Buyers are out there, but technology has dramatically changed their sophistication and behavior.
In a previous MacRo Report post Finding the Market for Commercial Real Estate, I tackled a frequently asked question:
“I know the market is not what it used to be, but even still … where are the buyers?”
The first step to a successful sale of commercial property in this economy is getting a true sense of market value. The previous post covered how a pricing gap wider than 5% or so discourages prospective buyers of commercial real estate from making even an exploratory offer.
There is another reason for the perception that buyers seem non-existent these days: with more information available through the internet, there has been a decline in the percentage of physical property tours.
Back in the day, commercial real estate agents would work to generate big buzz about a new listing without revealing much visually about the property. This more or less forced interested parties to make a call to the broker have a look.
These days, anyone with an internet connection has vast information on property listings, comparable offerings, recent sales, financing, and investment analytics at their fingertips. The modern real estate buyer is far more educated about the “big picture” than they were even before this recession began.
This has served to more or less remove the “greater fool” variable from the market place and tighten price ranges for property.
As I wrote in my previous post, “While the traditional 20th century physical property tours that many owners and brokers came to count on may be dropping for some sectors of real estate offerings, viewings of those same properties through the multitude of internet commercial listing services, including broker websites, may literally astound property owners.”
Website analytics indicate that MacRo, Ltd. property listing photos, videos, and property brochures are viewed thousands of times, by agents and potential buyers alike.
We know the buyers are out there, and they are actively looking. But this same technology has changed the dynamics of what still remains the commercial real estate industry’s most powerful emotional marketing tool—the property tour.
Today’s buyers tour properties without stepping foot inside: through virtual tours, videos, extensive photographs, floor plans, record plats, Google Street View maps, zoning maps, income and expense records, demographic and tax office research, etc.
They won’t waste their time physically touring a property until they have a deeper sense of how well the offering will fit their needs. Not unlike shopping for household products on the web, prospective buyers usually won’t take that next step toward requesting a tour unless they get a good “virtual” feel for the property.
Whether the property owner likes it or not, making information available on the internet is now expected by prospects. When is comes to more sensitive property details, the smart brokers require that the prospects and their agents register by providing contact info, signing a confidentiality agreement and in many cases producing verification that the prospect has the financial capability to acquire the property.
To that end, when appointments are requested, there is a much higher likelihood that there is serious interest in the property from a qualified party … therefore requiring the owner representative to have deep knowledge of the property and relevant market data … not to mention good closing skills.
The traditional form of garnering feedback from prospects has changed as well. While property tours have always been a critical component of market intelligence, the broker now has mountains of statistical information through website and listing service analytics.
Based on feedback from tours, agents were able to gauge whether a property’s price was in line with the market, or if there was something out of whack with the building or property that curbed buyer interest. Instead, a large percentage of prospective buyers tour properties from the comfort and anonymity of their computers. It’s radio silence for agents and owners—no direct feedback to be had.
Using analytics, the broker is able to weigh the number of times a property has shown up in searches against the number of times a prospect has actually viewed the specifics. This is only one example of how a broker and the property owner use web data to refine a property offering.
Look for continued evolution in the market. It’s coming fast. Like everything else, commercial real estate technology is evolving quickly which will continue to accelerate prospective buyers’ dependence on the web as a primary step in their search the right property.
The most interesting to watch will be those who raise the bar on virtual tours. Check out flyer.io to get a taste of what is coming.
The author: Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He also writes for TheTentacle.com.