Technology has turned many industries upside down and rendered many brokers (read intermediaries) obsolete.
So the question on the minds of many tenant rep brokers today is whether the tenant rep business is “ripe for disintermediation?” Can technology replace the tenant rep broker and make our industry obsolete? Over my 30-year career as a tenant rep broker and as a brokerage company owner, I have heard this question many times. And the answer I believe is and will remain: No! However, what is clear is that the commercial real estate business has and will continue to change and technology will be the driver. Tenant rep brokers who don’t adopt and use the latest and best technology will get left behind and will become individually obsolete.
Tenant rep brokers need to embrace technology and think about the services and value we provide our clients. In the old days, a tenant rep brokers’ primary value was providing building data and information on available space options. This changed with the advent of the internet as data on buildings and available spaces became easy to obtain online. At the same time, Google has enabled our clients to quickly find all types of valuable information on the leasing process and how to negotiate their own deals.
Many people point toward the residential real estate industry as an example of changes we can expect in the tenant rep business. There are certainly parallels – but there are also important differences. Commercial real estate leasing and acquisitions are significantly larger and more complex than residential transactions. In addition, there are many more components associated with commercial lease transactions such as space planning, construction, workplace, relocation, etc. What is interesting is that with all the technology that has been applied to the residential real estate business, residential brokers continue to thrive and prosper. But their business, just like ours, has changed and the value they deliver has changed significantly as well.
What makes the tenant rep business and commercial real estate transaction in general very difficult to completely “automate” is that every deal and every commercial property is unique and without the ability to standardize every building, complete automation is extremely difficult if not impossible.
Buying and selling stocks is completely automated and today’s stock broker lives on “advisory fees” versus “brokerage commissions.” But there is one key difference between selling stock versus selling or leasing commercial real estate. A share of IBM is a share of IBM – no matter who or how you purchase it. So as a result, it is something a computer can easily handle and the role of the broker shifted from buying and selling stock to advising clients on which stocks to buy and sell. Execution is easily automated when the product is a commodity.
So the role of the tenant rep broker is changing and will continue to change. We are becoming more like the “financial advisor” versus the “stock broker.” No longer is finding space, creating fancy reports and providing sophisticated analysis a competitive advantage as technology is making these tools available to all brokers. Just like Costar leveled the playing field for data and information, new process automation and presentation software is leveling the playing field with respect to reporting, presentations and financial analysis.
The tenant rep broker of the future will focus on helping our clients “sort through” the mountains of information now available. In addition, we will become more adept at advising our clients on current and future market trends, complex deal structuring, workplace trends and issues, personal relationship building and first class service.
Successful brokers will use the most up-to-date technologies to “automate” as much of the tenant rep process as possible to allow us the time to focus on the really important value creation functions that our clients are looking for.
The tenant rep broker will survive albeit with a dramatically changed role and focus.