NEW YORK CITY—It's common practice today to begin a search for just about anything by going online. But when co-founders Jonathan Wasserstrum, Aron Sussman and Justin Lee began developing the concept for what is now known as The Square Foot, they found little in the way of a frame of reference within the commercial real estate realm. The platform they launched in 2012 informs prospective tenants on its website, “You tell us what you're looking for in office space. We handle the rest,” and today counts Sakara Life, Casper and MGM Resorts International among clients that have done just that. In Part Two of GlobeSt.com's series on office leasing technology platforms, COO Lee discusses how The Square Foot's platform came to be and what makes it tick.
GlobeSt.com: Your backgrounds run the gamut from tenant representation to technology. How did that combination inform your development of the Square Foot platform?
Justin Lee: I began on the office leasing side, so I was working for the largest office landlord in Texas. I did that for a few years and then moved over to the development side, fortunately and unfortunately around 2007. So I had about one good year before the market crashed. Jonathan worked at JLL on the capital markets side, so he had a commercial real estate finance background. Aron was a CPA at Deloitte and from there was working for a healthcare tech startup. We had known each other; we were all part of the corporate world and were looking for new opportunities. We had the entrepreneurial bug to do our own thing and build something ourselves. We played around with a few ideas around commercial real estate; based on what Jonathan and I had seen, we knew that the industry had plenty of room to be streamlined.
Before we all left our respective companies to concentrate on The Square Foot, Aron had been tasked with finding office space. He did what he would do with anything else, whether it was to buy a car or get a hotel room, which was to go online. He flat out couldn't find a public-facing portal that helped him understand what was available based on his specific needs. We thought, “Well, we want to start a tech company, and something like this doesn't really exist out there, or if it does exist, it's geared more toward helping brokers.” We wanted to build something that was geared primarily toward helping prospective tenants.
So we put together a comp report of everything that was out there in terms of commercial real estate technology. We studied the residential space extensively—websites like Redfin, Zillow, Trulia, StreetEasy—because we knew that residential was typically five to eight years ahead of commercial in terms of technology adoption. Out of all that, we came up with the concept of The Square Foot, an online commercial real estate platform that was tenant-facing.
GlobeSt.com: Although you drew inspiration from the residential side, you probably had to adapt some of the features of sites such as Redfin and Trulia, rather than just putting them into a commercial real estate context.
Lee: No question. Although there are some similarities, residential and commercial are completely different animals. We saw what these websites were doing, and at a high level we thought that we could apply this to commercial real estate, but we spent a couple of years figuring out how to do it. It involved studying how to draw traffic to a website and building a customer base, and extensively studying the infrastructure of landlords and landlord brokerages. We needed to understand how those organizations worked, not only on the leasing side but on the marketing side as well.
When we first launched in 2012, we had a different business model than we have today. We started off charging landlords a monthly subscription fee to give us their inventory, and then we would refer a prospective tenant directly to that building's leasing agent. But we found that tenants were coming back to us and asking us questions about the landlord, and landlords were coming back to us and asking questions about the tenants. We took all of that feedback from the supply and demand sides, and at the beginning of 2013, we pivoted our business model to be a platform that offered space search and brokerage solutions to prospective tenants all under one roof.
GlobeSt.com: What would lead a tenant to use The Square Foot rather than rely on a traditional broker?
Lee: It's a few things. Number one is on the client acquisition side. Traditional brokers are going to spend a lot of their time cold calling, prospecting for deals, networking and building relationships that way in the hopes that they can build a book of business over time. We don't have that as part of our model. Because we have an online platform and understand online marketing, about 80% of our clients are inbound. They come to us as soon as they're ready to start looking. Which is great: everybody wants a resource they can turn to 24/7. They don't want to have to wait for a broker to cold-call them, or reach out to a buddy who knows a broker and can refer them.
From there, we do have an online portal and people can run their own search and carry out their own at least initial discovery and market education. Once they do that, they can inquire with us, which brings them into the system. So we're using the technology in a way that traditional brokers haven't really had to do.
Once they come into our system, we have a dedicated team that pre-educates them, filling in any missing pieces of data that they may need, and pre-qualifies them before guiding them down the appropriate path based on what their needs are. As you can imagine, we have a lot of people that come onto our platform that haven't really done this before, so they're not sure what they need or what to expect.
If somebody is looking for a coworking facility, we can refer them to WeWork or another company like it. If they need an executive-suite environment but want more flexibility in term, we can refer them to a Regus or another executive suite provider. And once somebody is looking for space that would require a tenant rep to help them vet their options, submit LOIs and negotiate on their behalf, those needs are handed off to one of our brokers internally. We have our own internal database that our brokers use to keep their clients in front of the market. We also use technology to help them physically tour spaces; we have what we call our digital tour book that enables them to see all of the spaces that they're touring through an application on the website.
Those are the main ways that we differ from a traditional broker. Once the tenant has narrowed down their space options and submitting LOIs, we're going to do that in the same way that any broker would, because that's a matter of emailing documents to a landlord—typical back-and-forth negotiation. We would love to be able to add technology and streamline the later phases of the process; those are things we plan on doing longer term.
GlobeSt.com: Your backgrounds run the gamut from tenant representation to technology. How did that combination inform your development of the Square Foot platform?
Justin Lee: I began on the office leasing side, so I was working for the largest office landlord in Texas. I did that for a few years and then moved over to the development side, fortunately and unfortunately around 2007. So I had about one good year before the market crashed. Jonathan worked at JLL on the capital markets side, so he had a commercial real estate finance background. Aron was a CPA at
Before we all left our respective companies to concentrate on The Square Foot, Aron had been tasked with finding office space. He did what he would do with anything else, whether it was to buy a car or get a hotel room, which was to go online. He flat out couldn't find a public-facing portal that helped him understand what was available based on his specific needs. We thought, “Well, we want to start a tech company, and something like this doesn't really exist out there, or if it does exist, it's geared more toward helping brokers.” We wanted to build something that was geared primarily toward helping prospective tenants.
So we put together a comp report of everything that was out there in terms of commercial real estate technology. We studied the residential space extensively—websites like Redfin, Zillow, Trulia, StreetEasy—because we knew that residential was typically five to eight years ahead of commercial in terms of technology adoption. Out of all that, we came up with the concept of The Square Foot, an online commercial real estate platform that was tenant-facing.
GlobeSt.com: Although you drew inspiration from the residential side, you probably had to adapt some of the features of sites such as Redfin and Trulia, rather than just putting them into a commercial real estate context.
Lee: No question. Although there are some similarities, residential and commercial are completely different animals. We saw what these websites were doing, and at a high level we thought that we could apply this to commercial real estate, but we spent a couple of years figuring out how to do it. It involved studying how to draw traffic to a website and building a customer base, and extensively studying the infrastructure of landlords and landlord brokerages. We needed to understand how those organizations worked, not only on the leasing side but on the marketing side as well.
When we first launched in 2012, we had a different business model than we have today. We started off charging landlords a monthly subscription fee to give us their inventory, and then we would refer a prospective tenant directly to that building's leasing agent. But we found that tenants were coming back to us and asking us questions about the landlord, and landlords were coming back to us and asking questions about the tenants. We took all of that feedback from the supply and demand sides, and at the beginning of 2013, we pivoted our business model to be a platform that offered space search and brokerage solutions to prospective tenants all under one roof.
GlobeSt.com: What would lead a tenant to use The Square Foot rather than rely on a traditional broker?
Lee: It's a few things. Number one is on the client acquisition side. Traditional brokers are going to spend a lot of their time cold calling, prospecting for deals, networking and building relationships that way in the hopes that they can build a book of business over time. We don't have that as part of our model. Because we have an online platform and understand online marketing, about 80% of our clients are inbound. They come to us as soon as they're ready to start looking. Which is great: everybody wants a resource they can turn to 24/7. They don't want to have to wait for a broker to cold-call them, or reach out to a buddy who knows a broker and can refer them.
From there, we do have an online portal and people can run their own search and carry out their own at least initial discovery and market education. Once they do that, they can inquire with us, which brings them into the system. So we're using the technology in a way that traditional brokers haven't really had to do.
Once they come into our system, we have a dedicated team that pre-educates them, filling in any missing pieces of data that they may need, and pre-qualifies them before guiding them down the appropriate path based on what their needs are. As you can imagine, we have a lot of people that come onto our platform that haven't really done this before, so they're not sure what they need or what to expect.
If somebody is looking for a coworking facility, we can refer them to WeWork or another company like it. If they need an executive-suite environment but want more flexibility in term, we can refer them to a Regus or another executive suite provider. And once somebody is looking for space that would require a tenant rep to help them vet their options, submit LOIs and negotiate on their behalf, those needs are handed off to one of our brokers internally. We have our own internal database that our brokers use to keep their clients in front of the market. We also use technology to help them physically tour spaces; we have what we call our digital tour book that enables them to see all of the spaces that they're touring through an application on the website.
Those are the main ways that we differ from a traditional broker. Once the tenant has narrowed down their space options and submitting LOIs, we're going to do that in the same way that any broker would, because that's a matter of emailing documents to a landlord—typical back-and-forth negotiation. We would love to be able to add technology and streamline the later phases of the process; those are things we plan on doing longer term.
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