Impact of the Internet on International Real Estate Office Markets. (Journal of Real Estate Portfolio Management)
Dermisi, Sofia V., Real Estate Issues
Executive Summary. The present study examines the impact of the Internet on the real estate office market through a survey of real estate professionals in traditional companies in Boston/U.S. and London/U.K. This survey captures professionals' opinions on the use of the Internet and how it affects their business. The results from both cities indicate differences when using the Internet versus traditional practice. The Internet seems to affect the role of the transaction participants, the length of the process but not the participants' earnings or transaction steps. It is currently used as a listing service, information-gathering resource and communication tool.
The Internet is a recent expanding medium of economic and social exchange. It is most effective at breaking down barriers, improving information flow, and speeding up the decision-making processes (Hartung C.J., et al., March 2000). Two factors significantly contributed to the increase in Internet adoption among real estate brokerage companies: increased computer use throughout the population as well as companies, and the downturn in commercial real estate. This downturn led brokerage companies to list properties online to reach a wider market (Rebuz.com, 8/8/01). Similar to the retail industry and Web-based marketing (Baen J., 2000; Miller N., 2000) the real estate industry is expanding its online listings by continuously advertising additional properties, thus providing property seekers with a variety of options.
The Internet use in the U.S. and the U.K. can provide a context of the Internet's adoption in the two countries where the survey took place. Nielsen/Net Ratings estimated that more than 62% of the U.S. population had Internet access in 2001 either at home or at work in comparison with 57% the year before (Stellin S., 2001). According to the U.S. Department of Commerce, in 2000 51% of all U.S. homes had a computer and 41.5% had Internet access. High per-minute charges have prevented people in the U.K. and other European countries from browsing the Internet, leading to a lower growth than in U.S. (Wickham R., 2000). In the U.K., household PC penetration was 46% (Nielsen, 2001). The U.K. government's E-envoy indicated that Internet penetration in the United Kingdom was still less than 60% (Holmes M., 2001). The housing market transactions have been more easily facilitated through the Internet compared to office transactions. Studies in the U.S. show that the numbers of homebuyers searching for housing on the Int ernet are between 40% [Forrester research, 2000; Farnsworth C. & Evans B., 2000] and 56% (Murray M., 2000). In general 79% of agents claim they do not think the Internet threatens their job (Gomez Research, 2000). However, the search for housing in the U.K. is mostly conducted through traditional methods because of limited Internet use.
This study was motivated by the limited research on the Internet's impact on the Real Estate Office Market (REOM). A survey of traditional real estate companies was conducted in Boston and London in order to capture the "real-world" views on Internet adaptation and especially its impact on the office properties transaction process. Boston was selected because of its small office market size compared to other major cities in the northeast U.S. and what brokers see as a tight, relationship-driven office market. London, however, was selected because it is the largest and most representative office market throughout U.K. What could the survey results indicate for these cities in two continents? This survey tries to identify how Internet use affects the role, time, and earnings of the key participants involved in the transaction process of office properties as well as the transaction process length. This survey of traditional real estate companies in Boston and London indicates that the Internet affects the roles of the transaction participants allowing the real estate business to remain competitive. …