By Brad Berton

The gadget-oriented high technology sector and the relationship-focused commercial real estate industry haven’t exactly had an ideal rapport. So as Internet-related euphoria pulled prominent properly players further into the cyberspace realm in recent years, skeptics were hardly surprised at the decidedly mixed results.

Many of the presumably promising real estate technology start-ups ultimately went the way of the dotcoms, frequently chalking up significant losses for the leading property companies that invested in them. Meanwhile, many information-technology specialists rushed to install automation solutions, which often overwhelmed the real estate pros using the systems. Likewise, transaction-dependent players set up slick websites urging would-be clients to satisfy real estate requirements online—only to find that those customers still preferred human interaction.

Nevertheless, the real estate industry continues to learn a key lesson from the rather rocky marriage: embrace the considerable bottom-line efficiencies emerging technologies promise. Many savvy real estate operations today are indeed taking that very lesson to heart. Still, industry pros readily concede that expectations about new technologies have been far too ambitious.

“What we generally saw in real estate technology in the ‘90s was a rush to solve problems people really didn’t have,” relates David Gialanella, vice president of global services of Cushman & Wakefield Inc. in New York City. “For instance, the theory that technology could efficiently disintermediate middle-man dealmakers proved nothing more than myth,” he elaborates.

Misconceptions and related pitfalls have clearly spawned confusion and skepticism about technology’s ever changing role in the income-property sector, experts acknowledge. As real estate technology guru Peter Pike points out, fewer players are willing to take considerable risks developing new real estate technologies for the time being, particularly after so many of them lost so much when the tech bubble burst.

However, past disasters aren’t entirely discouraging those seeking to tap into technologies’ productivity-enhancing capabilities. As some suggest, profit boosting opportunities still abound across the entire commercial real estate spectrum.

“The entire industry could run much more efficiently, but only if people dust off their computer closets and analyze whether they’re utilizing the systems they have and getting enough bang for the buck,” says Stuart Siegel, IT services director with consulting firm Rothstein Kass & Co.’s national real estate group in Beverly Hills, CA.

And as Siegel and others suggest, the professionals charged with that analysis need to accept that productivity enhancement will come in baby steps rather than giant leaps.

“No technology will revolutionize the commercial real estate business,” observes Pike, president of the PikeNet online directory in San Francisco. “Adoption of key technologies remains ‘a long, slow, incremental process’ due in great part to the integral role personal relationships will always play,” he adds.

Accordingly, most real estate techpros have now gotten past that so-called irrational exuberance over the Internet’s impact on commerce, adds C&W’s Gialanella, “Now, rationality is kicking in, and we’ll be seeing innovative products that provide solutions to real issues.”

Just ask the tech team at Stamford, CT-based property-finance giant GE Real Estate. GE’s theory of technological evolution has entailed the automation of 600-plus individual transactional and servicing-related processes in recent quarters, which is more than a third of the company’s processing universe. The bottom line is that when combined these incremental efficiencies can result in considerable savings in both time and money, which gets passed along to the customer, say company executives.

Those end customers don’t personally witness the bulk of the efficiencies gained through GE’s internally developed financial submission system, adds Kathleen Carey, the real estate group’s E-business and quality leader. “That’s because so much of the technological progress at large finance and investment institutions has come through the automation of back-office-type processing rather than in front-end deal origination and negotiation functions,” Carey explains.

“As so many peer operations in the business have learned, through costly lessons in some cases, automation at the origination end isn’t about to catch hold until borrower and investor clients become more comfortable with the technology,” Carey relates. “Technology will continue to improve transaction-processing productivity,” she continues, “but you’ll never entirely automate the interaction with the customer.”

Perhaps not entirely, but as many real estate tech professionals suggest, the near-term future will inevitably see customers and all manner of third-party vendors participating in emerging technologies. These will range far beyond transaction management and will likely include property and portfolio management, market and financial forecasting, design and development and much more.

That disciplinary diversity notwithstanding, experts point to a couple of common themes to look for as the industry continues to adopt new technologies, namely integration and collaboration. Both of those movements will, in turn, spawn advances in a couple of related areas: multiple technologies (wireless/hand-held especially) and platform/protocol standardization.

A key trend to watch on the integration front will entail linking a given operation’s real estate assets more intimately and effectively with functions such as accounting and human resources. “While it may not be a very sexy topic, integration of general accounting systems with valuation and forecasting tools is ‘a key development’ destined to improve productivity,” says Jennie Redner, regional implementation services manager at software developer Intuit-MRI Real Estate Solutions in Los Angeles.

Indeed, the latest financial administration software from Atlanta-based J.D. Edwards & Co. offers a “fully integrated application” aimed at making real estate forecasting more efficient and accurate, says worldwide real estate industry manager Andrew Rains. “Real estate companies receive tons of information from multiple sources, and they want to be able to just key it in one time and have everyone be able to access it,” he says, adding that such systems need to be both web-enabled and highly secure.

At the corporate real estate level in particular, C&W’s Gialanella sees integration of portfolio data with finance and human resources as a technological “next step,” allowing management to more effectively assess and track the interrelationships of properties, people, and costs. While parlaying that integration into bottom-line improvements won’t be easy, “I think we’ll be seeing much greater emphasis on this kind of technology over the next three to five years,” he predicts.

As that integration dynamic strengthens ties between real estate and fundamental business models, related technological advances are destined to bring more ancillary parties and functions into transactional fold.

“Real estate companies are telling us that in order to improve management services, they need their collaboration with customers, vendors, and pretty much all the stakeholders to be as efficient as possible,” says Rains. And rather than collaborating through the various ideas some of the defunct dot-coms developed, it’s more productive to work through a single platform, he adds.

“We’re now seeing tools developed that allow organizations or individuals to manage disparate groups that are all involved in a particular project,” Gialanella notes. “And that includes 24/7 access to the information, which allows you to manage a much broader base of people and assignments.” Over the past 18 months or so, C&W has implemented its CW1 collaboration portal to help its professionals manage activities and relationships everywhere the company is active worldwide.

Likewise, Encino, CA-based Marcus & Millichap in recent months has implemented its new collaboration platform, though which all agents and clients involved in a deal receive instant-messaging updates linked to the firm’s intranet “listing report” containing real-time information on the status of a transaction, notes CIO Rick Peltz. The company’s new Marketing Management Communication System, developed in partnership with iManage Inc., is to a great extent customer driven, Peltz continues, elaborating that today’s sophisticated investors “insist on consistent communications methodologies.”

With M&M’s recently launched BuyerNeeds communications tool, for instance, when an agent specifies a client’s investment-property preference through the firm’s intranet, all agents receive at least four fields of text messaging on their cell phones. If a broker who might have a buyer responds, that response is automatically forwarded to the listing broker’s email and cell phone alike, Peltz notes. “We’ve had several cases where the eventual buyer’s agent just might not have known about the opportunity otherwise.”

“No doubt, emerging wireless and hand-held technologies will help speed along not only transactions, but property management and related operations and even the design and construction disciplines,” predicts Intuit-MRI’s Redner.

Such mobility-enhancing technologies cut costs as well as time frames, as dealmakers today “no longer need as much desk support,” says Larry Kosmont, president/CEO at Kosmont Realty Corp. in Los Angeles. “When you can take the technology on the run and transmit and receive information, you’re not falling behind on deals. You’re handling more of them,” he adds.

Accordingly, Kosmont expects to see much of the near-term tech investments flow toward the development of seamless interfaces between field-personnel and their back-office counterparts. For instance, Kosmont Realty is endeavoring to allow associates to input information into its automated web-based database from anywhere and allow clients to access it from remote locations.

“When new leads are generated, we can input them right into our leads file from the field,” Kosmont says. “That’s part of that seamless integration everyone seems to be aiming for.”

Peter Pike notes that Redwood City, CA-based Corrigo’s latest property-operations communications systems lets each participating professional select a primary and secondary media method (e-mail, cell phone, fax, etc.) for receiving task-related communications. A maintenance request placed through a website, for instance, will be automatically converted to voice message and forwarded to an engineer’s cell phone.

As real estate tech pros acknowledge, however, all that collaboration and integration through various communications media inherently generates compatibility and, hence, data-standardization issues. Various and occasionally conflicting efforts have been under way to establish industry-wide data standards by the likes of the Mortgage Bankers Association, the National Multi Housing Council and the Data Consortium.

Michael Young, Chief technology officer at Rreef Funds of San Francisco, notes that the non-profit Data Consortium group has aimed to develop a comprehensive, open-source investment-property data standard in the XML(extensible mark-up language) protocol or schema, a cutting-edge technology that creates a common data language that’s easily translatable among various applications.

The expectation is that once property data is entered, applying it to multiple purposes will be as simple as clicking it into the corresponding desired style sheet, saving considerable time and effort. That has also entailed development of a dictionary of real estate definitions now at “5,000 words and counting,” Young adds. “Top public and private investors, the Appraisal Institute and three of the top real estate software developers are sponsoring Data Consortium’s effort to bring consistence to investment-property analysis,” Young notes. “But it’s quite a challenging process, as the experts helping develop the data standards predictably encounter widely differing opinions on specific definitions of terms and concepts,” he laments.

Meanwhile, the multifamily and mortgage groups are working independently on similar standards. The NMHC, for example, recently established an interactive website aimed at generating industry feedback as the new Multifamily Information & Transactions Standards evolves into a common apartment-sector platform and data dictionary.

“The group is likewise utilizing the XML, protocol, which should help multifamily oriented participants interact electronically with other commercial property sectors and capital markets,” notes David Cardwell, NMHC’s vice president for finance and technology. “For technology to really take hold and substantially improve apartment operations, all the disparate systems firms are using must be able to talk to each other,” Cardwell stresses.

Similarly, the MBA and the Commercial Mortgage Securities Association have been developing the Commercial Mortgage Industry Standards Maintenance Organization data-standard project, also utilizing XML, for the leading community.

So how might these trends impact the market over the near term? As that less than-concerted approach to data standardization suggests, the various professional functions seem set to witness ongoing battles for supremacy among competing technologies and players. In the multi-faceted brokerage arena, for instance, various efforts remain under way to establish dominant web-based leasing and sales deal-making platforms as well as electronic marketing and listing databases.

Major multi-market property users and some of their big property-services vendors have been pushing transactional platforms aimed at cutting deal timetables and costs through standardized transaction-management processes. For example, several large corporate users are backing the NetStruxr platform for identifying appropriate properties and negotiating deals, while a group of top brokerages operating as Project Octane is offering the WorkplaceIQ platform to multi-market clients.

“Forward-looking companies comfortable with the latest real estate technologies—and with sharing confidential data—can take advantage of Internet based transaction-management capabilities that substantially reduce timetables and costs,” stresses Henry Johnson, principal with Project Octane member Trammell Crow C. in Torrance, CA. “The system TCC is developing with CB Richard Ellis, Insignia/ESG and Jones Lang LaSalle places transactional documents on a server, allowing any approved executive to review them as well as provide comments facilitating the deal,” Johnson explains.

“We’ve turned what would typically be a 12-week lease-negotiating period into three weeks,” Johnson continues. The technology is even there today “to close a $10-million transaction without ever actually talking to anyone,” he says, adding that he questions whether that particular capability is truly beneficial in the grander scheme.

Office brokerage professionals, in particular, will no doubt also see key players in the electronic leasing and sales listing arena continue to bang heads near-term. Third-party suppliers CoStar and LoopNet have become the most-accepted major-market information exchanges, although Xceligent continues to grow by hooking up in various markets with local realtors, who retain some ownership of the market databases.

“If you build a database, they will come,” says Realtors Commercial Alliance past-chair Russell Booth. While the exchanges “vary in sophistication, price and data,” he says “brokerages are willing to pay to participate in effective listing services, and he’s anticipating more of them will be developed on local, state, regional and national levels.”

“While retail brokers are mostly disappointed at the continued absence of a truly effective multi-market information exchange, they and their clients are reaping the benefits of some of the industry’s most sophisticated site identification and selection technologies,” notes Janie French, vice president of research and technology at the Staubach Co. in Dallas. “Systems incorporating demographics, public-sector economic incentives and other data continue to improve and have reached the point that retailers and shopping-center developers can make reasonably accurate projections of returns they can expect from setting up at a given site,” she elaborates.

“Digitized aerial photography technologies are playing an ever-increasing role in sight selection, and several tech vendors continue pushing the envelope,” French continues. “Development of increasingly comprehensive parcel based databases helps retailers and their reps save plenty of research and travel time, she stresses. One underlying roadblock, however, is that public-sector jurisdictions still have widely varying availabilities of digitized parcel and zoning data,” French Laments.

In the property management/operation field, French and others suggest that emerging technologies should continue to speed up responses to tenant needs, reduce procurement costs and even automate preventative-maintenance operations. With urgent maintenance needs, hand-held technologies will help professionals respond to on-line service requests “in the span of several minutes rather than several hours or longer,” Redner of Intuit-MRI relates.

Various players also continue developing impressive systems that automate purchases of products and services. However, David Gialanella cautions that on-line procurement requires a certain portfolio size or critical mass to bring significant value. He also notes that management groups are still struggling to develop a definitive formula. “Near term efforts to resolve that issue should focus on more accurately assessing interstate purchasing and shipping costs,” notes the C&W executive.

“Another management-related area techies should be pursuing to a greater degree is automated preventative maintenance,” Gialanella adds. Owners and operators of large property portfolios could save great sums if computer systems are programmed to anticipate failures based on typical life cycles of equipment, he elaborates. C&W has, in fact, invested into a company aiming to develop just such a system: facilities-management specialist Business Integration Group in Tempe, AZ.

In the wakes of the Western energy crisis and terrorist attacks, building managers are also predictably pursuing upgraded energy-management and security technologies. Equity Office Properties and Arden Realty have invested in on-site generation systems reducing reliance on utilities, and third party operations such as RealEnergy continue installing such systems for clients. “The technology increases security and reduces costs,” says Daniel Cashdan, chairman of Woodland Hills, CA-based RealEnergy

In the building-security arena, many high-rise managers are adopting web-based visitor-screening systems such as pre-enrollment for visitors, host notification at check-in and automatic visit or badge printing.

“Tech pros working with large institutional property portfolios should continue improving the always-challenging valuation and forecasting functions,” notes Young. He expects the Data Consortium’s programs to automatically generate appraisals based on all three traditional valuation methods: income, cost and comps.

Young also expects technology to soon evolve from the property level to the fund/portfolio level. Indeed, Rains notes that J.D. Edwards will roll out a new fully integrated forecasting tool early next year that will analyze portfolio property-type and locational mixes and even “exposure to struggling tenants.”

On the finance front, GE Real Estate and peers including that other credit giant GMAC Commercial Mortgage Co. continue to internally develop productivity-enhancing tools aimed at stream lined, seamless transmission of origination, underwriting, processing, securitization and servicing data. GMAC divisions have cultivated the Mortage Ramp operation from incubation into a comprehensive lending-technology system, while also developing the realpoint CMBS analysis tool.

While it seems that the Internet will never replace professional transaction originators, some finance outfits are taking pains to at least make those front-end on-line encounters more user friendly. Cambridge Realty Capital in Chicago, for example, has just eliminated the “hard-to-read, text-intensive pages and outdated frames construction technique” on its website, notes chairman Jeffrey Davis.

More importantly, Cambridge clients should be able to complete the latest online loan application in under fine minutes and, in turn, will receive a quote or other response within two working days.

Davis expects the reformatted site to double the average daily on-line application count (now typically three to six) within the next few months.

Ever-improving technologies are also helping property developers pursue projects faster and more efficiently. Systems providers such as e-Builder aim to generate productivity through comprehensive web-based program management tools, while the likes of Screampoint link reams of project data as they digitize design documents.

As such incremental technological advances continue, cost-effectiveness will remain the key consideration, and healthy skepticism about technology’s role in the commercial real estate field should tend to limit further financial disasters. That certainly seems to be the approach among higher-ups at GE, stresses chief information officer Hank Zupnick. “Our budget is rising despite the slow economy,” Zupnick says. “That’s a real vote of confidence in the productivity gains we’re seeing from our technologies.”