Is This Common Mistake Holding You Back?
We’ve got some bad news: Most commercial real estate (CRE) firms are making a costly mistake … and they don’t even realize it.
For years, CRE professionals have relied on tried-and-true methods of operation.
The way they work today is the same way they’ve worked for decades. And they do this for a reason: it works.
But just because it works doesn’t mean it’s optimal.
Think about it…
- Washing your clothes by hand works — it just takes forever.
- Using a car that gets 10 miles to the gallon works — it just costs you a fortune.
- Navigating without GPS works — you just have to deal with accidents or road closures from time to time.
The point is this: Forward-looking firms that are willing to change can position themselves to leave their competition in the dust.
And firms that keep doing things the way they’ve always done them will soon find themselves falling behind.
There are countless examples of businesses in various industries that went from dominant players to afterthoughts when they failed to innovate.
Consider Blockbuster, which went out of business when Netflix offered a better way for customers to enjoy the same service.
They were confident their business model would stand the test of time, too. In fact, Blockbuster’s CEO once passed up a chance to buy Netflix for only $50 million.
And their story isn’t unique.
When an employee at Kodak invented the digital camera, the company hid the device, fearing it would cannibalize their film sales.
Once other companies proved digital cameras were the way of the future, Kodak tried to adapt, but it was too late. They filed for bankruptcy in 2012.
Below, we’ll explain why CRE is primed for a digital revolution of its own — and what savvy firms are doing about it.
Data-based decision-making is more critical than ever
CRE has always been a data-based industry.
Successful brokers must understand market conditions and analyze COMP data to close deals that benefit themselves, their firms, and their clients.
“Long before brokers, investors, and other commercial real estate professionals embraced smartphones and tablets, commercial real estate was a data-driven business, even if many of us didn’t realize it. Successful professionals in our industry have always been masterful networkers and information-gatherers, with encyclopedic knowledge of market conditions. Today, this mastery of data and analytics has earned a place of even greater importance and is becoming the tool of choice for gaining a competitive edge.”
But making data-driven decisions is getting more and more difficult.
Market conditions are evolving fast, and many firms are struggling with data overload as they attempt to navigate the increasingly complex world of CRE dealmaking.
If you’re already feeling the pinch at your firm, rest assured the problem isn’t just in your head.
In fact, Forbes noted that:
- 5 quintillion bytes of data are generated every day — and the pace is accelerating.
- 90% of all data was created in the last two years.
That’s difficult for anyone to keep up with, but the stakes are too high to throw in the towel.
A study from the Business Application Research Center (BARC) showed that organizations that prioritize data-based decision-making reported an 8% increase in revenue and a 10% reduction in cost.
So, how can firms go about analyzing the mountains of data they generate?
Leaders at Shannon Waltchack realized they needed to fundamentally change the way they organized information — as much of their data was stored across multiple spreadsheets, emails, and paper notes.
“Everybody was sort of doing their own thing,” explained firm Partner Derek Waltchack. “We knew the power you can get when you combine everyone’s data and pick up the loose pieces. That’s really just a best practice in our industry.”
The solution? Investing in technology.
The role of technology in modern commercial real estate
Technology is the key to aggregating and analyzing the data needed to successfully manage the CRE dealmaking process.
“Technological advances have increased the capacity — and lowered the cost — of data and analytics platforms that enable quick data aggregation and new ways to create real-time analyses and scenarios for commercial real estate decisions. Advanced Web platforms, cloud computing, and new storage technologies are speeding up the data and analytics evolution, making it cheaper and faster than ever before to acquire and interpret the data.”
But many firms have been slow to adopt technology.
“Commercial real estate as an industry is the second least affected by technology — the least at the moment is farming,” said Derek Waltchack. “But that’s changing. We have to stay cutting-edge because of what’s around the corner. The way we work today isn’t the way we’re going to work in 10 years.”
When it comes to dealmaking technology, much of the hesitation to adopt comes down to the outlook discussed earlier in this article: What brokers are doing now seems to work well enough.
But those who invest in a dealmaking solution quickly realize they’ve been missing out.
“Most people in this space use Excel, and it blows their mind when they see what a solid platform can do,” said Michael Brondello, an independent Salesforce consultant who recently helped The Whinery Group at Marcus & Millichap replace spreadsheets and paper notes with Rethink.
Rethink’s CRE-focused client relationship management (CRM) and PropTech solution now helps The Whinery Group collect, store, organize, and analyze data to uncover eye-opening insights that help them close more deals.
“The ease of managing the prospecting process has been an absolute game-changer, and the level of clarity on the pipeline is unparalleled,” Michael said. “I can’t even imagine how broken it would feel at this point to use Excel because the way we use Rethink is just so intuitive.”
Other users report similar benefits.
“That visibility is really valuable,” said AnnaMarie Thompson, Project Administrator at Northpoint Development. “Everyone’s running in different directions, working with different deadlines and budgets. Now, instead of tracking their progress in their own spreadsheet, inbox, or desktop, our whole team has important information in one collective space. Rethink’s insights have helped us decide where to focus growth efforts and continue to make smart decisions.”
By investing in Rethink now, Northpoint Development and The Whinery Group at Marcus & Millichap have given their firms a competitive advantage.
While other firms in their market struggle to manage increasing quantities of data using manual processes, they can quickly and easily make strategic, data-based decisions that drive growth.