How Technology Can Help Tenants and Brokers Find the Perfect Match

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MINNEAPOLIS—Until recently, no one talked much about innovation in commercial real estate. More than two decades after the Internet first became front-page news, the CRE industry still functions largely the same old way. A business move still generally involves finding a tenant rep, having that broker connect with a landlord rep, touring spaces one at a time, and in hot markets, grabbing the first space that seems like a fit.

What's wrong with this model?  Well, lots.

For starters, it's massively time consuming. The tenant communicates with his rep, who communicates with the landlord rep, who communicates with the landlord. And then the communication trail reverses back to the prospective tenant. 

It's also very expensive to the tenant. While the tenant pays the rent on a monthly basis, the landlord pays both brokers up front. And, the tenant can be sure that the landlord figures out a way to recoup those commissions over time.

Worse yet, if the prospective tenant is a small business, they often receive less attentive service than a large business. It takes roughly the same time to complete a big deal as it does a small one, so guess where the tenant and landlord reps focus?

Thankfully, big data and advanced analytics—in combination with growing frustration and recognition that "there's got to be a better way"—have resulted in a frenetic pace of innovation in commercial real estate. Today, everyone is talking about innovation and several have introduced new solutions for financing and marketing properties. But while innovation may be great in itself, for it to truly disrupt a market, everyone the innovation touches has to accept it. Not just accept it, but love it.

For businesses seeking their next office space, one innovation they will love is online "matchmaking" that pairs prospective tenants with landlords who have space available. However, for such a matchmaking innovation in CRE to become disruptive, tenants and landlord reps should demand several specific capabilities.

First, the solution must be easy for all to use. Prospective tenants have to be able to quickly and easily list their preferences and learn what's available. Likewise, landlord reps should be able to market their properties rapidly and engage quality tenants with a minimum of wasted time and effort.

Market information must be comprehensive and transparent. Unless a prospective tenant can see a wide range of available properties in his company's desired locations—and the pricing associated with those properties—they won't feel confident when making a decision.  Landlord reps and landlords, conversely, should be able to see how their properties' value propositions compare other properties the tenant is considering.

The solution must deliver a better "fit" for everyone. Business managers should be able to describe exactly what they are looking for—everything from location, style of building, amenities and more—to ensure they are only seeing options they know are a good fit for their company.  For landlords, this means tenants come to them pre-qualified with fewer unproductive tours and more tenants who immediately fit the vibe of the building.

There should be less "friction" in transactions.  In this context, friction includes things like delays due to brokers being out of the office and the time needed to process paper documents.  Solutions should always streamline the process.

It must be accessible on all devices.  For many businesses, especially smaller ones, tenants are already wearing many hats within their business. Looking for office space might be one of those jobs left to nights or weekends. They don't have time to seek answers.  There must be a way for mobile technology to bring potential office space to them. 

Finally, it must save money.  Landlords currently pay both tenant rep and landlord rep commissions, which can be sizeable. The matchmaking solution must reduce these commissions and landlords should be able to pass on these savings on to the tenant in the form of rebates or TIs, sweetening the deal.

There are many naysayers in CRE who state that this type of innovation and disruption is not possible.  Here is a quote from one blog, the author will remain nameless:

The process of transferring or transacting real estate is a relatively complex one, much more so than booking an airplane … a commercial real estate transaction involves hundreds of thousands to millions of dollars, requires the expertise of multiple participants and disciplines … The complexity of valuing and transacting commercial real estate makes the prospect of disruption a challenging obstacle.   There is a need for expertise from professionals who do it daily …

While there is definitely complexity in CRE transactions, utilizing database technology and analytics to match tenants' needs with office space is relatively straightforward. The resulting solution isn't for every tenant, but it is for some, and that ratio will only increase as web-centric Millennials mature to become the captains of industry.

Innovative technologies are taking root in many areas of commercial real estate. Which ones will become disruptive and which will simply fade away remains to be seen. However, to ensure tenants and landlord reps both find their "perfect fit," the solution should involve advanced matchmaking technology that improves everyone's experience while reducing the time and cost. There are solutions like these already in the marketplace and it certainly makes sense for you to look for them. Your competition surely is.

Jim Simpson is CEO and founder of Crelow.com, the industry's first demand-driven marketplace for commercial real estate. His passion for CRE comes from personal experience as an owner and developer of commercial properties. Simpson was formerly co-owner and president of Periscope, one of the largest independent advertising and digital marketing agencies in the U.S., and has led the development of commerce websites for several Fortune 500 companies.