Role of Information Technology in the Real Estate Industry
The Real Estate Industry is a crucial component of the economy of any country. It plays a crucial role in the economic health of the country. Information and Communication Technology has taken the world by storm, and has pervaded almost all fields of life and work. Real estate is an information intensive business. It is therefore inherently amenable to application of ICT tools and services. The coming of the Internet and the World Wide Web has provided unprecedented impetus to the Real Estate industry. ICT has also been instrumental in helping the major players in the Real Estate industry to boost the value of the social capital that is a critical factor for success in any real estate endeavour.
Information Management has helped in streamlining the real estate sector and in managing the voluminous documentation processes that is inherent of the industry. In the aftermath of 9/11, ICT has added value to real estate by providing much needed security systems. Computer Aided Design (CAD), Geographic Information System (GIS) and GMN have taken the Real Estate industry to new heights of efficiency and business achievements.
The brokerage firms, the real estate agents, the property managers and the sellers – everybody has benefited from the proliferation of ICT in the Real Estate industry. It has however been the buyer who has been at a distinct advantage in comparison to the rest of the players in the sector. ICT has opened many new avenues for the buyer of real estate who now has the information, the options and the means available in a variety of forms and access mechanism to make the most judicious and optimal selection from a wide variety of choices. ICT has transformed the Real Estate industry.
Profile of the Real Estate Industry
Total assets of the United States commercial real estate market was valued approximately at $4.6 trillions in 2001 (Rojen Consulting Group, 2001). Properties of the real estate market include retail, office, industrial, and multifamily investments. The buying, selling and management of these properties are done by a large service sector. Prominent players in this service sector are the brokers, the managers of property and facility, specialists in financial services and contractors, who in turn are supported by other service providers such as legal consultants, insurance providers, appraisal agents, surveyors, etc. The total revenue generated by the commercial real estate service sector is estimated to exceed $35 billion in the United States annually. The real estate brokerage constitutes the largest service sector in the industry in the United States as in elsewhere in the world, and generates $12.8 billion annually, out of which $7.6 billion comes from leasing commissions and $5.2 billion comes from investment sales commission (LaSalle, 2001).
Inherently amenable to ICT
The unprecedented development of Information and Communication Technology (ICT) in the last two decades has pervaded almost all aspects of life. The Internet and the computer have together transformed the world into a digital global village. In the arena of work and business, as also in the personal lives of people, ICT has brought in far-reaching changes. ICT has changed the way of life of people bringing in the new Digital Culture. Every field of work and business has been affected by the ICT revolution. So has been the Real Estate industry.
In fact, the inherent characteristics of the Real Estate industry make it ideally suited for the application of ICT tools and services (Yin, 1984). Real Estate is an information-intensive business in which information availability, accessibility and quality plays a very crucial role. In its very basic model, real estate business comprises real estate agents playing the role of intermediary between the buyer and the seller. The agents connect the buyers with the sellers. They are able to do so only if they are able to acquire the required information of both the buyers and the sellers and their properties, and are able to disseminate this information in a systematic, organized and easily accessible manner to their clientele. Real estate agents are values for the volume and quality of information that they make available in making both listing and sales.
Real estate is an economic activity embedded in social structures. Social capital acquires a very high importance and value in the Real Estate industry. Social capital means the set of social resources embedded in relationships (Tsai & Ghoshal, 1998, pp. 464). Social capital is made up of three components: structural component, relational component and cognitive component. The structural dimension comprises the interactions between the real estate agent and the buyers and the sellers for access to and interchange of information and resources; the relational component comprise of the relations of trust and loyalty that develops as a result of the interactions; and the cognitive component consists of development of convergence in views, norms and codes of action between the many players involved in the industry. ICT applications and services impacts all the three components of social capital (Sawyer et. al., 1999).
Leasing and managing properties and space involves the management of a vast amount and number of documents. The processes involved in real estate transactions require large scale documentations. Information management becomes a vital aspect from the point of view of documents management and process support also. Management Information Systems coupled with the introduction of wireless technology and mobile devices has given the liberty and mobility to realtors to pursue the business as per its requirements.
Role of the Internet and the World Wide Web (WWW)
The coming of the Internet and the World Wide Web (WWW) heralded a sort of revolution in the functioning of the Real Estate industry. Not very long ago, search for a new property would have begun with visual scanning of the pages for classified advertisements in the newspapers covering the areas where the new property was being sought. The prospective ads would have been circled in red, and would be followed up with visits to the broker’s office and open houses and apartment walk-throughs until the right apartment was finally located.
All that has however changed with the new millennium. Search for property nowadays is most likely to begin at the computer terminal connected to the Internet and the Web where a multitude of specialized websites and portals are available to cater to every requirement of the prospective real estate purchaser.
Web sites of brokerage firms list properties according to location, price range, facilities and many other classifications so that users can easily and quickly pin point what they are looking for. It is not only that, the websites provides pictures of the properties, floor plans and virtual video walkthroughs so that people are able get a visual feel of what they are looking for.
Many comprehensive web portals like the NYtoday.com and the digitalcity.com have altered the layout of the classified advertisement pages to link associated products and services such as movers and packers, furniture, and mortgage auctions together with real estate brokerages sites to provide value-added information to potential clients.
As far back as in 2000, it was estimated “up to 50 percent of prospective US homebuyers would use the Internet to search for new homes within two years, encompassing more than 9 percent of households online, or about six million visitors, to various real estate sites.” (Greenberg, 2000). According to a report of the National Association of Realtors (NAR), 23 per cent of potential home buyers were conducting online searches for information on homes, with the possibility of the percentage for the Tri-state area being as high as 60 per cent. Real estate websites were averaging 10,000 hits a month.
Buyers prefer the websites because they result in huge savings in money and time. Properties which are obviously unappealing to the buyer can be eliminated at the very onset. A selective list of the choicest offers can be drawn up with the help of the information available on the web sites. This list can then be followed up physically for making the final decision.
What information technology is doing in this case is sorting and classifying the information and presenting it in different formats such as text, graphics and audio-visuals to help the customer in decision making. The greatest advantage her is that the entire process is being done online, and as long as the brokerage firm takes the care to keep the information hosted on the web site up to date, the Internet and the Web becomes the most cost-and-time effective way and the fastest means of prospecting for real estate for the buyer.
For the brokerage firm and the seller too, the Internet has its own distinct advantages. They in turn get access to a global base of customers whom it would have been very difficult to access, or even to identify, with the help of conventional methods. The sellers and the real estate agents view the Internet as a great medium for advertisement. In fact they acknowledge that it has come to a situation where it is impossible to exclude the Internet from the strategy for marketing in real estate. The sellers demand online information and the buyers expect it. There is no way that brokerage forms can avoid going online if they were to survive the market competition.
It is estimated that utilization of the web reduces the transaction time by half. Whereas conventional home buyers used to look at an average of 22 homes before making a deal, Internet-educated home buyers look at only six. That is a huge come down. In fact the Internet and new technologies result in the saving of the real estate agent’s time and money to the tune of over 60 per cent without any compromise in the quality of service and without affecting the final sale price (Ellis, 2007). These savings can well be passed on to the customer according the agent a huge advantage over competitors who lag behind in the utilization and application of ICT in the Real Estate industry.
Fears that the Internet and the Web could altogether eliminate the role of the brokers are however brushed aside. They feel that thought the Internet has changed the process of advertising in the Real Estate industry, the process of buying remains the same. People could use the Internet for the research part of the buying process but would always require the personal touch and assurance of the brokerage agent for the actual buying. This approach and attitude in effect takes away all possibility of resistance to technology application in the industry on part of the intermediaries or the brokerage firms.
The seller too gains in the bargain because the promotion of the property on the Internet can be tailored according to the expectations and requirements of the seller. It is the Internet which enables the seller to access all information on real estate brokerage firms and agents and select the best for his or her requirements.
The Advantages of Information Management and Mobility
As in all other fields of business, ICT plays a very pivotal part in increasing the efficiency, speed and reliability of all major players in the Real Estate industry. The development and implementation of customized Management Information Systems (MIS) in brokerage firms and other service providers makes it possible to make relevant information available as, when and where required so that there is no loss of time in decision making. Real estate firms have the option of hosting their databases and MIS applications for access over both intranets and the Internet so that the required information is not only available locally in a centralized office but also in a geographically dispersed working environment.
The introduction of wireless technology and mobile devices has added greatly to the value of ICT applications in the Real Estate industry. Real estate agents cannot afford to be stationary. They are constantly on the move, going on field visits, on promotion trips and vetting properties. A realtor has to makes up to 50 site visits a month, showing 5-8 properties a day. On each visit, the realtor not only has to keep all information on the property of current visit in mind but also comparative information on other available properties. The realtor also has to keep note of the comments of the clients for every visit so that it can be used in the final analysis to infer the choice of the client. Besides that, the realtor also has to keep track of the information that he consolidates in his office. Now that is a lot of information to deal with for a human mind. Wireless technology and mobile devices take the load off the real estate agent. When a remote access devise is readily available, the information that is required is available at the fingertips no matter where the real estate agent is located at that point of time.
With its latest acquisition in 2004, CB Richard Ellis’ (CBRE) of the United States had acquired the position of the world’s largest real estates service firm. True to its promise of introducing new technological innovations into the business, the company had provided hand-held mobile devices running a new software that provided them instant access to listings, property data, deal comparables, and tenant information anywhere, anytime. This enabled the employees to work outside the office with the same information support that they had inside the office, and helped to push up the efficiency level to a new high (Jeffery, 2004).
The advantages of having a MIS in place was also demonstrated by CBRE when it redesigned its comprehensive market information system called PropertyView, and was as a result able to “produce the first report on demonstrating the disparity between published asking rents for commercial space in Manhattan and the actual price per square foot tenants are actually paying.” (Jeffery, 2004). The report went a long way in providing much needed transparency in the market by providing the business community information that was never available before.
The introduction of ICT services and tools have resulted in radical improvement in management of the vast amount of documentations involved both in leasing and in trying to cope with a large number of properties and spaces. This is a boon for all players, including building owners, corporate real estate departments and property managers. The technology involves converting real estate information on leased or owned into digital format in order to be able to process the records to administer the properties and make rent and other transactions. The National Facilities Group was one of the pioneers in the field. Its product SLIM (Strategic Lease Information Management) reduced the costs of managing complex portfolios of leased and owned properties. “The NFG system helped companies track leases for practically everything under the sun from ATM locations to cell sites, repeater towers and satellite dishes as well as in-store product sales space.” (Viator, 2001).
The real challenge in development of MIS for the Real Estate industry was however in digitising the existing information to build up the appropriate backend databases. Once the digital information was in place, there was no dearth of software development companies which came forward with a surfeit of information management solutions to meet the requirements of the industry.
As a result of the introduction of information management systems in the Real Estate industry, less people were required to handle a greater number of properties with a higher volume of information. There was a marked improvement in productivity. The information systems acted as vehicles of collaboration. . As commercial systems became more open, it enabled different systems and applications to talk with each others.
Design and Security
Security of real estate has acquired new significance in the aftermath of the terrorist attacks of September 11. ICT provides the means to secure any piece of real estate. There is a wide range of ICT security tools and applications beginning from card readers and fingerprint devices and optical scanners that could be utilized to make a building more secure. Smart buildings with the application of wireless technologies where the virtual and physical merge, effectively combine working and living environments to provide the maximum security possible. ICT applications therefore add to the value of real estate from the point of security provision.
ICT has been extensively used in the design and construction of buildings in every phase starting from planning to implementation. At the planning stage Decision Support Systems (DSSs) are used for selection of construction material and design parameters. Computer Aided Design is used to design the structure and other elements of a construction in the most optimal and cost effective way. The scope of ICT is multi-disciplinary in construction projects.
“IT needs to support the integration of the information and perspectives about project alternatives for many disciplines. IT also needs to cover the design of the product (facility, project scope), the project organization carrying out the design and construction, and the process (schedule) to carry out the project.” (Fischer & Kunz, 2004)
This scope is called the integrated POP design where POP stands for Product, Organization and Process design. Application of ICT in construction therefore enables all the stakeholders, including the real estate players, to decide on what to build, by whom it should be built and when it should be built. This provides the real estate industry huge advantages in terms of planning for the promotion, marketing and sale of the property. It also allows real estate players to have their own say in the construction process through a well-defined system so that requirements of prospective clients can be built into the construction process of the property itself.
ICT applications allow for Virtual Design and Construction (VDC). Modelling, simulating, analyzing, visualizing, and evaluating the performance of the product, organization, and process with IT simulates how the real project might happen (Fischer & Kunz, 2004). VDC can therefore be defined as the use of multidisciplinary performance models of design-construction projects to support business objectives that could go a long way in making the real estate industry more cost effective.
GIS and GMN
“In the strictest sense, Geographical Information System (GIS) is a computer system capable of assembling, storing, manipulating and displaying geographically referenced information i.e. data identified according to their locations. Practitioners also regard the total GIS as including operating personnel and the data that go into the system. GIS technology can be used for scientific investigations, resource management and development planning” (He, 2001). GIS is utilized to provide geographic information and 3-D visualization capabilities in conventional real estate information systems. GIS-enabled systems enable the buyer to locate a particular piece of property on the map. The map could in turn provide information about the distances from public utility systems such as schools, play grounds, medical centres, airports, libraries, etc, so that the buyer knows beforehand the conveniences and facilities that would be available on the basis of location. GIS can then provide 3-D visualized simulations in the form of walkthroughs and bird’s eye views to accord the potential buyer a near-live feel of the property of interest.
GIS as it is, was no amenable to the Net. GIS applications were mostly offline and could be viewed and experienced only as standalone systems. GMN integrates GIS, MIS and Network to provide Net and Web functionality to GIS applications. GMN therefore makes it possible for the potential real estate client to experience GIS functionalities online. The introduction of GMN did not only make GIS interfaces available on the Internet, it also provided the technology to store information on terrain and topology on the Internet.
New ICT tools and services thus provide superior and hitherto unimaginable capabilities to the Real Estate industry.
Thanks to ICT the Real Estate industry has undergone an unprecedented technological evolution in the last two decades. It is now an industry better equipped, better managed and better informed to handle the challenges of the future.
Fischer, M., Kunz, J., 2004, The Scope and Role of Information Technology in Construction, CIFE Technical Report, Stanford University.
Greenberg, P., A., 2000, Consumers edge towards web-based Real Estate, e-Commerce Times, [Online] Available. http://www.ecommercetimes.com/perl/story/2932.html Accessed. [May 27, 2008]
He, H., Wenjun, W., Qioming, Z., 2001, The Application of Geographic Information System on Telecommunication Cable Management System. Wuhan University Journal of Natural Sciences, Vol. 6, No. 2, pp. 482 – 485.
Jeffery, H., 2004, New Technology transforms Real Estate Business, Real Estate Weekly, New York, Tri-state Region.
LaSalle, J., L., 2001, Octane: Knowledge and Transaction Platform, In McMahan, J., Preface: Case Studies on the interface of Technology and the Real Estate Industry, Real Estate Issues, 2002.
Mulhare, R., D., 2000. The Web’s Role in Real Estate, The Cooperator, [Online] Available. http://cooperator.com/articles/516/1/Cover-Story-The-Webs-Role-in-Real-Estate/Page1.html Accessed. [May 27, 2008]
Rosen Consulting Group, 2001, Rent Lease Real Estate Investments. In McMahan, J., Preface: Case Studies on the interface of Technology and the Real Estate Industry, Real Estate Issues, 2002.
Sawyer, S., Crowston, K., Wigand, R., 1999, ICT in the real estate industry: Agents and social capital [Online] Available. http://crowston.syr.edu/real-estate/AIS1999.html. Accessed. [May 27, 2008]
Viator, R., 2001, Technology brings efficiency, safety to real estate industry, Midwest Real Estate Industry. Real Estate Solutions.