Transparency is just one of those small little details that most commercial real estate brokers feel they need to leave off their list of personal attributes (at least during the workday). I have noticed this over the past several years, but have not really ever ventured to understand why. Maybe it’s because it just seems to be the way things work in the commercial brokerage industry. However, in this post I will attempt to put my finger on why this happens, and why it’s becoming a thing of the past…or at least should be.
Typically senior brokers hire young kids right out of college or after their first job, and train them to sell a certain way. Within a few years, BOOM!, there are broker clones trained in 1980s sales tactics representing some of the top firms out in the market place. As these senior brokers move on to their golden years, hopefully things will begin to change. But if you ever run across one of their clones, here are a few tactics they might employ and reasons why you might not want to buy what they are selling:
They share partial information to entice you to meet with them. This is a common tactic among those brokers that don’t realize that the internet exists. While it might be difficult to find out exactly what your neighbor is paying in rent, every major firm releases quarterly, if not, monthly research data on every submarket, so it’s quite easy to do some preliminary homework. One must simply call a few brokerage companies and ask for info, which they will surely give to you in exchange for a shot at your business. Or, companies can call neighboring tenants for info on their leases. But this is not even the reason why this tactic is lame. The lameness lies in the fact that most brokers don’t realize that the selling point is not the “insider info,” it’s the client’s problem. If I were making a hiring decision for a broker, I would want to hire the team that understands my business and its challenges, not the one with the commoditized market info.
They don’t tell you how they get paid. In fact, some might tell you their services are “free of charge,” or “at no cost to you.” This is all code for: “we are all the same and we all get paid a market commission, so just please, please hire me.” Like any other service fee, it’s built into the overall cost of the deal. In commercial real estate leases, the landlord is most likely outlaying the cash for the commission, but it’s really being paid for by the tenant in the form of rent over the term of the lease. If a broker can’t tell you this in a straightforward manner, then he’s not confident in his ability to execute a good deal on your behalf, and he is really the same as the others. Transparency trumps manipulation of data.
They specialize in _________. While real estate transactions can turn out to be quite complicated, there really is a finite amount of variations on the same type of deal. As a tenant you are either signing a lease or purchasing real estate, so you need someone who understands your goals for the project, and can assemble the resources to execute on those goals. Sure, it’s nice to have a broker that knows what a fume hood or an autoclave is, or that really understands how law firms use office space, but these are just features. The best brokers I know sell the problem and don’t compete on features. Not every cleantech company is represented by a cleantech expert. Is there even enough cleantech business out there to be a cleantech expert? No, that’s why brokers that say they specialize in something also do other things. They are called real estate brokers.
They have no conflicts of interest. Well, that’s too bad. That means you aren’t busy. If you don’t have conflict then you are not successfully cultivating relationships and building your deal pipeline, which means you might not be the best choice for the next big project because you don’t have experience. Whenever I refer a client to an attorney, the first thing the attorney does is run a conflict check. If the attorney has a conflict, then its too bad that they can’t work on my deal, but it also means that they already have business that is getting in the way. Conflict does not necessarily mean that a tenant rep broker, for example, also represents a landlord. Conflict can also occur when a tenant rep broker represents two similar companies considering the same space. Its better to turn down business than not have any at all. If the broker cannot be upfront with you about his existing clients (or lack thereof), then you might want to take your business elsewhere.