opportunity while displacing products, firms, whole industries (Kodak and Blockbuster come to immediate mind). And most certainly, un-employing hardworking people caught up (doomed) in the fray of displaced plants, rusting equipment, outmoded peripherals, and robotic replacements. Because technology is ever-evolving and relentless (becoming smarter, speedier, even sassier like Alexa), so is the likelihood (certainty) of newer, even more disruptive innovations. Yes, disruptors are innovators, but not all innovators are disruptors.
E-commerce
The impact of e-commerce is evidenced in how consumers purchase and receive goods. As commerce has shifted from Main Street and onto Cyberspace, the demand for retail space has alarmingly eroded. Bigger distribution warehouses have supplanted “big box” stores, or reduced their purpose to big screen showrooms or Geek Squad repair shops. In order to compete (survive), retailers must adopt better (faster, less costly) sales and distribution platforms – showcasing their products to customers, facilitating online orders, then shipping goods directly from retail locations (rather than industrial centers) to provide same-day delivery to their nearby client base.
The Sharing Economy
The “sharing economy” is an economic model whereby individuals buy or rent goods and services from other individuals in a synergistic manner (typically through online platforms). Examples of mutual “back-scratching” are alternative financing, vacation rental, and transportation platforms.
- Uber and Lyft and clones have transformed how people move about big cities.
- “Fintech” networks, such as Fundrise, Kickstarter, Lending Club and Prosper, provide real estate developers with alternative (less rigid, costly and time consuming) options for financing new projects. This is particularly helpful for fledgling and expanding businesses.
- Vacation rental platforms like Airbnb allow people to list and rent convenient, less costly, more “colloquial” places to stay the night.
Other Technology-focused Disruptors
- Through data-driven analysis, businesses (like commercial real estate companies) can better understand market trends, segment customers, and develop new strategies to match market conditions and more efficient targeting of “probable” immediate customers.
- Changing communication methods let employees work efficiently from remote locations. As companies revamp their business models to fit more fragmented staffs, office space is being redesigned to sustain and foster greater collaboration. As a result, the demand for traditional office space is falling.
- Direct access to equity, data, and asset management assistance has created widespread disruption in the financial industry. Mobile (Smartphone) apps lets bank customers deposit a check or transfer money. New, exclusively online financial entities are also being created. Such disruptions have reduced (eliminated or downsized) demand for bank branch space and other office space.
Technological advances like these and others are already replacing many jobs (mostly blue collar and middle management positions, e.g.). Seemingly, some jobs cannot be replaced by a computer – those requiring creative and social intelligence. In commercial real estate, there’s a high probability of automation replacing many current functions of real estate agents, association managers, appraisers, and transaction coordinators.
Down the road, the only constant is change