BOSTON / Sept. 6, 2000--Arthur Andersen today released the second in its series of groundbreaking reports that explore the key eBusiness issues facing the real estate industry, eReal Estate Companies: The Impact of eBusiness and the Internet in the New Economy.

The study examines the new competitive realities the industry is encountering in the 21st century, and how developments such as eBusiness and the Internet will influence day-to-day and long-term business operations of real estate services providers, commercial developers and home builders, real estate operating companies (REOCs) and real estate investment trusts (REITs). It offers an in-depth analysis of how real estate companies can use today's technologies to create value by leveraging eBusiness opportunities in five key areas: strategy, people, processes, technology and finance.

Overall, the Arthur Andersen report indicates that real estate companies have broad opportunities to improve profits, market share, growth and operational efficiency by taking advantage of the opportunities presented by eBusiness. But real estate companies will need to take innovative – and in some cases, radical – steps to build new business models.

"Some real estate professionals believe that the industry is too relationship-oriented to benefit from the technology-driven Internet," says Carl Berquist, Worldwide Managing Director of Arthur Andersen's Real Estate and Hospitality group. "They don't recognize the impact of enhanced customer access and communication, the savings in business-to-business cost and time, the critical importance of changes in information access and dissemination, or the effect of improved work processes and organizational efficiency."

Key conclusions of the report include:

Real Estate Service Companies--Commercial Brokers--Opportunity: The Internet is opening new opportunities for cooperation and partnership across industry and geographical borders. This means brokers can find more information faster, provide new services to their existing clients, reach new clients, support faster transactions and generate new revenue. Challenge: The Internet gives buyers and sellers an inexpensive way of quickly obtaining property information, as well as access to online comparative and property valuation information providers. Thus, as the commercial brokers' access to information becomes less exclusive, their services may be of less value to their clients unless they assume a strong role as advocate and negotiator.

Developers and Home Builders--Opportunity: The Internet is changing the definition and advantages of being "local" for developers and home builders, creating strong opportunities for growth as Web sites introduce customers to firms outside of their community. Companies that once had a hard time securing local materials and subcontractors can now use Internet bidding sites to solicit subcontractors in any geographic location. Challenge: The Internet may devalue many structural advantages that have protected developers and homebuilders that have relied on local presence as their competitive advantage. As competition intensifies, developers and home builders may find that their customers have a much clearer idea of competitive costs, and they may expect developers and builders to lower the project cost accordingly even as they demand technology-intensive services, like real-time virtual walk-throughs of homes.

REOCs and REITs--Opportunity: It is only a matter of time before property changes hands partially or completely online. REOCs and REITs that transact business over the Internet will be able to take advantage of much faster, more efficient ways of purchasing and disposing of property, which will improve portfolio management. Challenge: REOCs and REITs will have to either develop employees that can perform and enable these technology functions or outsource them, thereby substituting supplier assets for employee assets.

"Once every few decades, something has such a profound impact on an industry that established leaders are challenged, competition emerges from unprecedented areas and old notions of how value is created are changed," says Daniel Aronson, a manager in the firm's eBusiness Strategy practice, who directed the research. "This study demonstrates that eBusiness has the potential to change who the leading real estate companies are, how they compete, and the basis for creating value in the real estate industry."

The eReal Estate Companies report is available in hard copy for U.S. $150. Copies of the study can be ordered by calling VantageSource at: 800/872-2454 (U.S., Canada & Mexico) or 941/341-2020 (other international locations).

Arthur Andersen's vision is to be the partner for success in the new economy. The firm helps clients find new ways to create, manage and measure value in the rapidly changing global economy. With world-class skills in assurance, tax, consulting and corporate finance, Arthur Andersen has more than 77,000 people in 84 countries who are united by a single worldwide operating structure that fosters inventiveness, knowledge sharing and a focus on client success. Since its beginning in 1913, Arthur Andersen has realized 86 years of uninterrupted growth, with 1999 revenues of more than $7 billion. Arthur Andersen is a business unit of Andersen Worldwide.

Gina Marie Gralnik
Arthur Andersen Real Estate Hospitality & Services Group