COVER STORY, AUGUST 2005

THE SAME EFFICIENCIES, NEW PRODUCT
The big technology firms take notice of lucrative real estate markets.
John Combs

Combs

Some of the driving factors influencing interest from the technology giants include labor and production. Consider these statistics. Compare the costs of labor in major U.S. markets to other countries. Cost of production must be lowered to compete with the higher domestic labor market. Labor costs in this country are $21 per hour compared to $1.70 in Mexico, $0.92 in China and $0.70 in India. Thus real estate employment was up 3 percent last year, but output was up 22 percent as reported by the Torto Wheaton Research Report.

How does the industry keep up production without increasing costs? The baseline for commercial real estate automation has moved up. As the industry matures, there has to be more automation of workflow. For property managers to keep up with the output requirements of doing more with less, they must incorporate and integrate technology into their daily activities.

Historically, technology advances to date have been relegated to real estate applications related to accounting systems. This primarily allows property managers to customize financial reports for the building owner. The opportunity for progress, however, is in two areas. These include streamlining the interface with tenant activities, like tracking insurance certificates, call centers with dispatching capabilities, procurement of supplies and in brokerage with mapping and photo galleries.

As the mega-international real estate firms start to invest in technology, the leading technology firms are stepping into the game. Overall, this leads to more affordable pricing for these tools and makes them available as a commodity to everyone. Prime examples of these applications are electronic filing cabinets, client web-based portals and fantastic lobby directories provided by well-known electronics companies such as Pioneer and Hitachi.

Based on the advancement of this technology and the immense applications, soon most service providers will offer tenant service dashboards similar to Fed Ex. Imagine tenants being able to make requests and check on their request status from their own computers by accessing the service providers web site. This is similar to the type of service provided today by Fed Ex, Amazon.com and others. What makes it more exciting is that the price point for this type of productivity and these software offerings continues to come down.

And it isn’t just the big tech firms that are entering the real estate marketplace. There are many other product and supply companies creating leading-edge productivity tools. At the recent RealComm show in Anaheim, California, Proctor & Gamble was in place with its products selling direct to the real estate buyer. Ingersol Rand has entered the hardware security systems industry with very affordable and unique equipment and software.

What is the next generation of adoption? Real estate information technology departments will merge with real estate or facility management departments. This will put the customer in charge of the technology needed while also benefiting from the biggest return on investment. Eventually, tenants, managers and brokers will all talk by phone via instant messenger.

In the very near future, we will have standard G/Ls and reporting formats that will be adopted internationally. Groups such as OSCRE, the Open Standards Consortium for Real Estate, are driving this initiative today. OSCRE is an electronic data exchange standard, based on the industry standard XML, developed for the U.S. property market.

The goal for OSCRE is to facilitate a greater level of coordination, standardization and collaboration across the key stakeholders in the commercial real estate industry — corporations, public agencies, service providers, management consulting organizations, software vendors and suppliers. According to OSCRE, the need for a standard methodology and language is fundamental for the corporate real estate supply chain to operate and communicate within today’s e-business environment.

The fact is that real estate owners can no longer depend on compression of cap rates to create value. Now more than ever, the property management professional must be as productive and creative as possible in order to deliver service to their clients and tenants that will result in building true value.

John Combs is founder and principal of RiverRock Real Estate Group Inc., a commercial real estate management and leasing firm headquartered in South Coast Metro, California.

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