From SoCal Real Estate’s August 2018 issue
Tech is taking a greater role in these transactions as the asset class grows more complex.
“We have begun to see a dramatic shift. Industrial deals are increasingly more popular and account for a larger percentage of listings on [our] platform.” So says Carlsbad, California–based Real Capital Markets (RCM) a global marketplace for commercial real estate investments, which announced earlier this year that industry professionals have leveraged the firm’s technology platform to transact over $2 trillion in commercial property online.
The firm reports that of the more than 60,000 properties that comprise the $2 trillion in transaction volume spanning across all CRE asset types, the most common types of properties brought to market using the RCM platform are office, multifamily, and retail properties. Office property listings make up approximately 25 percent of the listings, followed by multifamily, at approximately 22 percent; retail, at approximately 18 percent; and industrial, at 12 percent. However, RCM says, those numbers don’t tell the complete story — for RCM or the industry as a whole — because for much of the last 19 years (before e-commerce began to dramatically change the dynamics of the commercial real estate market) the appetite for industrial property simply did not compare to office, multifamily, and retail offerings.
RCM also reports that this fact is underscored by findings in the firm’s 2018 National Investor Sentiment Report, where industrial real estate was characterized by 33 percent of study participants, second only behind multifamily, to be the sector of commercial real estate offering the greatest opportunity in 2018. In a release earlier this year, RCM’s executive managing director Steve Shanahan said, “It is interesting to see how market dynamics change over time. Industrial real estate has increased in prominence and popularity with the growing importance of e-commerce related businesses — a trend not likely to subside as sellers look to capitalize on that strong interest.”
But back to that $2 trillion milestone. Tina Lichens, COO of RCM, said in the same release that the firm’s commitment to its clients and continuous innovation allows the firm to not only keep up with the changes in the industry, but to provide the best products and services for the future of CRE technology. “This milestone demonstrates that RCM is able to distinguish between the flash and the hype and the true solutions,” she added. “We’ve established a proven and well-documented track record of solving problems, creating efficiencies as well as addressing client issues and concerns; the $2 trillion milestone further validates that.”
We caught up with Lichens recently to discuss RCM’s growth trajectory, its role in the commercial real estate industry, and how to satisfy the specific needs of industrial clients.
SoCal Real Estate: To what do you attribute your firm’s impressive growth?
Lichens: It has been different things over the years as our business in the industry has evolved. Early on, we had success right out of the gate by doing what no one else had ever done. We married technology with a practical need: how do you reach your buyers? That need will never go away.
When we started, we weren’t just a tech firm — we were real estate people, not tech people. We understood the business. We started with a database of buyers, which was unheard of: nobody who wasn’t a broker had this. We also combined the service aspect. In early 2000, most clients weren’t familiar with email; they would print off emails and write comments back to us. The concept was completely radical, so it was a matter of being able to get people comfortable with that type of reach and putting things online. This was back in the days when everyone had a hard-copy books of listings, and if you made a mistake and put the wrong information in the book, you took whiteout and corrected it. It took a long time for people to pull back on building hard-copy books. We made it comfortable for people by offering that service and doing a lot of hand-holding. You had your early adopters, your middle-of-the-road folks, and then your laggards. We were able to help people get comfortable with doing these because we were real estate people and spoke the same language. Early on, that’s how we established ourselves, and I think with any business, if you do what you say, you exceed expectations, and you really care about what you do and don’t sit on your laurels, you’re going to do well.
Everything was great in 2007. We were at the top of the market, and business was booming for everyone. We were happy, and then everything crashed. There were a lot of tech firms who had come into the space serving different niches, and a lot of them went away. We were able to stick around because the industry had seen this was the way things were being done. No one was going back to mailings. We made adjustments to our platforms. People wanted to do things themselves; they wanted to get their listings out into the market immediately. We were able to modify the platforms to give them fast service. From that point forward, we rewrote the platform. We didn’t eat the elephant all in one bite, but we kept making modifications.
After the crash, we focused on technology and made sure it delivered what people wanted: uploading more photos, differentiating themselves from the competition. The company had already proven we were going to be there from a service perspective; we were providing a team that could help them with every step along the way.
What do you see as your firm’s most important role in the CRE industry?
Our basic tenet is to help clients reach the appropriate buyers. We’re talking to potential investors to understand their acquisition criteria in order to help our clients reach those people. There has been a trend for several years of buyers coming from all over the place. Cross-border investment is accelerating, and we’re helping them with that. Also, in the past, the individual brokers were our clients, but now the brokerage company is our client. We need to offer best-in-class technology because the companies themselves are looking for enterprise platforms: consistent brands, business intelligence, a way for their brokers to get a wider reach, cost efficiencies, and insight into what their business is doing even though they have individual cowboy brokers. It’s a way for them to see what’s going on with their business and make strategic decisions.
Industrial properties are making up a larger percentage of your business. How do you fulfill the needs of this sector in particular?
I think it’s the makeup up buyers. People are looking for where they can generate returns. They’re thinking of industrial and looking at industrial portfolios; they’re looking to invest higher amounts of money, and industrial now offers higher-volume stuff. It used to be traditional warehouse distribution and industrial, but now maybe they’re looking at clean-room type space. There are different subtype opportunities within the industrial class. The other part is geographically: conservative investors will always look in the top-35 MLS cities, but now they also have to look at secondary and tertiary markets.
How do you see RCM growing over the next five years?
We’re expanding our business-intelligence platform, which is exciting. Companies can now see what they’re doing, where they’re going, whom they’re working for, whom they’re speaking to, who’s looking at their deals, who’s giving them deals. Any way they want to slice and dice that, we’re giving them information in graph and report form — however they want it. Also, clients are looking for a single-enterprise solution, marketing their core platform and expanding on it. If they’re doing a listing, don’t want a webmaster to have to update their website with the listing; they should just be able to hit a button and it automatically does it — the data should be automatically entered. It’s integrating your marketing with your CRM with your basic accounting to make sure you’re getting paid. It’s creating a system where everything is integrated. We’re working with our clients a lot on that.
Looking ahead, what tech services will be increasingly needed in the SoCal market?
Everyone’s mobile and on the run, so you need to be able to do everything on your phone because you’re sitting in traffic a lot or sitting in the back of an Uber. If you’re a buyer, you need to make your offer then and there.
What else should our readers know about your company?
Playing off the $2 trillion, it took us about 14 years to get to the first trillion and less than five years to reach the next. I’m wondering how much time it will take to get to the third, but I figure it will probably take a couple of years.