THE REAL ESTATE OFFICE OF THE FUTURE. 2The Options: Target, Starbucks, or Amazon.com?

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1 THE REAL ESTATE OFFICE OF THE FUTURE 2The Options: Target, Starbucks, or Amazon.com?

2 Swanepoel TRENDS Report 2013 Challenges Like Starbucks, location is key, and the café-lounge needs to be placed in a good central location with preferably good foot traffic and/or easy access, otherwise it defeats the purpose of making it easy for consumers to visit. With limited or no opportunities to have the agents together in the café-lounge space on a regular basis it will be difficult to build strong team spirit and culture. THE CLOUD-BASED OPPORTUNITY The growing number of Millennials in the work force is definitely one of the largest drivers reshaping the office of the future. They have little interest in the corner office, for them its become passé. Since most of them live in the online world they prefer to work offsite from home or their favorite Wi- Fi stop. At the office they want an open atmosphere with maximum flexibility for interaction with their contemporaries. One of their growing preferences is the new co-location facility where people from varying industries share common amenities like Wi-Fi, printers, phones, conference rooms, kitchen facilities and secretarial services. Office space no longer means a separate private office, just a Smartphone or laptop, an Internet connection and ear buds. The bottom line is that there is an undeniable generational shift in how young people today perceive their living, social and working spaces. As Robert Lang, professor of urban affairs at the University of Nevada-Las Vegas put it: There are other markers for status. It s not the turf. It s your network power. Amazon is of course a well-known new paradigm electronic commerce company that started as an online bookstore before diversifying into movies, music, software, electronics, apparel, furniture, food, toys and jewelry. Today they sell almost everything, and with revenues over $48 billion they are already the size of Best Buy and 70 percent the size of Target, the second largest discount retailer in the country. We cite this company as a comparison for the model because it s an e-commerce business that facilitates the buying and selling of products or services over electronic systems such as the Internet and other computer networks. There is a difference between those companies that are cloud-based a pure-click company and those that are brick and click channel system companies. According to Wikipedia a pure-click company is one that has launched an online business without any previous existence as a bricks firm and does not operate brick locations. Brick and Click companies are those existing companies that have added an online website for e-commerce. So Amazon, although operating many warehouses across the country, is a cloud-based model and served as a great example for the real estate company we went hunting for. The Real Estate Office in the Cloud For two decades industry pundits have been debating when it will be possible to build a genuine full service real estate brokerage online. Well today, 20 years after the arrival of the Internet in real estate, many agents have evolved into a fairly technology-savvy, mobile sales force that has a decreasing dependency on location. The growth of broadband, high-speed and the wireless Internet 2012 RealSure, Inc

3 2 The Real Estate Office of The Future has removed the limitations of the virtual and suddenly most major real estate offices are racing to move certain components of their company to the online world. Today, virtually all real estate brokerages have significant online capabilities, allowing their agents to connect to their offices virtually and execute some level of a paperless transaction. But that, although valid and viable, is of course not a true virtual model. It s only the adaptation of an existing model using new virtual tools. To find an actual virtual real estate example we went hunting in the cloud and found exp Realty (exprealty.com), a virtual company built from the ground up, and like Amazon it's a true pure-click company. The Model The cloud-based model is unique in that there are no physical offices other than those legally required to operate in a given state (or by the MLS). exp utilizes a 3D immersive work environment to create a cloudbased office ecosystem. Everyone in the company, including the corporate staff and state and provincial managing brokers, are all cloud-based as are all the documents. Brokers, agents and staff can now truly collaborate from anywhere at any time. For those agents who require an office environment exp partnered with a global Executive Office Solutions company to provide drop-in space or a conference room in over 500 markets across the U.S. Entering exp in the cloud is a bit like sitting down to play a video game one with realistic and extensive interaction often referred to in the gaming world as a massive multiplayer online role-playing game. This is of course not a game, it s a real workplace with a reception area, boardrooms, training centers, transaction rooms, a Wordpress design studio, a business plan development space, a coffee club, an administration office and so on. There are rooms for RealSure, Inc.

4 Swanepoel TRENDS Report 2013 teams of agents or meetings between the state broker and the agents in his/ her state. Being 3D Immersive you can literally walk around the offices just like you would in a physical office and drop in and join whatever discussion is taking place. All it takes are a headset, webcam and the ability to share your screen so everyone can see what you re sharing. It does feel strange, and did to us, the first time we toured the offices. However, after a while you become more at ease with the process, your Avatar and the functionality of the site. And then you start to really appreciate the power of anywhere and anytime. The first thing you do is set up your Avatar, your alter ego, inside of the virtual work environment. It s a graphical representation in the shape of a person that has your photo for a head. Interaction is very similar to what you do in the real world. In the virtual office you locate who you want to talk with and then sit down at their desk or meet in a conference room. Brokerage Office Traditional Superstore Café-Lounge People entering and leaving the room are announced and while in the room you can move around, change seats, walk up to the podium, turn your head, walk around and so on. It s an environment in which agents enjoy socialization, broker support, web development support, training, coaching, transaction support and camaraderie like they would in a physical office. Advantages The major benefit of the virtual office is of course the ability to collaborate from anywhere and still be part of a larger organization with all the support you expect from a more traditional brokerage office. Support is literally a mouse click away. The closest you can get to totally paperless. All contracts are either executed electronically between buyer, seller and the agent or, if the transaction starts on paper, it is scanned into the company s Real Estate Office Type Comparisons Tiers Office Size (sq ft) Brokerage Size Averages Conventional 4,000 6,000 Large 10,000 12,000 Starter 8,000 12,000 Mega 16,000 30,000 Boutique 2,000 3,000 Mini 1,500 2,000 Agent Count Space Per Agent (sq ft) SOURCE REALSURE AND COMPENSATION MASTER back office and the transaction moves to cloud. With exp s virtual office model the expense normally associated with opening up in new markets is greatly reduced. Expansion doesn t involve any more work than a few lines of new code and managing the paperwork and legal issues according to the respective state requirements and exp is up and running. Challenges One of the biggest challenges facing any totally virtual company is the fact that brokers and agents obviously do not have the same level of personal interaction that you have in an IRL (In Real Life) environment. exp strives to overcome this through its Chief Cultural Officer who acts as the internal glue that keep agents, brokers and staff connected by facilitating virtual classes, regular breakout sessions and private Facebook groups. Current software restrictions only allow for a maximum of 50 people that can be in any one online office at a given time. Technology will however overcome this restriction in the not to distant future. SUMMARY Over the past two decades residential real estate brokerage has undergone an evolving 2012 RealSure, Inc

5 2 The Real Estate Office of The Future reorganization. Part of that process provides for the restructuring of the home buying process, the introduction of new technologies and players and the reengineering of the real estate office. What is evident is that the traditional office model created a half a century ago has run its course and is no longer cost effective in the new economy. Office space per agent must decrease to make real estate offices more cost effective. The three office models featured in this year s Report the superstore, the café-lounge and the cloudbased virtual model address the challenges, especially downsizing of square feet per agent, very efficiently (the virtual model of course does so in spades). Many ask which model will win. We think it is inconsequential as the real estate market is large enough to sustain all three models comfortably probably more than one of each. These are all very stimulating and healthy business models and their growth will be less at the expensive of each other than at the expense of the traditional office that resists change. People often say that big is bad, or that bricks and mortar is dead. Neither statement is valid. There are literally thousands of examples to dispel both of those fallacies. Size does matter and most of us enjoy the fruits of economies of scale every day why would we not extend that benefit to homebuyers. KW is and it s working very well. the specialty coffee segment. So who will be the Starbucks of the real estate industry? People often say that change will come from the outside. Our guess is that it will actually be an insider that has the knowledge, vision and financial ability to roll out this new model successfully. At the moment no one has really snatched the lead spot but we think RE/MAX and United Real Estate are the frontrunners. The virtual office model requires the biggest change to the traditional model and will therefore meet with the most resistance from traditional agents. But that s exactly what innovation does it makes many people uncomfortable. However, history has repeatedly shown us that it takes innovation to become an industry leader. For example, Century 21 did it when they rolled out the franchising concept, RE/MAX did it when they introduced the 100 percent commission concept and HFS (now Realogy) did it when they perfected the M&A consolidation. Cloudbased real estate is no different. It s showing all the promise of being a powerful new innovation and exp is leading that charge. And as Victor Hugo said: Nothing is as powerful as an idea whose time has come. In 1998 industry analysts saw Starbucks as being well on its way to becoming the Nike or Coca-Cola of RealSure, Inc.