For CRE Brokers, Virtual Tours Are Not A Panacea

In the near term, the coronavirus pandemic has turned the economy on its head. In the longer view, it may benefit commercial real estate by ushering in the adoption of new technologies. One of the most discussed areas of potential growth is virtual property tours.

Of course, the phrase evokes different things for different people. For some, the virtual tour is a residential broker shakily FaceTiming their way through a space —“the new reality” for real estate agents across the U.S. as social distancing shuts down in-person showings and open houses.

For others, the virtual tour may involve building information modeling to create “fly-through” tours stitched together with 3D software, giving prospective tenants the same perspective they would see if they were floating through the space — the stuff of the future.

Some of this virtual tour technology is beginning to appear in multifamily, according to Newmark Knight Frank Vice Chairman of Multifamily Investment Sales Christine Espenshade.

"Our clients very quickly have been able to pivot and essentially do their entire business remotely, and a lot of that is just fueled by virtual tours," she said in CREW Baltimore’s Conversations Over Coffee — a morning industry chat that has, for the time being, gone digital.

Whether during shelter-in-place or not, high-quality virtual tours can certainly expedite the rental process for multifamily, but the first hurdle is normalizing this need for landlords and property owners, and convincing them they should pay for it. 

According to Espenshade, it may cost $700 or more to have listing photographers produce video as well.

“It isn’t that big of an expense, and I would think that there’s a case to be made that this is something a property owner should have for their buildings, for marketing or insurance,” she said. In fact, for a number of reasons, she added, multifamily property owners should “probably always have videos” of their spaces. Post-pandemic, these assets would allow available units — even if they were vacated suddenly — to go to market within minutes rather than weeks.

When it comes to office space, acceptance of virtual tours has been slower, but some are using them successfully. 

Truss, an online platform for listing office space, offers virtual tours, floor plans and other assets for many of their office listings, and according to Truss Business Operations Analyst Steve Singer, it’s not just a Band-Aid solution for the limitations caused by the coronavirus.

“Virtual tours don’t just help tenants narrow their search and move through the leasing process more quickly. They’re powerful marketing tools for listings,” Singer wrote recently on the company’s website. “We’ve found that Truss tenants are 4.7 times more likely to shortlist and 6.4 times more likely to tour spaces that offer virtual tours.”

Singer sees virtual tours becoming the norm in office space, even when the pandemic has passed. But there are caveats.

Harkins Builders Commercial Business Development Manager Kristen Schrader said 3D BIM fly-through tours and other virtual tour technology could bring a lot to the brokerage process, but for most companies, the big question still remains: “Who’s going to pay for that?" she asked. "I’m not sure.”

Plus, while many brokers speculated on how high-tech virtual tours could shorten the process and expedite times to closing, all seem to agree that digital video can't seal the deal. The vast majority of prospective tenants will still want to tour a space in person before closing, even if a virtual tour helped get them through the door.

"There's so much more than just the space that they’re looking at. It's the surrounding area, it's the lobby, it’s how they feel with the security — just different impressions even on their way up to the space," COPT Property Manager Kim Hogan said in the CREW conversation. "I don't know that you can really get a full sense of what the building and the space is like unless you come in person."

KLNB Senior Vice President Abby Glassberg agreed: "There’s nothing like walking through the space no matter how good the online is. Tenants will always want to understand the ideas that don’t come across online."