Virtual reality expected to shake up future of real estate

Nearly a year before Jack Sazama will actually set foot in his new digs at the Spectrum apartments near the University of Minnesota, the freshman strapped on a set of cheap plastic goggles, strolled through his new apartment in virtual reality and then signed a lease.

"The buildings weren't even up yet, so it was nice to get a sense of what it would look like," Sazama said.

Virtual reality (VR) is expected to reshape the real estate industry in much the same way internet listings did. It may not be long before your first view of your next house or apartment will be through a View-Master-like headset.

The time is right, many say. The technology has gone down in price and is now easier to use, buyers and their agents aren't as afraid of technology as in past years, and real estate markets are more global than ever.

"It is a foregone conclusion that we'll be evaluating real estate this way in the future," said Gene Munster, a Twin Cities tech analyst and investor who sees VR as the most significant development in real estate since the advent of the internet.

Already, "virtual tours" sans goggles are joining aerial drone tours as standard fare for many Twin Cities real estate agents, enabling house shoppers to more easily narrow their options without ever having to set up a physical showing. Agents are hiring companies that use sophisticated software to stitch together still photos that give house shoppers interactive, 360-degree room views that you can't get with a traditional photo slide show.

Though these "virtual tours" are technically not three-dimensional, they provide a much more comprehensive look at every interior surface.

More important, it's a tool with the power to create an emotional response that a single, static view of a room can't, putting buyers into spaces that could be hundreds of miles away.

"Pictures are just pictures, but when you can spin around inside those rooms, you can really get a good feel for what that house is like," said Cathy Lawton, who wasn't even seriously shopping when she was cruising through a national property listing site last summer.

Her grandmother had a place on Lake Le Homme Dieu near Alexandria, Minn., and she had fond memories of spending time there with her family. Though she now lives near Milwaukee, she and her brother had always talked about someday owning a lake place in the area.

While casually — and spontaneously — perusing online listings in the area near her family's lake place, she happened across a property that caught her attention. The online listing for the 13-acre property included a virtual tour that enabled Lawton to explore the log-sided house and essentially walk the shoreline.

"You really do get a tremendous appreciation for what the property is really like," she said.

She was quickly smitten and felt confident enough to schedule a showing and make the 7 ½-hour drive. Setting foot on the property confirmed all of her initial impressions based on the 360-degree photo tour, and she was able to quickly make an offer.

"In most respects, it matched what I was expecting," she said.

The situation was a particular coup for the listing agent, Andy Asbury, because the property had previously been listed with another agent for three years without a serious offer.

In addition to having the ability to tug at the heartstrings of sentimental shoppers and create momentum when there was none, such tours also make it difficult for sellers to conceal unsightly elements they'd rather buyers not see.

"Once you can look into a headset and get a sense of the space, you don't have to miss out on the one corner they didn't take a picture of," said Zach Wendt, a seasoned VR developer in the Twin Cities. "When you have a 360-degree view of a room it's hard to hide a problem."

The new VR technology, used with goggles and headsets paired with a cellphone or computer, uses the kind of technology gamers have been using for years, with computer-generated imagery and environments. Such a perspective makes viewers feel like they're part of the image, and not just from a distance or from a single perspective or angle.

Accessibility to this technology reached a turning point in March 2014 when Facebook CEO Mark Zuckerberg bought Oculus, a leading VR headset company. The $2.3 billion investment has helped the entire industry mature.

VR viewing devices are now available in a variety of styles and price points, from cardboard goggles that cost a few dollars to sophisticated headsets with hand controllers that cost hundreds. At the same time, the software that helps transform images into multidimensional environments has become far more sophisticated and accessible.

Several years ago, Silicon Valley company Matterport introduced special cameras that create 3-D-like photo tours specifically for real estate. And in 2013, a Twin Cities company began taking the virtual experience to the next level. Realvision, which has offices in south Minneapolis and Toronto, developed software that works with standard digital single-lens reflex cameras to let users tour properties using a range of viewing devices, including the Oculus Rift, Google Cardboard and Samsung Gear VR.

In mid-February, Minneapolis-based Spacecrafting photography and video — which works with nearly 4,000 real estate agents, architects, builders and designers in the Twin Cities — held a "launch and learning" event at its headquarters in the city's North Loop to announce its partnership with Realvision.

Bryn Erickson, Realvision's Minneapolis-based co-founder, said Realvision raised $1.3 million in seed funding to help the company compete on an international scale and said the real estate package is taking off.

Munster, the tech analyst, said there are now 20 million people who use VR in one form or another at least once a month, and he expects that number to reach 50 million by the end of 2017 and 1 billion by 2023, creating the kind of market saturation that will force technology companies to create cheaper and easier-to-use devices for all VR applications.

So far, adding VR has been working for CPM Cos. In a rental market that's becoming increasingly competitive, CPM has been able to get a head start to fill complexes like the Spectrum near the U before they open. And while the company has spent thousands to embrace VR, the company expects to easily make up for that by reducing the number of empty units when the building is finished this fall.

It's difficult to measure how many people have signed leases based solely on the VR technology, but it's one more tool for leasing agents to use. Marketers have been out to Burrito Loco and other campus watering holes to offer the virtual tours — and free shots of booze in a lit-up shot glasses — to help promote Spectrum.

"We're early adapters," said CPM co-founder Dan Oberpriller. "But this is going to become the standard."

Jim Buchta • 612-673-7376