Disruption is a crazy thing. It’s uncontrollable, unpredictable, good, bad, necessary and evil all in equal parts depending on where you sit and live. These days everyone seems to think Uber is the darling of disruption and uses it to talk about what will happen to their industry. But the lesson of Uber is often mis-interpreted in the telling.
Uber is about information and control. Previously taxi companies had it all. They had pricing dictated by local government and had the only rights to picking up passengers on the street. Sure, black cars did some as well but they were a bit limited. Uber changed everything by cutting out the middleman. No longer did you have to have a taxi medallion to drive people around. As passengers you no longer had to fish around for a phone number or hope for someone to drive by. Information flows freely and control in the middle has been cut out.
If you apply the same situation to real estate you see something significant happen. An Uber style disruption in CRE would be all about connecting lessees to landlords without any assistance in the middle. Terms would be pre-determined by that middle-ware provider, location metrics would guide the lessee to buildings that meet their needs, rates and terms would be automatically assigned the lease based on market dynamics as determined by the technology. Landlords give up some negotiation control and lessees take on more market search work themselves but largely the technology serves to ensure that both sides meet at a middle ground.
This scenario cuts out the brokers – which is major disruption. It potentially changes the entire compensation model of the entire industry! Right now brokers function to ensure that clients and landlords meet and negotiate on even footing while making sure that clients get the right solution. It’s a manual process that would be difficult if not impossible to automate. It’s a matter of working out the conditions and functions to allow that equal footing and then getting people to sign-up.
But that’s the thing, everyone thought the same about the taxi industry – couldn’t be done. Yet here we are.