Forget location. If theres a 21st century axiom for the commercial real estate industry, its broadband, broadband, broadband.
The commercial real estate industry is, in many ways, still mired in old ways of doing things. But market demands from both business and consumer customers for high-speed Internet access are pushing property owners to equip their buildings for digital-based business as well as to update and automate their own antiquated internal operations.
"There should be a lot of IT opportunities in real estate, because its a lagging industry in terms of technology," says Peter Pike, San Francisco-based publisher of the PikeNet Directory of Commercial Real Estate and producer of the PikeNet Forum, an annual commercial real estate technology conference. "The reason theres been a low expenditure on the IT infrastructure is because the industry has so many independent contractors."
It is a highly fragmented industry, which can make it a difficult place to sell. "Each broker has a lot of autonomy," says Wayne Warthen, VP of technology and chief technology officer at PropertyFirst.com, a Web site that provides a multiple listing service and marketing tools for owners and brokers of commercial real estate. As a result, says Warthen, PropertyFirst has to sell its services both at the corporate level of large property owners and brokers and to each local office, because local brokers have so much say over how they conduct business. But that fragmentation also makes it ripe for online marketplaces such as PropertyFirst.
Much of the industry is concentrated in a handful of large property owners and a few major brokers, however, and theyre the ones driving the major IT projects—as well as funding some of the major IT suppliers—in the industry.
General Growth Partners, for example, a Chicago-based owner of 116 million square feet of mall space nationwide, has several tech projects under way. The company has a Web site that was first designed as a marketing destination but has morphed into a leasing tool that has helped General Growth Partners shorten the average lease process by 35 percent and maintain 93 percent occupancy in its malls, according to executive VP Charlie Graves.
The company also plans a new release in June of its consumer Web site that acts as a virtual mall for shoppers to get information about local malls. And it is pilot-testing the use of kiosks in five malls with plans to roll out the stations to 100 malls by years end. Retailers rent links on the kiosks like they rent space in the malls to provide visitors with information on movie times, store sales or other marketing information.
But the companys biggest IT undertaking is a project to wire its properties to provide broadband access for retail tenants. "We put technology as one of the top priorities of our business," says Graves.
So far, General Growth Partners has equipped 90 of its 150 malls with their own LAN, along with a router and PC for each store. The company is working with Cisco, which provides the routers; IBM, which has laid the networks and provides the PCs; WorldCom which provides the phone circuits; and Unisys, which provides network management. Retailers subscribe to a basic broadband service that includes 128Kbps service and communications applications such as e-mail. On top of that, General Growth Partners plans to offer a menu of other, fee-based apps and services, some of which the company will develop and some it hopes to offer through third parties. "Theres tons left to pick and chooses from, including employee scheduling and payroll," says Graves. "The next module will be e-learning."
PhatPipe Inc. is doing something similar in the industrial real estate sector (SP, Jan. 15, p. 40, www.smartpartnermag.com/ issues). The Carlsbad, Calif., company—funded in part by the top four industrial real estate owners—brings T1 lines to industrial parks and then provides DSL or fixed wireless connections to the parks tenants. PhatPipe, like General Growth Partners, plans to run on top of that a series of applications to help tenants run their businesses.
"We will add services over the infrastructure," says Don Ankeny, president and CEO of PhatPipe. "That is something were very focused on." To do that, Ankeny says the company is in talks with the major app vendors in procurement, logistics, supply-chain management and other areas that interest the types of businesses that occupy industrial parks.
PhatPipes clients, the property owners, pay for and own the infrastructure. That has helped the company distinguish itself from the pack of failing DSL providers that target the real estate industry, vendors such as VelocityHSI Inc.—which earlier this month announced it may run out of money to fund operations by May 1—and BroadBand Office. "The problem the broadband players have had is the amount of money tenants and owners are willing to pay has been less than they hoped," says Pike. "PhatPipe, on the other hand, has a really cool broadband story."