Going Beyond the Garage: Innovation in Real Estate
Do big companies believe that they can replicate the garage startup model?
Large corporate innovation requires overall commitment, discipline, workflow process improvement and above all other things — a willingness to take risks and fail. The more fluid the concept, the less likely corporate cultures are to embrace them. Executives from companies with strong innovation capabilities —and disruptive ambitions—still represent minuscule numbers. HBR has spent decades studying how the practices of these top innovators differ from laggards.
It is worth noting that not everyone is suited to innovation practice- just who innovates is the subject of another piece.
Innovation in the real estate and mortgage markets is particularly challenging. Frequently it is only the companies with a foundation of innovation capability that can aspire to break through. Too many companies will shoot for the moon or try and build a space station while docking to it, and their innovation programs will fall out of the sky.
U.S. commercial real estate is a $12 trillion industry, with a significant percentage of revenue concentrated in a handful of REITs and brokers controlling extremely high-value assets. Until very recently, these firms were reliant on outdated legacy software and, in some cases, pen and paper to manage their vacancies and schedule tours for prospective tenants.
Today, companies like VTS and Hightower are revolutionizing the commercial real estate industry by centralizing a firm’s data in a single cloud-hosted database and making it the system of record for agents to manage their workflows and customer relationships.
Because these assets are so expensive, the value of shortening the time from vacancy to occupancy through improved data and information flow between owners and brokers makes an investment in information technology a no-brainer. At some point, companies like VTS may even be able to provide market comps by anonymizing firm-level data and aggregating it into industry-level benchmarks by zip code.
Unlike commercial and residential real estate assets, which turn over less frequently, apartment units have tenants moving in and out on a much more regular basis. This poses challenges for landlords and property managers, whose profit margins depend on maintaining high occupancy rates. The software helps solve this problem in a couple of important ways.
Given the on-the-go nature of their jobs, realtors need mobile apps.
First, data analytics platforms like Rentlytics give owners and managers greater transparency into the performance of their portfolios, both on an overall basis and at the level of an individual asset. By identifying which buildings in a portfolio are having difficulty maintaining target occupancy rates and drilling down to address root causes, landlords and portfolio managers can improve profitability.
Meanwhile, companies like Nestio and Online Residential (OLR) bolster the marketing and lease management functions of multifamily owners by allowing them to syndicate listings to multiple Internet listing services.
This saves teams hours of time each day that would otherwise be spent manually updating listings across sites and ensures their listings are always accurate and up-to-date. Brokers also benefit by getting faster, more reliable data on new listings coming onto the market.
The average residential real estate agent spends very little time at his or her desk. Every minute spent sending marketing collateral or pulling listings information is a time that could have been devoted to sellers and buyers closing homes, which is how realtors get paid.
Given the on-the-go nature of their jobs, brokers need mobile apps that automate the repetitive aspects of their job so Impact Innovators can focus on building relationships and completing transactions.
DotLoop makes the closing process for agents easier by allowing them to bring all the constituents of a sale together in one “loop,” upload relevant documents, negotiate a transaction and get bank-approved eSignatures.Meanwhile, more recent startups like Homesnap and Agentdesks help agents more efficiently manage their workflow and communicate with existing clients, while others like Zurple and RealScout allow them to market effectively.
This explosion in recent real estate tech startup activity comes with risk. There will be an inevitable shakeout. Buyers of real estate tech are advised to evaluate the long-term viability of the startups with which Impact Innovators work. It is a delicate balance operating at the leading edge of tech adoption and adapting to shifting economic conditions. The benefits created by the jump in real estate tech startups will far outweigh the costs. We expect that the future will see continued efficiency gains as information speed, and accuracy pervades the real estate industry.
As the real estate industry embraces all that technology has to offer, not only will real estate businesses and their agents become more efficient, but emerging startups, venture capital firms and investors who back them will share in the profits.
Real estate is also predominantly an information business, where transactions depend on the steady flow of data between buyers and sellers, and brokerages with the best data tend to make the most money. There is ample evidence to support innovation in the real estate businesses that can assist these humans to operate more efficiently with more accurate data. These are afforded by workflow automation and online collaboration tools.
While Real Estate Tech 1.0 was about bringing real estate data online, Real Estate Tech 2.0 is about equipping humans, the agents and brokers with software platforms to harness that data and run their businesses more effectively and efficiently. Brokerages with the best data ultimately make the most money. Agents now access real-time information in cloud-hosted databases and collaborate more efficiently with colleagues based on a standard system of record. Workflow automation software is making agents more efficient by eliminating the need for repetitive tasks that brokers previously did manually. Ultimately, these tools save agents time and their parent firms money, leading to leaner and more profitable businesses.
Some savvy business people anticipated these changes on the consumer-facing side of the company and launched startups in the early 2000s to provide online access to home and apartment information. Zillow, Trulia, HomeAway, and Rent.com are just a few. Joining them are legacy software companies such as CoStar, Yardi, and RealPage, who have updated their platforms to be user-friendly. Startups like LoopNet (now part of CoStar) have democratized commercial real estate information by providing online access to buyers and sellers of commercial properties nationwide.
This article was originally published on Huffpo