Until the late 1980s, commercial real estate brokers identified available space in the market either by listing work that they were performing for their Landlord clients or cold calling others for availability. While residential brokers could search the Multiple Listing Service to find out what houses were for sale, no such database existed for commercial space.
Everything changed in 1987 with the founding of CoStar, a national database of commercial real estate availabilities. Suddenly, market information became a commodity and every broker had access to the same vacancy and “for sale” information. Big brokerage shops who had the most landlord listings and the largest research departments were now on the same footing as small boutique firms who did no listing work at all. There was no longer any magic or risk in space finding, and this no longer represented the greatest value that brokers provided tenants.
In the past, because no firm’s database was ever complete or up to date, tenants felt insecure committing their search to a single broker or brokerage firm. Today, the non-exclusive model is not only obsolete, it actually works against tenants’ interests.
Despite the facts, some tenants still believe that they are best served by working with multiple brokers rather than committing to one.
To the Child with a Hammer, Everything is a Nail
Typically, when a tenant opens its requirement to all brokers, the only calls they will receive are from listing brokers who are marketing a specific asset. Their allegiance is to the Landlord, not the tenant. Thus, when a tenant is contacted by a broker about a particular property, it is not because that property is the answer to the tenant’s prayers; rather, the broker is hoping that the tenant is the answer to the Landlord’s (and broker’s) prayers. This approach limits exposure to market opportunities that pose the best options for a tenant’s specific needs.
By using a single broker who isn’t representing a Landlord, the tenant will be made aware of all market availabilities. Further, the broker can help identify the best options given the tenant’s specific needs.
A Competition of One is No Competition at All
To get the best deal, you need to create competition. Unfortunately, when tenants work with multiple brokers, they often end up focusing in on one option at a time as opportunities are brought to their attention. Because there is no structured search process and schedule, options are not vetted and competed against each other. Deals struck in a vacuum and without context will result in poor outcomes for the tenant.
The true value of a broker today is no longer finding space, but rather, getting the tenant the best deal terms among the viable options that exist.
If the Broker is Not Outcome Neutral, Their Advice Isn’t Neutral Either
Suppose a tenant is working with three different brokerage firms and each has identified a different property for the tenant. Who will help the tenant objectively assess the pros and cons of the different options and leverage them against each other? Whose advice can be trusted or relied upon when none of it is objective? If, however, the tenant is working with a single broker who gets compensated regardless of which property is chosen and who has no allegiances to any of the Landlords, the tenant will receive objective guidance and a committed advocate for its interests.
The best outcomes occur when there is competition among the Landlords, not among the tenant’s brokers.
Commitment is a Two-Sided Coin
If a real estate requirement is important to a tenant’s business, the tenant deserves to know that every day, someone is waking up thinking about that need and making it a priority. The question a tenant needs answered is not “what is out there?”— that is easy— but rather, “what is the best solution to my problem?”
In the end, it is going to be hard to solve the tenant’s real estate problem if no one is making it a top priority. Qualified brokers work on an exclusive basis with their clients, because at the end of the day, they want to know that their resources and efforts will be rewarded.