A Secretive Business Is Slow to Open Up to the Internet

In an industry traditionally so secretive that brokers have been known to lock up their Rolodexes at night, executives at a Northern California company called LoopNet considered it quite a coup last month when Grubb & Ellis, one of the country’s largest commercial real estate brokerages, chose it to market property listings on the very public Internet.

LoopNet, which calls itself “the Internet’s largest commercial real estate listing service,” is one of a host of companies angling to adapt the Net to the commercial real estate world.

But purveyors of online services, and others who would like to see the world of commercial real estate brokerage become more efficient through the use of technology, have their work cut out for them.

According to industry veterans who have embraced computers and wish others would do the same, “network” in the commercial brokerage sense is still more likely to refer to personal business connections than to personal computers.

“Business America, in general, is way ahead of the commercial real estate industry in terms of its use of technology,” said Alan Beaudette, senior managing officer of the Newport Beach office of CB Commercial Real Estate Group.

Experts say the commercial brokerage world has been slow to get interconnected for a number of reasons: Despite the existence of large, national brokerage houses, the industry is still quite fragmented, populated by many small shops that may or may not employ the latest technology. The most successful brokers have traditionally been gregarious, personable types--not office-bound computer jockeys. Brokers who have made a good living for many years without technology may see little reason to change.

And unlike the online culture, in which information flows freely, the real estate business has always placed a premium on keeping information proprietary, with brokers guarding data jealously in hopes of closing potential deals before someone else hears about them.

“There is still a perception that knowing the details of the most recent lease in a market makes you the expert. It doesn’t. It’s just one small piece of what you need to know,” Beaudette said. “There isn’t a public database for lease transactions because every firm collects them on their own. Many of the firms don’t even computerize the data. It’s still every individual sales professional sitting in his or her office, collecting those [statistics] and hoarding them.”

But technology advocates believe much of that is going to change. Beaudette said one of the first orders of business when CB Commercial merged with Koll Real Estate Services last year was to ensure that every professional in the company had a computer. But many real estate professionals at other firms still don’t have computers on their desks, Beaudette said, and many of those who do are still not connected to the Internet.

“I can’t reach the bulk of the brokers in Orange County through the Internet because so many of them aren’t on it,” he said. If more brokers were hooked up, he explained, they could all market properties much more efficiently.

Beaudette and other technology advocates such as founder Jerry Porter of Brentwood-based Metrospace/Cresa and Bill Millichap of Palo Alto-based Marcus & Millichap believe the commercial real estate industry is just beginning to tap the potential of computers and the Internet.

Porter, who founded Metrospace in 1983, says the company’s use of technology is one of the biggest reasons his relatively small firm of 20 brokers has landed some prestigious clients, including DreamWorks SKG, E! Entertainment and the city of Los Angeles.

“We wouldn’t be where we are without technology,” he said.

Porter points to the 26 Metrospace computers all linked together and to the Internet with the fastest connections available. Anyone at the company can access online information immediately without having to go through the dial-up process--and can share that information with others instantaneously.

Porter has a high-speed ISDN line at home for Internet access and is never without either a laptop or his hand-held computer. Metrospace was the Los Angeles test site for CoStar, a national service that tracks commercial property data, and Porter admits to a passionate interest in technology that finds him constantly scanning computer magazines to learn about the latest and best hardware and software.

But the technology isn’t just gadgetry; it provides a way for him and his staff to access more information faster, to communicate with clients and one another faster, and to provide new types of services that clients are demanding. An example: When clients want to find new work sites that are conveniently located for their employees, Metrospace uses a list of employee ZIP Codes to create computerized maps showing where all workers live in relation to a proposed new location.

Another example: If Metrospace is representing a client looking for, say, 75,000 square feet of space in a specific geographic market, the company can tap a database that lists all such spaces available and indicates how many other companies are looking for spaces that size--along with a list of which Metrospace competitors are representing those companies.

At Marcus & Millichap, a national brokerage that specializes in investment properties, President Bill Millichap has identified 25 deals his company did during the last year that wouldn’t have been done without the Internet.

While that number is small, Millichap expects it to increase rapidly over time because every broker in his company is increasingly working with clients found via the Internet.

Millichap expects online listings to eventually give newspaper classified ads a run for their money as one of the most effective ways to match buyers and sellers.

“The electronic matching of buyer and seller is really starting to come of age,” Millichap said. “I gave a speech last year in which I was fairly negative on the effectiveness of online listings, but I’m giving a speech this year that will have a distinctly different tone.”

Millichap, whose company has maintained its own Web site since 1995, believes competition will eventually whittle down the dozens of sites that post online property listings.

“I think you’re going to see, within the next 12 to 24 months, one or two online listing services that establish themselves as the sites to visit,” Millichap said.

According to Beaudette, online listings today are useful, but they need to become more centralized.

“There are so many listing services that the question is where do you go? The key to making [the listings] more of a factor is in getting the major firms to form an alliance to move down the path of a single, centralized system,” he said.

Among the online services that hope to achieve such distinction is Burlingame, Calif.-based LoopNet, which adds approximately $85 million worth of new listings totaling 1.6 million square feet every day, according to Dennis DeAndre, company president.

“When brokers get listings, their goal is to get the highest possible rent or the highest possible selling price, and the best way to do that is to put the listing in front of as many eyes as possible. The best way to do that is to have one centralized listing service with brand-name identity,” DeAndre said.

DeAndre said the February deal with Grubb & Ellis, the latest of 43 organizations that have chosen his company to post their listings on the Internet, is further evidence that the commercial real estate industry is gradually becoming more willing to share information. He said LoopNet offered all 43 companies the option of making their listings available only to their own brokers, but all 43 chose to make the listings public.

Despite such strides in making information more accessible, Beaudette said the industry has only scratched the surface in terms of computerizing and centralizing information.

But the CB Commercial senior vice president is hopeful that is about to change. He has identified some basic technological advances he expects will have a big impact on the industry in the next year or two.

* Improved online access to listings of properties for sale and lease.

* “Push” technology--software programs that can be set up to automatically retrieve news and information about specific companies or topics.

* Online marketing materials, which will begin to replace printed brochures, which are expensive and often out-of-date soon after they’re printed.

Beaudette said the industry has much room for improvement because most of the gathering and retrieval of information remains fragmented. Relatively little of the data that could potentially be computerized is available in electronic form, and that which is available isn’t centralized, he said. He said a small, partial list of the kinds of information that commercial real estate people spend their time chasing would include: properties available for sale or lease, names and addresses of property owners, rental rates and other terms of the latest lease transactions, comparable sales, detailed information on the property’s tenants, title information, whether the property has hazardous-waste problems, flood-plain maps and zoning information.

“All of this information all resides in separate repositories,” Beaudette said. “But if all of it could be pulled together under one umbrella, into one platform, it would make us all a lot more efficient.”