Virtual CRE Tours, After Mass Adoption, Face Fight For Relevance Post-Covid
When the coronavirus restrictions froze almost every aspect of dealmaking — from travel to in-person tours — the real estate industry scrambled to find alternatives to keep business going. Many of those alternatives came in the form of advanced technology, with developers, property managers and proptech firms alike plowing time and money into creating new technologies to allow clients to keep looking at assets to buy and space to rent.
As the pandemic slowly begins to recede and restrictions ease, doubts have emerged as to whether these offers will stand the test of time. Some commercial real estate players consider them a vital part of the business that is here to stay, but others think their shelf life is limited.
“I think momentum is exponential across the board, and it’s never going back,” VTS co-founder Ryan Masiello said. “But there's going to be many people that are providing the sort of digital services that where the proof really wasn't in the pudding and that they'll sort of fade away.”
Last summer, VTS launched a new offering, called VTS Market, an online marketing platform that allows landlords and agency teams to market and lease space remotely. Masiello said the idea was already in the works before the pandemic hit, but the restrictions of the pandemic gave it an extra push forward.
Pre-pandemic, the company was expecting it could take three years for the remote marketing and leasing program to take off. But interest was sped up quickly because of virus regulations, meaning those three years were shrunk down to just a few months, he said.
There has been a fundamental shift, too, he said, in what prospective tenants and landlords expect in the leasing process.
"In a typical process, somebody might take five or six tours, and on each of those tours, they might look at five or six spaces. That's gonna get cut in half,” he said. “On the landlord's side, they're going to realize they're getting a more qualified prospect walking through their door, and they're not going to waste time showing the wrong people the wrong spaces. People are starting to realize that the efficiencies across the board are profound.”
VirtualAPT co-founder Bryan Colin, whose company has built robots that go through properties to create virtual reality tours, dismisses any suggestion that new offerings will lose their relevance, even as the world of in-person returns.
The firm has been in operation for some years, but when the pandemic hit, the company ramped up its development of a video streaming service, called 360 Meet, which allows brokers, landlords and management companies to run virtual reality tours remotely. Its workforce roughly quadrupled since the pandemic set in.
Establishing a platform that would allow for very-high-quality virtual tours was a priority in the lead-up to the pandemic, Colin said, but when the crisis struck, he and his co-founder diverted their attention to it as a matter of urgency. The program is in beta right now, but VirtualAPT expects to open it to the public in the coming weeks.
“Our strongest markets are the ones that have emerged from Covid the fastest," Colin said. "So Miami, some of the Texas markets — Austin, Dallas — places that eliminated the restrictions the quickest have been our strongest markets, and we've had substantial growth."
Ultimately, he said the goal of 360 Meet was to help prospective investors and space occupiers the opportunity to narrow down their options, but he said there are multiple examples of users of the technology who have bought or leased space without physically seeing the site at all. He said an 8K SF retail lease closed completely virtually — declining to identify where — and he considered deals of that nature remarkable.
"There is a comfort level, depending on the quality of the technology, to make transactions," he said.
Those transactions overall, however, have been few and far between in the past year and a half. In New York City, the nation’s biggest real estate market, just 78 sales closed between January and March. Office leasing in the pricey Manhattan market has tanked through the crisis; availability is still steadily rising and went up for the 12th month in a row to reach 17% in May.
Brokers, who make their money out of deals, are facing leaner times, and are keen for any methods that generate leasing and purchases. But not everyone in the brokerage community is convinced these advances are where the answer lies, with some brokers saying traditional means of working relationships and walking space are still at the heart of dealmaking.
“I've definitely seen a lot of these videos, and basically, the only thing it helps me with is OK, you know, I can tell whether the space is a hellhole, but that's about it. I find them, frankly, not helpful,” said Ruth Colp-Haber, the CEO of office brokerage Wharton Property Advisors. “I'm all for technology, but for this particular use — showing office space — it doesn't add anything to the process.”
The job of an experienced broker, Colp-Haber noted, is to know what a tenant wants and to take them to buildings that suit them.
“I think it's very overhyped,” she said of the technology.
Others felt the pandemic unlocked the value of the offerings, and there is no going back.
“The pandemic forced innovation in our industry like never before, and as a result certain processes have become seamless and many efficiencies have been created,” Cresa Vice President LaMean Koroma, an office broker in Washington, D.C., said in an email. “You can get a sense for the look and feel of a multitude of buildings without ever having to move a muscle.”
Colliers International San Francisco Retail Services Group Executive Vice President Julie Taylor also believes virtual tours were helpful during the crisis and are definitely here to stay.
“Tenants expanding from other markets are able to 'pre-tour' and vet whether a site is of interest before booking a flight. A virtual tour can also be used to verify certain conditions, or jog a memory of a prior visit to the property or street,” she wrote in an email. “Virtual tours limit unnecessary travel and also confirm whether a site merits a physical visit.”
CBRE Tri-State CEO Mary Ann Tighe, who has brokered some of the biggest office deals in New York City, said she has only ever heard of one deal being signed based entirely on a virtual tour.
Still, she said she uses the technology to vet options, sometimes sitting with a customer to go through building options while she provides a live, running commentary on things like the neighborhood, the street and the landlord.
“You must have the video tour as a filter when you have 75M SF of space on the market,” she said in an interview this month. “You say to a customer, ‘Look, here's your requirement, I've got 30 possible alternatives for you.' And they're like, ‘Oh, do I really have to see them all?' And you say, ‘No, you do not.'”
Monday Properties, a real estate developer and operator that owns 4.5M SF of commercial office space and more than 2,000 units, in February launched MondayVR, a remote touring offering for the company’s Northern Virginia office portfolio.
“It was never designed with the goal of, ‘Hey, we think we're going to get tenants to sign leases without actually coming and touring,'" said John Wharton, a senior vice president of leasing at the company. "It was just that they're so protective of their time, we need to get them comfortable enough that this is the right space for them that they're actually going to come and physically tour it."
The offering has proved successful in expanding their relationships with smaller companies, Wharton said, many of which are using the tool to look for space without the help of a broker.
While the offering is just for office space right now, the firm is considering incorporating it into its multifamily offerings as well, and its designer is convinced that this is far from a passing trend.
“Virtually everyone's going to need to be managing these spaces in a virtual way,” Interface Multimedia principal Mark Burlinson said. “I don't think this is ever going away for anybody, it's just going to augment the brokerage community and it's going to give them better tools, better ways to distill the information faster.”