Just in case you've been in hibernation for the past few years, Arthur Andersen released a "groundbreaking" report this week, stating that "eBusiness and the Internet will have sweeping implications for the real estate industry.

The study examines the new competitive realities of the real estate industry, particularly the impact of e-business and the Internet on day-to-day and long-term business operations of real estate services providers, commercial developers and home builders, real estate operating companies (REOCs) and real estate investment trusts (REITs).

"Some real estate professionals believe that the industry is too relationship-oriented to benefit from the technology-driven Internet," said Carl Berquist, worldwide managing director of Arthur Andersen's real estate and hospitality group.

"They don't recognize the impact of enhanced customer access and communication, the savings in business-to-business cost and time, the critical importance of changes in information access and dissemination, or the effect of improved work processes and organizational efficiency," Berquist added.

The firm claims that it is only a matter of time before property changes hands partially or completely online. This means that REOCs and REITs transacting business over the Internet will be able to take advantage of much faster, more efficient ways of purchasing and disposing of property, which will improve portfolio management.

But watch out. REOCs and REITs likely will have difficulty developing employees who can perform and enable these technology functions. The result may be outsourcing.

One of the strongest impacts of the Internet on real estate may be with commercial brokers. The Internet is opening new opportunities for cooperation and partnership across industry and geographical borders. This means brokers can find more information faster, provide new services to their existing clients, reach new clients, support faster transactions and generate new revenue.

But on the other hand, the Internet gives buyers and sellers an inexpensive way of quickly obtaining property information, as well as access to online comparative and property valuation information providers. Thus, as the commercial brokers' access to information becomes less exclusive, their services may be of less value to their clients unless they assume a strong role as advocate and negotiator.

"Once every few decades, something has such a profound impact on an industry that established leaders are challenged, competition emerges from unprecedented areas and old notions of how value is created are changed," says Daniel Aronson, a manager in the firm's eBusiness Strategy practice. "This study demonstrates that eBusiness has the potential to change who the leading real estate companies are, how they compete, and the basis for creating value in the real estate industry."

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Published: September 11, 2000

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