Back in 2009, a 94-year-old property management company was looking for technology to help it better manage its properties. There was nothing. A recent article in the New York Times describes how one of the largest property management companies in New York became one of the leaders in proptech: It had to invent its own solution to get an edge in the industry. Rudin founded Nantum, software that lets property management companies run their buildings through a smartphone. Pretty cool if you’re in property management, right?
A senior VP at the company explained why to the Times, “We had a lot of technology in our buildings, but no interoperability between the various systems. We wanted those various silos to be able to communicate with each other and share data.”
That’s precisely where the $13 trillion residential real estate loan industry found itself about a decade ago, too. The solution? Proptech startups that see opportunities in the residential loan industry’s cumbersome manual processes and transactions. They're creating cloud-based platforms that integrate and streamline the siloed interactions between borrowers, mortgage brokers and lenders. The result? With data-driven market intelligence and a shared lending ecosystem — based not on old habits, but rather on innovation spurred by opportunity — residential real estate lending is looking not quite so stodgy these days.
So let’s take a look at the $3 trillion commercial real estate lending industry. How has it kept up? If you’re a CRE finance professional who still uses Excel to track your loan quotes, you know that it hasn’t. If you’re a mortgage broker who spends hours every day juggling the status of your analysts and your loans, you know it hasn’t. And if you’re a lender who struggles to sift through myriad emails around each loan transaction, you also know that it hasn’t.
Fortunately, the tide might be turning. The buzz and innovation from residential real estate is creating a similar demand realized by those of us working and innovating in CRE, despite resistance from a minority of skeptics who continue to claim that broker relationships are too complicated, or that lenders won’t be willing to adopt new technologies.
A recent industry report by the Altus Group shows that 61% of CRE executives around North America use lending platforms. And, when the “2018 DNA of #CRE” survey asked brokers to name a CRE technology that would most help their daily work, they suggested an “affordable one piece of technology that does it all” and “integrated, seamless and comprehensive CRE tech,” to name a few.
Residential real estate has already shown us how, when mortgage brokers and lenders and borrowers conduct transactions on a single, integrated platform, they can shave weeks off the process of securing loans. That’s real time — and money — for everyone involved. But CRE is being left behind.
For example, a typical CRE loan costs several thousands of dollars in labor to originate and takes an average of 90 to 120 days to close. Why? Because half of that time is wasted on manually sifting through and gathering documents, and then conducting negotiations and client interactions over phone and email. But if you simply put everyone on a single platform where they can share, research, track and interact, you’ve taken the friction off the interaction and shaved literal weeks from the process. I know because we do it, and we aren't the only ones.
That’s all on the transactional side of things. But there’s the data side, as well. Today’s loan originators are hamstrung by the amount of time it takes to get quality historical data from Excel spreadsheets, no matter how organized they are. But it is data — a critical step in ensuring the right terms for the loan. Most companies today look to data as a source of market intelligence to help their clients make more informed decisions. Why not commercial real estate, too? And that’s the beauty of storing data in the cloud — with the right algorithms and the right platform, you can do precisely that.
By integrating disparate technologies and automating tedious manual process into cloud-based tech, as we and others are doing, commercial real estate lending can finally catch up to its residential cousin. The early adopters — lenders and mortgage brokers savvy enough to recognize the opportunity and insight that tech is bringing to CRE — will win big. They'll get more business, close more deals, build more relationships, and save more time.
The rest? They'll be forced to adopt new tech when it isn't new anymore — when their clients demand it of them. And by then, it might just be too late.