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"Commercial Real Estate E-commerce Models"

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Derek Olsen Photo
4/6/01 Interview with Derek Olsen

O'Connell Hospitality Group
380 Stuart Street, 6th Floor
Boston, MA 02116

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The Internet and Commercial Real Estate

  1. As a masters thesis for MIT's Center of Real Estate, Olsen co-authored with Linley Williams Reintermediation or Disintermediation? The Impact of E-commerce on Commercial Real Estate Brokerage; many of its principles are valid for the residential side of the industry as well.
  2. Olsen views the Internet as a practical tool for improving communication among real estate participants; he believes technology can be applied to make the real estate process more efficient.
  3. Accessibility of information from data suppliers such as CoStar and online listing services such as LoopNet is making the Internet an increasingly essential communication medium and marketing tool for brokers.
  4. Olsen particularly focuses on the issue of disintermediation‹whether Internet technology will eliminate the need for brokers for specific steps in the real estate transaction.
The Six Basic Brokerage Functions

  1. Database‹gathering and storing information.
  2. Search‹responding to requests with appropriate data.
  3. Tour‹physically showing the space.
  4. Analysis‹matching space with the best potential buyer or tenant.
  5. Negotiation‹arranging the best terms for the client.
  6. Documentation and closing‹completing the paperwork.
E-commerce Models

  1. The number of established e-commerce players, led by CoStar and LoopNet, is limited, but the field is evolving rapidly.
  2. Many e-commerce ventures tend to be based on research (CoStar) and marketing (LoopNet) models‹these concentrate in the database area; other examples also focus on just one or two functional areas. 3. CoStar holds the strongest position because it has a two-to-three year head start in aggregating its database; it was a brick-and-mortar company that migrated online.
  3. Zethus, in contrast, illustrates the transaction platform model; it takes a collaborative, approach, providing one site where all the pieces of the transaction can be brought together for efficiency; if a part of the process cannot actually be done on that site, an outside link is provided.
  4. Zethus is funded by Goldman Sachs; brokerage companies such as Cushman & Wakefield have already signed on to use it.
The Dot-Com Crisis

  1. The flight of capital away from dot-coms has caused a healthy retrenchment within the e-commerce arena; too much investment had been going into companies with no clear revenue model.
  2. The biggest surprise to Olsen from the study was the number of companies with no plans for making money that still got funding (at the time).
  3. The surviving e-commerce companies that have viable business models will continue to get funding and will rise to the top.
The Impact of E-Commerce on Traditional Brokerage Firms

  1. The first response from many firms has been to outsource much of their information gathering to online services such as CoStar; the brokerage firms get better data and achieve considerable cost savings.
  2. More brokerage companies are investing internally in technology infrastructure and employee training to bring about more effective communication with clients; the trickle down effect is the realization among individual agents that technology is here to stay.
  3. To be successful, agents must recognize that technology will change their jobs and learn to use it to make their day-to-day work more efficient.
Personal Favorites on the Web

  1. For direction to commercial real estate sites:
  2. For general real estate technology information:
  3. For the latest news in the hospitality industry:
  4. For useful information on distant and local destinations: and
Summary Lessons for Society Members

  1. The Internet is an amazing tool for increasing productivity for real estate practitioners.
  2. E-commerce companies are not likely to disintermediate brokers, but brokers that ignore technology will find it increasingly difficult to remain competitive. Members can access the full study, Reintermediation or Disintermediation? The Impact of E-Commerce on Commercial Real Estate Brokerage, through the Members-Only section at
Contact Information for Derek Olsen:

(v) 617-794-6379
(f) 978-739-9154

Real Estate Sites & Tools in this Briefing: