A. THE FLUX IN REAL ESTATE TECHNOLOGY CONFERENCES
Our last couple of newsletters covered the technology backlash that has occurred in real estate. In this issue, trends uncovered from a recent real estate technology conference are shared.
Last month this editor attended Inman's Real Estate Connect conference for the sixth time. About 1,000 people were in attendance, woefully off from its peak of some 4,000 last year. This conference not only marked an enormous turnaround in size, including vendors, but also in enthusiasm. Gone were the dot com marvels; present were primarily residential brokers and agents with a much more sanguine attitude towards technology. Also missing was just about any thing about commercial real estate.
Many technology conferences have experienced attendance declines, but with the attendance at Realcomm two months ago holding steady from a year earlier, the low turnout at Real Estate Connect was a surprise. I pondered, what happened? First, apparently many of the prior attendees to Real Estate Connect were at a company's expense. Besides a decrease in both the number of firms in attendance and in the number of attendees from those firms, those in residential real estate are more likely to be independently employed and less likely to pay for the conference themselves than those in commercial real estate. Second, Inman appears vanquished from commercial real estate and lost this group entirely. Although it was never a predominant area for Inman, it appears the enormous success of Realcomm, and to a more modest extent PikeNet, has made its mark. Third, in general, many real estate practitioners may be in the throws of a technology withdrawal. Great promises have seemed to vanish. There is a feeling that less change is occurring.
Yet, after a film presentation by Homestore of a strange sort, the following panels made it evident that residential real estate has actually changed more in the last two or three years than in decades. The big issue is the final vulnerability of the 6% listing commission. It is going down. Even the venerable Coldwell Banker is so concerned over an epidemic of firms with lower commission rates that they are test marketing a new limited service firm themselves, at about half the normal rates, known as Blue Edge. Since it is oriented to listings by owners, CB claims this is not cannibalizing their full service brokers, but possibly even helping them. (uh huh) Although eBay presented and tried to say it was a friend of the broker, it seemed more like a PR ploy to avoid broker panic. Only about 30% of eBay's listings currently involve a broker. In part, what is driving the change in residential markets is that over half of all buyers are using the Internet in some fashion and measuring. Regardless of what a broker may say, they know they need to either offer more services or accept lower commissions. It simply appears many brokers are doing less, while the buyer (and seller) are doing more.
Of course, an important parallel is how this may relate to commercial real estate. Can fees for commercial real estate come under even more pressure? What may be even more significant, however, could be commission declines for leasing and tenant representation. Of course, the potential winner here could be the owner, e.g. REITs, that may need to pay out less and keep more. Stay tuned for more.
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