Corporate Real Estate is "NOT" a Relationship Business - Part One

Time and again, I hear  "Corporate real estate is a relationship business!".  Brokers, landlords, and corporate real estate executives, will tell you that they get things done based on relationships.  Is that really true? In the days of corporate transparency requirements and Sarbanes-Oxley compliance regulations, are corporate real estate transactions really based on personal relationships?  Or, is there a deeper meaning that most people miss?

In an article entitled "Great Companies or Great People:  Who Do You Hire?"  I wrote that companies don't hire companies, people at companies hire other people.   The fact that people hire other people based on more than just relationships has proven itself to be true over and over again.

So, if people really do hire other people, not companies, and since human robots have not yet infiltrated the corporate real estate industry (other than a few people I've met!), then business MUST be conducted on the strength of relationships between people....right? Wrong!

Certainly in many instances, personal relationships are the reason for getting things done. But, could personal relationships really define an industry, especially one that is as huge as commercial real estate and one that is such an important and primary driver of our nation's economy?

In days gone by, commercial real estate brokers won business from prospective clients by wining, dining, entertaining, and befriending them.  The more creative and sometimes the more expensive the entertainment, the more successful the broker would become.  The broker with access to the best sporting events and concert tickets, the one who took prospects on the best fishing trips or to the fanciest restaurants, or the one who told the funniest jokes and showed-up often enough at the client's office with donuts and coffee, could be counted on to win assignments from corporate executives.  Now, it still holds true that people prefer to do business with people with whom they feel comfortable, and very often with people they like.  But, friendship is no longer the sole foundation, or even the primary one, for engaging service providers, especially in big business when a lot is at stake!

Look at it this way;  Let's say that you're the CEO of a company, and you have a new and critically important initiative underway.  This project is so important that the future of the company could hinge on the successful outcome of the services provided to you.  Everything you've planned, all your years of hard work, all of your energy and resources have been brought together for this one very, VERY important moment in your company's history.  Your next moves will impact the company's future, and perhaps, your career.  You will need to hire a professional, or a group of professionals, with the precise experience, proven expertise, sound judgment, logical approach, depth of resources and integrity, and ethics to get the job done right.  Whomever you hire must recognize the importance of your assignment and its potential impact on your ability to complete your company's intended mission. 

So, who do you hire?  How do you make that choice when everything hangs in the balance?  Do you hire the guy who takes you to ball games and tells great jokes or, the service provider you trust the most, the one who has successfully represented other companies in similar circumstances, the one in whom you have the greatest levels of confidence in his or her ability to complete your company's project, accomplish its objective, and protect your interests?

Did you just ask yourself "What if the guy with whom I'm friends is also the best qualified"?

Read next week's blog for the rest of this discussion.  In the meantime, send me your thoughts!