'E-Wakening': Industry's Technophobia Ebbing,
But Openings Fading Fast, Says EKYL Study

By JACK LYNE • Site Selection Executive Editor of Interactive Publishing

Real estate and the Web: a glass half full or a glass half empty?

It depends on who's talking - and the whole industry, it seems, is chattering about real estate in the Internet Age.

The major latest offering comes from a solid source: E&Y Kenneth Leventhal Real Estate Group (EYKL), the real estate arm of Ernst & Young LLP (E&Y at www.ey.com), which has just released a new "white paper" -- "E-wakening: The New Technology Play in Real Estate."

The real estate/Internet glass is definitely half full, and it's getting fuller all the time, says the EYKL white paper.

At the same time, the e-opportunity window will soon close for some real estate players, the study suggests.

(The white paper is available for free downloading under the header, "Now That the e-Honeymoon is Over . . ." at either www.ey.com/realestate. The report can also be downloaded at www.gallen.com.)

'Most Impacted' Real Estate Processes

Dale Anne Reiss, who leads EYKL's global real estate arm, underscored the jackrabbit growth within the ranks of real estate-focused e-sites.

"We've seen phenomenal growth both in the adoption of technology by traditional real estate firms and in the formation of real estate-focused dot.coms, with literally hundreds of technology firms now operating and more arriving every day," Reiss said. (An online chart accompanying the report lists part of the corporate horde operating in real estate's virtual marketplace.)

What exactly are all those Web sites doing? The white paper outlines the real estate processes that EYKL says are "most impacted by new technology": transactions; customer/tenant services; asset & property management; development and construction; facilities management/MRO; and financing.

Startup sites focused on transactions and capital are proliferating at a particularly rapid clip, according to Reiss.

"While the transaction sector is in its relative infancy, more than two dozen sites have quickly emerged through which commercial real estate properties can be acquired and sold online; and there are more than 30 sites where commercial properties can be leased or marketed online," she said.

Money Changes Everything

Bottom-line benefits are the fuel that's driving real estate's rush to the Net, according to Joe Rubin, national director of EYKL's Real Estate e-Business Solutions.

"The Internet is making it possible for an industry that has been technologically challenged to become technologically enabled," Rubin says. "Traditional real estate companies are finally embracing technology because they see that the Internet has now delivered the tools for online service providers -- many of them the startup ventures now populating this space -- to deliver various business processes faster, cheaper and more efficiently.

"This means that real estate companies embracing the online revolution will ultimately realize substantial cost savings, increased net operating income and higher values both at the property and enterprise levels," Rubin added.

The dot.com shakeout, however, will likely thin the ranks of real estate-focused sites, the report noted.

"Now that the hot air is starting to leak from the dot.com balloon, real estate companies doing business in cyberspace are bracing for what may be a coming shakeout in e-commerce," says the report. "Wall Street's unrequited love for any Internet startup has given way to a new pragmatism: Online companies in real estate and other business sectors are being evaluated on the path-to-profitability."

Better Late for Real Estate?

Somewhat ironically, real estate's laggardly pace in adapting to the Net may now be an advantage, particularly for new players, the report notes.

"For once, the real estate industry's relative slowness in adapting to new technology and the Internet could work to its advantage," the report says. "In assessing revenue and profit opportunities for new online business ventures, real estate companies can learn from the successes, or failures, of online companies that have gone before them."

The key to success for a real estate e-site is "creating a unique value proposition" - something many observers find lacking in much of the ongoing deluge of real estate-targeted sites. But companies searching for that optimal value proposition need to spend more time looking within themselves, rather than looking at what others have done, the study adds.

Window Closing in Six-12 Months?

Real estate-focused companies intent on capitalizing on the Web need to be aware that time is of the essence, the study adds.

"The next six to 12 months represent a window of opportunity for established real estate companies to start e-business or dot.com companies to launch Web sites targeted to the real estate market," says the EYKL white paper. "After than, the window could begin to close, and opportunities may be more limited."

But whether a company is new or old, flexibility is essential to survive in online real estate, the study advises.

"The right strategic approach for most companies is that they must, above all, stay flexible," Reiss says. "The digital economy is changing so quickly that companies in this space need to be able to think on their feet, adapt their business models and reap opportunity whenever and wherever it comes."