This article has been reposted with permission and was originally posted from Pittsburgh Business Times on March 1, 2019. Click here to view the original article.
As commercial real estate market technology becomes more accessible to prospective investors and tenants, a fundamental shift is taking place in the brokerage business. The emergence of online tenant brokerage services such as SquareFoot and Truss are creating options for companies seeking space, while platforms like Ten-X are gaining traction with investors looking to buy and sell properties online.
In response, brokers in today’s marketplace are repositioning themselves as full-service advisors in order to retain their competitive edge in an increasingly digital world.
“Brokers used to be able to provide information that nobody else in the marketplace had, and because we had information that was proprietary and not public, we were able to provide an immense amount of value to our clients,” said Don Mancini, SIOR, and principal at Worcester, Mass.-based Kelleher & Sadowsky Associates.
“But with the advancement of technology, almost everything that you want to know about a market is readily available on the internet, so brokers have had to find ways to add value for their clients.”
For Mancini and his firm, that means providing additional services, improving the customer experience, and becoming significantly more creative in their approach to adding value. In recent years, Kelleher & Sadowsky has stepped up its advisory functions: becoming more involved in the process of working with owners to reposition properties; helping them to better understand who their ideal tenants may be; providing financial guidance; and conducting analyses of clients’ entire portfolios to develop long-range strategies for optimizing returns.
The additional services are something that more and more of his clients are demanding, says Mancini. “Brokers that are transaction-oriented are dead in the water,” he said. “This is really an advisory business, a consulting business, and a business where you have to be able to prove your value-add in any transaction that you’re involved in.”
Technological advances in data-gathering in recent years have provided a wealth of information on how space in buildings is actually used, and brokers have learned how to access and leverage that information to help their clients make better decisions regarding space needs.
Grant Pruitt, SIOR, is president and managing director at Whitebox Real Estate. His firm conducted a study for one large client, and using technology, monitored the number of employees that were actually using the office space (taking into account employees that travel, work from home, etc.) versus the head count. The analysis led to a significant reduction in space (and rent) when the client renewed. “It’s an example of how we’re using technology to harvest data to make sure that our clients are in a space that is commensurate with their needs,” said Pruitt.
Chris Falk, SIOR, and principal with Newmark Grubb ACRES in Salt Lake City, says he now sees himself as more of a consultant, conferring with clients to identify their most important business goals and then helping them to make appropriate real estate decisions that align with those goals. “Clients have to understand what space best fits their culture, or accommodates potential growth, or what surrounding development may be happening in the near future as the company grows,” said Falk.
Although the availability of data is transforming the way that tenants and investors pursue space, that does not mean that the transactional side of the business is in any danger of going away any time soon. Tripp Guin, SIOR and owner/principal of TRIPP Commercial in Charlotte, North Carolina, sees the proliferation of online information as a boon to his business – not a threat. There is much more to the equation than just price per square foot, he says, and working with a broker/advisor enables tenants to see the larger real estate picture when choosing a space or purchasing a property. “Anyone can get information, but it’s how it’s analyzed that’s critical,” said Guin.
Guin cited an example where a client identified two properties online for a possible relocation that were $3 to $4 per square foot more than they were currently paying. Utilizing his market knowledge, he was able to identify another property with lower rent, secure a proposal, and use the proposal as leverage in negotiating a renewal at reduced rent with the owner of the company’s existing location. The deal resulted in a savings of “a couple hundred thousand dollars” for his client. “The ability to navigate those kind of waters is why technology is important and is not a threat to my business,” said Guin. “But it’s the personal relationships that what will keep brokerage going.”
The Society of Industrial and Office Realtors ® (SIOR) is the leading society for industrial and office real estate professionals. With more than 3,200 members in 685 cities and 36 countries, SIOR represents today's most knowledgeable, experienced, and successful commercial real estate brokerage specialists. Learn more about SIOR online at sior.com.