Why Now's the Time for CRE Tech Innovation

STAMFORD, CT—Several years after the global financial crisis, the commercial real estate industry has gained solid footing, better positioning itself for growth in 2015. A positive outlook has large institutional investors showing greater interest in the industry, as evidenced by a recent BlackRock survey. Commercial real estate is a massive industry (approximately the size of the $15 trillion US stock market), yet it faces a host of challenges in order to continue growing. A primary challenge relates to finding ways to promote efficiency throughout the industry by embracing technological innovation. This is particularly true as it pertains to some of the more laborious but essential aspects of the industry such as lease administration.

Historically, a sense of technological complacency has characterized the CRE industry. Real estate is notorious for having created immense wealth without much alteration to tried and true processes. For this reason, CRE firms often see little incentive to expend resources on technology, even though much of the lease administration implicit in commercial real estate work is extraordinarily time and labor intensive.

For example, lease abstraction is an integral part of lease administration as well as an important element of CRE transactions. However, accurate lease abstraction, whether performed in-house or outsourced, requires extensive review and manual mining of lengthy and complex lease documents, costing property management organizations fees in excess of hundreds of dollars per lease. Investing in automated lease abstraction technology to augment human reviewers translates not only to significant cost savings for CRE firms, but also leads to an improvement in the quality of lease data abstracted, giving firms who utilize such technology a distinct advantage over competitors.

Up to this point, technological innovation on the commercial side of the real estate industry has been limited, giving CRE firms few opportunities to improve their workflows. Yet with $605 million invested in real estate tech in 2014, a whopping 2.5 times venture fund investments in real estate the year before, many are pointing to innovation on the commercial side as the next growth driver for the industry.

Parallels can be drawn to other industries in which innovative technology has substantially improved efficiency and accuracy. The litigation side of the legal industry has been using eDiscovery software for many years to accelerate processes that were once performed solely by people. More recently, artificial intelligence tools have been augmenting human contract review on the corporate side of the legal industry as well. In both cases, technological innovation spurred increased efficiency, helping firms get through reviews more quickly, with ultimate time and cost savings passed on to the clients. It is not surprising that real estate attorneys in law firms have been some of the earliest adopters of CRE technology.

As real estate technology continues to evolve, more and more commercial real estate professionals will incorporate technological tools as a seamless and essential addition to their natural workflow. Some may argue that when it comes to improving commercial real estate management through technology, we've only just begun to scratch the surface. But I would argue that where technology stands today marks a significant starting point for helping real estate companies create additional real and measurable value for themselves and their clients in the years to come.

Ned Gannon is a co-founder and CEO of eBrevia, a legal tech company commercializing artificial intelligence technology developed at Columbia University to analyze, extract information from, and summarize contracts. He may be contacted at ngannon@ebrevia.com. The views expressed here are the author's own.