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Think you can do your office or retail relocation or renewal yourself? Consider the following 5 reasons why tenants will always need commercial realtors.
There are really two factors that play into this category:
There will always be small landlords.
Small landlords fit a certain profile - they own the small buildings, they are typically do-it-yourselfers, and they like to save money when they can.
For this reason they are less likely to hire listing agents and use any of the fee-based databases. Some are old school enough to just put a sign on a building. There are even cases in which landlords have space available for lease and are relying on word of mouth.
There will always be residential agents who dabble in commercial real estate
The best example is when a full-time commercial agent at a national firm cold calls a 5,000 square foot tenant in an A class office building only to discover that the tenant is working with a "personal contact".
The tenant is subletting their space and chose the residential broker due to the existing personal relationship. Many residential agents are not aware of, or do not have access to all of the channels that a commercial broker would use.
Both the small landlord and residential sub-listing broker are publishers of available space and they do not play by the conventional rules.
It leaves the industry being scattered and decentralized. The good commercial leasing brokers must take extra steps to uncover the small landlord listings, and the residential broker listings.
Which both provides job security for the average commercial real estate agent, but also provides on the job frustration as well. We simply do not live in a world in which someone searching for space can hit a magic button to find all the options.
"No, that space is leased, but I may have something else for you." This what a real estate broker hears daily when making calls on available space.
Especially in a hot market, it is not about what is available today that matters, it is what is about to become available.
And that communication channel is not open to most tenants as it requires making a ton of phone calls and follow up calls. And without existing relationships, a lot of those calls simply go un-returned for tenants directly.
This may seem surprising, but the real estate industry is filled with part timers and people that are either too lazy or too busy...so many "sign calls" from tenants off the street simply go un-returned if a listing agent feels they may not be quality leads.
Ever hear about the $38 million comma? The average lease is 50 pages and about 25,000 words. And it is not written in plain English.
Leases have evolved to being that size because it has been necessary. The first lease would have been much smaller and then something came up and the landlord community invented a clause that deal with that issue. Then another problem arose and landlords again reacted.
Since tenants only negotiate a commercial lease every 5 or 10 years it is simply too much of a burden to try to become an expert in commercial real estate leasing and negotiating for the micro period of time that it takes to get the lease done and move on with life.
You don't know what you don't know. In retrospect you could go through a commercial lease review and see that a broker did not add value. Maybe you already knew of all the clauses that he or she recommended improving. But that is in retrospect.
There will always be tenants that are just uncomfortable handling a high stakes document with no expertise or authority on the matter.
Doing some early investigating into space options is intriguing and many tenants start the process with a web search, but the process of turning over every stone is just too time intensive.
While the search for space is becoming more automated (check out our post on how cool 42Floors is):
The simple fact of the matter is that in business we focus on using our knowledge, time and talent to make money for ourselves and anything that is not a core competency should be outsourced.
Follow Up Reading: Virtual Real Estate Brokerage: The Future of Real Estate.