Digital competition for brokers (NZZ, 27.5.2015)

The most striking change in the Real Estate sector concerns brokerage for rental and for-sale properties, whether they are apartments, office spaces, or commercial properties. Today, a potential buyer can already take a virtual 3-D tour of a property in Geneva or New York. Thanks to digital staging technology, it’s possible to get a sense of most of the property’s external features—such as the floor plan, sense of space, materials, and natural light—without being physically present on site.

Who does what?

However, technological innovations in communication—and the Internet in particular—are not only changing brokerage methods but are also increasingly affecting other areas, such as real estate brokerage and the transaction market. According to Claude Ginesta of the real estate firm of the same name in Küsnacht, such Internet platforms will transform the real estate scene even more significantly than previously assumed: “There are already examples in the United States—and to some extent in Switzerland as well—of web platforms competing directly with real estate agents.”

For example, an online platform establishes initial contact with a potential seller, offers them various services, and, in a subsequent step, connects them with a real estate agent from its own network of Sales specialists. What was previously considered the exclusive domain of good real estate agents—namely, establishing the initial contact between sellers and prospective buyers—is thus shifting into the hands of web platforms.

Professions in transition

“Perhaps we real estate agents will have to get used to the idea that, in the future, both parties to a real estate transaction will find each other through different channels than before,” said Ginesta. Nevertheless, this would not completely turn the real estate agent’s role on its head. After all, in addition to advising clients, assessing and documenting the property, and professionally managing the Sales and negotiations, a transaction still involves a wide variety of other services.

In Switzerland, the platforms that are developing new business models in real estate brokerage include, above all, Comparis and Realmatch360. Comparis has already established its own network of partner real estate agents and set up the corresponding operations. Any real estate agent wishing to participate in this new segment of the real estate market must sign the relevant partnership agreements with Comparis. Comparis cites quality assurance as the reason for this, but business interests undoubtedly play a role as well: If a real estate transaction is concluded through this channel, Comparis is entitled to 25% of the sales commission earned.

In the longer term, web service providers will endeavor to market additional services and products via these sales channels: Mortgage brokerage, real estate insurance and much more are obvious.

The Internet and the new communication possibilities generally create new information and comparison possibilities. Buyers and tenants who approach estate agents, property managers and landlords usually have more solid prior knowledge than in the past and tend to have higher expectations. Databases and digital marketplaces on the Internet offer a rich pool of comparative data, especially for standardized, relatively comparable condominiums or single-family homes. As sellers, private individuals now have new ways of estimating the approximate market or comparative value of their property. This puts both sellers and buyers in a better position.

The traditional profession of appraiser or real estate valuer is therefore not fundamentally called into question. Whenever easy comparability is not a given, their expertise and qualified service will continue to be of central importance. This applies, for example, in the case of increased requirements for the reliability of an independent valuation, such as in the case of the division of joint heirs or divorces. This is even more true for complex and large transactions. “When entire real estate portfolios or investment properties change hands, the services of valuers are still in demand, especially their expertise in advising the parties during the transaction,” says Thomas Gawlitta from the consulting firm of the same name in Berlin. Gawlitta is also the author of the book “Digital Real Estate Communication” and has been dealing with the consequences of digitalization for years.

A culture of feedback

Changes can also be expected from the fact that tenants, buyers or, more generally, users of space and services in the real estate sector will be able to provide more feedback and performance assessments in the future. Just as Airbnb or Tripadvisor have already been developing considerable market power in the accommodation and tourism sector for some time on the basis of customer recommendations or reviews, the real estate scene will have to adapt to such changes in the same way.

On the one hand, this increases the pressure on all suppliers and service providers in the entire real estate value chain, but at the same time opens up new perspectives in a constructive sense: The more data is available on actual wishes, needs and quality assessments, the more reliably services and products can be adapted to demand. In the construction and real estate sector, such innovations are particularly valuable because it often takes years from the first sketch of an idea for an undeveloped plot of land to the occupation of an apartment.

Residential construction “on demand”

Well-founded knowledge of demand trends and the respective needs on the market ultimately helps to avoid incorrectly designed or incorrectly positioned offers from the outset. In combination with the new display and staging technologies mentioned at the beginning – almost perfect 3D views of apartments and houses – new approaches to product design and positioning are available to the planning and real estate industry. Based on virtual tours, the tenant or The buyer will have a good basis for experiencing and designing their “dream property” in advance. This would also make something like “on demand” housing production possible in the future.

* Transcript of an NZZ article from 27.5.2015 by Jürg Zulliger