Tanner Mc Graw, CEO and founder of Apto

|

There's a lot of prattle about new technology that allowssellers to communicate directly with buyers or renters, without theintervention or assistance of a broker. It makes for good reading,but its threat to the commercial real estate industry is oftenoverstated. Those thoughts are according to Tanner Mc Graw,CEO and founder of Apto. “We will always need commercialreal estate brokers, particularly those with extensive property andmarket knowledge and shrewd negotiation skills.” In the exclusivecommentary below, McGraw discusses more about the profession andthe value that brokers bring that machines cannot.

|

The views expressed below are the author's own.

|

The profession may not be in imminent danger of extinction, butthat doesn't mean brokers can ignore the fact that the industry isevolving. Tomorrow's most successful brokers will be those who movepast a transaction-based mindset and step into the role of valuedadvisor.

|

Below are five reasons why we will always need commercial realestate brokers—at least those who add value that machinescannot.

|

1. In-depth industryknowledge

|

Real estate professionals have a nuanced understanding of theeconomic strengths and weaknesses of the geographic region in whichthey operate, and they are dialed-in to how that area is likely tochange. And because the market is ever-evolving, real estateclients can take advantage of their long-term relationship with abroker. For example, let's say you are a building owner and thereis a new property in your area in the midst of its entitlementprocess. If you have an ongoing relationship with a broker, he orshe can alert you to this information, anticipate how the newinventory will impact supply and help you adjust your marketapproach if necessary.

|

Brokers understand regulatory and environmental factors specificto a market that the average buyer or seller won't be familiarwith. They also have experience interpreting lease contracts, whichcan be hundreds of pages long. Dissecting a document of that sizeis a daunting task for a novice; it's even time-consuming for apro. Plus, there is just too much at stake to risk an error thatcould be easily avoided. Commercial real estate brokers haveexperience reviewing contracts and working with counsel to identifylegal red flags.

|

2. Properties areidiosyncratic

|

Brokers are no longer just gatekeepers of information or a meansfor accessing listings and records. You can get that online!Rather, brokers make themselves invaluable by interpretinginformation and advising clients based on factors that can't befound in a listing. Each property is unique, and it takes an expertto understand all the issues that affect a building and its owner,landlord or tenant.

|

Brokers should function as analysts for their clients; theyunderstand the ramifications of every property detail. They canidentify hidden costs, price out potential renovations and providerealistic timelines. Brokers also help sellers and landlordsproperly market their space through the right channels to get thebest deal.

|

Unless you are an expert in the field, it is challenging to keepup with the idiosyncratic nature of commercial real estate. Brokersact as proxies, adding value not just by providing information, butby interpreting it.

|

3. The value ofrelationships

|

There is an old adage in real estate: “Off-market is themarket.” Off-market transactions occur all the time, facilitated bybrokers who have a Rolodex of potential buyers and sellers. Evenwhen sellers list their property, someone needs to make sure theyget qualified buyers in the door. Real estate brokers use theirrelationships with other brokers and potential buyers and tenantsto their clients' advantage.

|

Brokers save businesses time by shortlisting properties that fittheir needs, including off-market listings. They know who to callto get a tour arranged and questions answered, and they also helpassess property pricing. Plus, many brokers can also providerecommendations for real estate attorneys, architects, contractors,electricians and other valuable service providers.

|

4. The art ofnegotiation

|

Negotiation is a complicated and time-consuming process. It isalso a skill. Some people are better negotiators than others, andthat prowess—or lack of it—can have major cost implications.Brokers can bolster a negotiation strategy by drawing on previousdeals they've worked on and pulling relevant comps.

|

Let's take another case study. A building owner receives severalunsolicited offers for his property but wonders if he could getmore for the space. He engages a local broker who extends his compsearch into other markets and finds that comparable buildings insimilar areas are commanding higher prices. This allows the ownerto secure a higher evaluation, and in turn, a higher asking price.The owner has to pay a broker fee, but the cost-savings cover thatprice—not to mention the time and energy saved by outsourcing.

|

Brokers know there are a variety of factors beyond rent that canbe discussed to get both parties the best deal possible,including:

  • Built-out costs
  • Security deposit
  • Lease terms, such as length and flexibility
  • Utilities and maintenance fees
  • Parking
  • Conveniently located signage
  • Clauses such as non-competes and the ability to sublease
  • Timing (how quickly someone can get into the space)

A layperson might not be familiar with all of those factors. Itmakes sense to outsource negotiation to someone who does it for aliving, especially when there is so much money on the table.

|

5. Time is money

|

Even if someone has the knowledge to successfully navigate acommercial real estate transaction, does he or she really have thetime? It can take months to finalize a single commercial realestate deal, as well as countless emails and conference calls,building tours, legal proceedings, contract reviews and hours andhours of coordination. Those tasks are better handled by people whodo them every day.

|

As intermediaries whose core function is to match buyers withsellers (or landlords with tenants), brokers develop significanteconomies of scale and scope that make them much more efficient atgathering information and solving problems associated with a realestate transaction.

|

A smart business owner realizes his or her time is better spentdriving the business forward. For this reason alone, commercialreal estate brokers don't need to worry about disintermediation.But they do need to provide value that clients can't get elsewhere– knowledge, analysis, skills and a human touch.

|

Tanner Mc Graw, CEO and founder of Apto

|

There's a lot of prattle about new technology that allowssellers to communicate directly with buyers or renters, without theintervention or assistance of a broker. It makes for good reading,but its threat to the commercial real estate industry is oftenoverstated. Those thoughts are according to Tanner Mc Graw,CEO and founder of Apto. “We will always need commercialreal estate brokers, particularly those with extensive property andmarket knowledge and shrewd negotiation skills.” In the exclusivecommentary below, McGraw discusses more about the profession andthe value that brokers bring that machines cannot.

|

The views expressed below are the author's own.

|

The profession may not be in imminent danger of extinction, butthat doesn't mean brokers can ignore the fact that the industry isevolving. Tomorrow's most successful brokers will be those who movepast a transaction-based mindset and step into the role of valuedadvisor.

|

Below are five reasons why we will always need commercial realestate brokers—at least those who add value that machinescannot.

|

1. In-depth industryknowledge

|

Real estate professionals have a nuanced understanding of theeconomic strengths and weaknesses of the geographic region in whichthey operate, and they are dialed-in to how that area is likely tochange. And because the market is ever-evolving, real estateclients can take advantage of their long-term relationship with abroker. For example, let's say you are a building owner and thereis a new property in your area in the midst of its entitlementprocess. If you have an ongoing relationship with a broker, he orshe can alert you to this information, anticipate how the newinventory will impact supply and help you adjust your marketapproach if necessary.

|

Brokers understand regulatory and environmental factors specificto a market that the average buyer or seller won't be familiarwith. They also have experience interpreting lease contracts, whichcan be hundreds of pages long. Dissecting a document of that sizeis a daunting task for a novice; it's even time-consuming for apro. Plus, there is just too much at stake to risk an error thatcould be easily avoided. Commercial real estate brokers haveexperience reviewing contracts and working with counsel to identifylegal red flags.

|

2. Properties areidiosyncratic

|

Brokers are no longer just gatekeepers of information or a meansfor accessing listings and records. You can get that online!Rather, brokers make themselves invaluable by interpretinginformation and advising clients based on factors that can't befound in a listing. Each property is unique, and it takes an expertto understand all the issues that affect a building and its owner,landlord or tenant.

|

Brokers should function as analysts for their clients; theyunderstand the ramifications of every property detail. They canidentify hidden costs, price out potential renovations and providerealistic timelines. Brokers also help sellers and landlordsproperly market their space through the right channels to get thebest deal.

|

Unless you are an expert in the field, it is challenging to keepup with the idiosyncratic nature of commercial real estate. Brokersact as proxies, adding value not just by providing information, butby interpreting it.

|

3. The value ofrelationships

|

There is an old adage in real estate: “Off-market is themarket.” Off-market transactions occur all the time, facilitated bybrokers who have a Rolodex of potential buyers and sellers. Evenwhen sellers list their property, someone needs to make sure theyget qualified buyers in the door. Real estate brokers use theirrelationships with other brokers and potential buyers and tenantsto their clients' advantage.

|

Brokers save businesses time by shortlisting properties that fittheir needs, including off-market listings. They know who to callto get a tour arranged and questions answered, and they also helpassess property pricing. Plus, many brokers can also providerecommendations for real estate attorneys, architects, contractors,electricians and other valuable service providers.

|

4. The art ofnegotiation

|

Negotiation is a complicated and time-consuming process. It isalso a skill. Some people are better negotiators than others, andthat prowess—or lack of it—can have major cost implications.Brokers can bolster a negotiation strategy by drawing on previousdeals they've worked on and pulling relevant comps.

|

Let's take another case study. A building owner receives severalunsolicited offers for his property but wonders if he could getmore for the space. He engages a local broker who extends his compsearch into other markets and finds that comparable buildings insimilar areas are commanding higher prices. This allows the ownerto secure a higher evaluation, and in turn, a higher asking price.The owner has to pay a broker fee, but the cost-savings cover thatprice—not to mention the time and energy saved by outsourcing.

|

Brokers know there are a variety of factors beyond rent that canbe discussed to get both parties the best deal possible,including:

  • Built-out costs
  • Security deposit
  • Lease terms, such as length and flexibility
  • Utilities and maintenance fees
  • Parking
  • Conveniently located signage
  • Clauses such as non-competes and the ability to sublease
  • Timing (how quickly someone can get into the space)

A layperson might not be familiar with all of those factors. Itmakes sense to outsource negotiation to someone who does it for aliving, especially when there is so much money on the table.

|

5. Time is money

|

Even if someone has the knowledge to successfully navigate acommercial real estate transaction, does he or she really have thetime? It can take months to finalize a single commercial realestate deal, as well as countless emails and conference calls,building tours, legal proceedings, contract reviews and hours andhours of coordination. Those tasks are better handled by people whodo them every day.

|

As intermediaries whose core function is to match buyers withsellers (or landlords with tenants), brokers develop significanteconomies of scale and scope that make them much more efficient atgathering information and solving problems associated with a realestate transaction.

|

A smart business owner realizes his or her time is better spentdriving the business forward. For this reason alone, commercialreal estate brokers don't need to worry about disintermediation.But they do need to provide value that clients can't get elsewhere– knowledge, analysis, skills and a human touch.

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Natalie Dolce

Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.

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