Is The E-Commerce Revolution Really Going To Hit Real Estate? by Lesley Hensell
Is the electronic commerce revolution for real, or is the real estate industry simply desperate for a way to capitalize on the continual rising tide of e-business? I know you’re tired of hearing about it. But everyone has an opinion on where e-commerce is going and how it will affect commercial real estate. And there’s a good reason for this healthy obsession - while e-related industry will make up only a portion of the real estate market, it is growing faster than any other area. Commercial real estate brokers, service providers and owners who understand the implications of the wired world stand to experience significant growth. Yes, there’s some hocus-pocus out there. If I see one more press release for a real estate auction Web site, I think I’ll scream. But on the other hand, real estate technologists who really understand how technology can work for the industry and its customers may be poised to stage a revolution of their own. According to Ernst & Young’s Dale Anne Reiss, e-commerce and emerging business-to-business technologies are the new driving forces promoting rapid change within the commercial real estate industry. The company’s global head of real estate said Friday that the most high-profile indicator of this change is the retail sector. Although pure Internet retailers still hold a commanding share of the online market, traditional retailers are making the biggest percentage of gains in online sales, Reiss said. Of the 10 top-selling holiday retailers in the Ernst & Young survey, five were "real world" companies with online sites. "From management of construction projects to real estate financing to deal structuring and sales, most every real estate transaction is moving online," she said. "The assets are physical, but the infrastructure to manage the development, financing, ownership and management of these assets increasingly is virtual." Like traditional retailers, online companies need traditional supply chains to support their sales, and this has created new demand for real estate, Reiss added. Dot.coms are investing billions of dollars in development or acquisition of warehouse and distribution space, and owners of industrial real estate are repositioning for this change. According to Heller Financial Inc. (NYSE: HF), the Internet will not diminish demand for commercial real estate in 2000 and beyond. "The Internet is going to drive even greater affluence, and people are going to upgrade their homes and offices -- not abandon them," said John Petrovski, Heller Real Estate Finance group president. "Your ‘virtual office’ will be your second office; it will allow you to work more, but most people won't give up traditional offices -- they like the community and synergy of working with other people," Petrovski said. "Retail also will continue to evolve to compete with the Internet, offering a social and entertainment component that Internet shopping cannot." Reiss also pointed to changes transforming the office sector, from the design of office buildings to the financing of office properties to supplying janitorial services for 24/7 companies. According to Reiss, real estate is also witnessing the emergence of forward-thinking companies melding years of real estate experience with technology-savvy to create online marketplaces in which transactions can be executed far more efficiently than in the past. "The trend toward the creation of these e-marketplaces is one that will drive greater efficiencies and value propositions to the real estate community," Reiss said. "Youthful companies of today -- like SiteStuff.com, which is creating an online community for the real estate industry in preparation for a truly independent marketplace for real estate goods and services -- will be the real estate titans of the future," she said. But beware the online auction concept, as we discussed last week. The big winners will be business-to-business providers who provide ubiquitous information from any location. An auction site may be easier to develop than a corporate intranet, but it won’t earn the big bucks. | 
