As dot-coms have disintegrated into dot-bombs, many have abandoned the once-popular notion that the Internet would revolutionize the commercial real estate industry.

But a new study reveals that while traditional commercial brokerages will not see fundamental change based on an e-commerce model, the Web eventually will become an important distribution and information channel for these companies.

The academic study, "The Impact of New Information Technologies on the Commercial Brokerage Industry" was sponsored by the Society of Industrial and Office Realtors Educational Foundation.

So why have companies jumped into the dot-com fray in commercial real estate in the first place? The answer is simple - money.

According to the study's first phase, the buying, selling and leasing of office and industrial real estate properties in the United States generates brokerage commissions each year totaling an estimated $10.4 billion to $13.3 billion. Phase one also found that the "present value" of brokerage industry profits for office and industrial properties ranges from $5.7 billion to $7.1 billion.

Those sizable chunks of change have tempted several entrepreneurial companies to create e-services businesses for real estate, from online listings to brokerage information and complete supply chain integration.

According to Stephen Podolsky, president of the SIOR Educational Foundation, the study seeks to answer a key question: "Will the Internet evolve into more than an efficient information conduit for commercial real estate and ultimately realize the hope of those who believe that e-commerce will transform the way commercial real estate companies conduct transactions?"

SIOR last week released the results of the study's second phase, which surveyed and analyzed 25 Web-based operations in the online commercial brokerage and listing sector. The survey examined firms followed by Wall Street brokerage houses and did not include online listing services operated by local commercial real estate broker groups.

Most existing commercial real estate sites limit their activities to listing available properties for sales or lease. The study found that the pricing of these Web-based listing services will soon become an important issue.

In the past, most listing services were free. They sold banner advertisements and sponsorships to generate revenue, allowing users to search the site at no charge. But advertising alone is not enough to support real estate listing sites, and free services are finding they must begin charging fees for accessing information about properties for lease or sale, the study says.

As an alternative to full-priced, paper-based services, web-based real estate firms would do well to view the success of online stock brokers.

Discount operations such as Charles Schwab have encouraged Web-based trading in stocks by promoting discount pricing and greater self-service.

Similarly, a discount brokerage model now emerging could be the first step toward a purely Internet-based brokerage operation. For online commercial real estate companies to be successful, "it may be important for a successful discount model to have been developed," the study states.

Only a few companies have ventured to the next level of e-commerce by providing systems to complete commercial real estate transactions on the Web. Even fewer have tackled the more ambitious goal of impacting the entire supply chain in commercial real estate brokerage.

In fact, the recent bankruptcy filing of Zethus, a company with backing from Goldman Sachs that intended to provide a Web-based platform for commercial property transactions, casts doubt on the possibility of a complete e-commerce approach to commercial real estate brokerage in the near future, the study says.

For more articles by Lesley Hensell, please press here.

Published: June 13, 2001

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Lesley Hensell covers commercial real estate and financial issues for Realty Times. Based outside of Dallas, Lesley works with high-tech and real estate clients as an independent marketing and public relations consultant. She also writes for several publications, including the Dallas Morning News. E-mail Lesley at: lhensell@earthlink.net