Monday, May 15, 2017

Data-led tech threatens to make agents obsolete


New online property platforms offer a greater wealth of data than ever before. They also provide the means to do business in a transparent and standardised way, potentially mitigating transaction risks without the need for an agent. Websites such as Rightmove and Zoopla have already offered a snapshot of how access to data can change the industry. Buyers and renters find out everything they need to know about a property without setting foot in an agent’s office. Online platforms such as Purplebricks and Yopa are taking this a step further by offering upfront fixed fees for transactions instead of commission. So far, commercial property agents have escaped such disruption. But they are vulnerable. “The traditional gut-feel world is going to change,” says Andy Pyle, head of UK real estate at KPMG. “Agents that don’t change with it or ahead of it will become obsolete. Access to data will accelerate the pace of obsolescence.” KPMG is playing its part in this process by launching an online platform called Deal Room to sell property loan portfolios. For now, it is focused on portfolios larger than £50m. But Mr Pyle says Deal Room could be adapted to sell individual properties. “Smaller [commercial] deals may be more ripe for disruption. We could do what Zoopla and Purplebricks have done for the residential market for the commercial property sector,” he says. Property Partner, an online property crowdfunding platform, is also changing the investment landscape. It has reduced barriers to investing by offering shares in buy-to-let properties that pay dividends and track asset values. The company plans to create the first global stock exchange for all types of property. It used agents to find the £51.5m of transactions completed so far, but does not expect this to always be the case. “Once we get the [global] scale, we will have a market of buyers and sellers and there may not be a place for agents any more,” says Mark Weedon, its head of institutional development. The amount of information everyone has on one another checks the risks Tushar Agarwal The company is attracting a new type of investor who previously could not afford to buy property and does not want the liabilities attached to managing assets. If the company achieves its global ambitions it will probably attract some investors who know little about property. “One of the biggest risks is people who don’t understand it well enough and overestimate their liquidity position,” acknowledges Mr Weedon. So far, he says, this has not happened. Hubble, a start-up based in London’s tech hotspot of Shoreditch, is introducing a similar concept to the office leasing market. It is attempting to empower tenants by using data to improve the market’s transparency. The company brings together people hunting for flexible office space with those who own space on an online platform that automates a search process normally undertaken by agents. “The average transaction time for office space is down from three months to three weeks — although in some instances we can do it in three days,” says Tushar Agarwal, chief executive of Hubble. He argues that agents “hide behind smoke and mirrors” to support higher prices. To combat the usual upfront risks faced by young businesses, Hubble has standardised client reviews, leases, contracts, deposits and financial outlay. The are risks involved in doing deals directly online. Property agents have long been characterised as a necessary evil by many clients. Yet many would also begrudgingly concede that the market advice received from brokers can often be of comfort despite its cost. This underpinning of the intermediary’s central role, though, is weakening. “The risk to consumers is real,” Mr Agarwal says. “But on other platforms it is dealt with by ratings and reviews. The amount of information everyone has on one another checks the risks. We have come a long way from where a broker is needed.” Agencies are alive to the threats posed by data and technology. As a result, larger companies are investing heavily in both to remain relevant. “We are reinventing how we provide services via data,” says Charles Boudet, managing director of JLL France. “The risk also creates opportunity — so we are completely behind the data drive. It is up to us to move further up the value chain and give better advice.” Chandra Dhandapani, chief digital and technology officer at CBRE, is equally bullish about the opportunities data and technology could bring. But there is a caveat. “Digital technology is only as effective as the quality of the data that fuels it, and importantly, the expertise of the organisation that leverages it,” she says. “The risk associated with purely online transactional activity is the imbalance of knowledge and understanding between the parties involved.”

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