How tech is reshaping the CRE landscape
[{"id": "d2k5jpo", "text": "Franco, great article and an exciting time for Stefan and his team.", "replies": [{"id": "d2nxbtj", "text": "Thanks! I look forward to seeing create grow. If you know of any more exciting real estate tech companies please send them my way. I am always looking for ideas for other articles.", "replies": [], "depth": 2}], "depth": 1}, {"id": "d2l38ea", "text": "I have seen and heard similar rumblings for some time now and certainly would not argue that technology has made access to data much easier.  Of course as a result of this ease of access there will be changes to how any business is gong to be conducted.\n\nThat said, in my opinion the value of a commercial agent will still reside in their ability to interpret and utilize the data that is presented to them.  Will fly by night or one and done agents go by the wayside? Sure.  But I find it hard to not see the value that professional agents will bring to the table, either in the property search, negotiations, or facilitating the transaction.", "replies": [{"id": "d2ltsvi", "text": "Agreed. One of the biggest assets of a broker is exactly what this article brushed aside: We are middlemen! and that is beneficial to both sides. A property owner is going to be too attached to his building and over value it. A business owner is going to want the best rate and under value it. A middleman has (or should have) no bias and will be able to give the best opinion of value. \n\nNo matter how many print outs from loopnet the business owner shows the property owner claiming fair market value, that property owner is never going to trust the business owner's opinion. An experienced broker knows how to relay to the owner that his price is too high. And if that still does nothing to lower the price, a broker has so many tricks up their sleeve to recapture costs and net out the final amount so it is favorable to his client.\n\nFor instance, I just did a deal where my client wanted a certain building. The building was for lease by owner. The doctor that owned the building was the one who built it so he was very much attached to it. He would not budge on the price. I saved my client thousands just because the doctor had no clue about rent escalations. The doctor also had no clue about asking for first month's rent or deposit upon execution. No personal guaranties. An out clause that I slipped in. And I literally redlined every single clause regarding repair &amp; maintenance of building systems (HVAC, roof. etc. ) by the tenant. The doctor's CAM fee's were high and he couldn't find all the necessary statements to determine actual cost so I wrote in that after 6 months, all of the statements for utilities must be provided to the tenant and the CAM (single net) would change to that newly determined price, but could not go any higher than the original set amount, it could only go down. lol. \n\nSome tenant's and landlords can get along and hash things out themselves. But there will always be that unforeseen issue that pops up later that neither party wants to take care of. I love when this happens and the tenant comes to my listing and doesn't give two shits about negotiating because he just wants to sign on the dotted line and get away from his previous landlord. \n\nI love that commercial real estate revolves around the contract. Since we don't have to worry about consumer protections we can be creative and structure the deal however we want (with a few exceptions on state by state basis). As soon as the laws start changing to treat sophisticated entities (businesses) as consumers, I'm out. ", "replies": [{"id": "d2n1zz1", "text": "NeesonsAndWilly I agree that the agent still adds a lot of value to the commercial transaction. Commercial appraisers can be prohibitively expensive and the leases that give comps value are not public knowledge. \n \nPart of the problem is that the agent is stuck between a static real estate infrastructure and a very dynamic and unpredictable client. Lease structures haven't changed in recent memory, but modern companies grow from 3 employees to 30...only to be scaled back down to 10. \n\nWhen I wrote the article my intention was not to suggest that brokers will no be useful. Rather, it should be a call for change. Agents need to change with the times. The good ones already have. ", "replies": [{"id": "d2neg63", "text": "There is a major reason why the demise of residential agencies does not equal the demise of the CRE industry: Residential is purely sales. No residential agents are making a living off of leasing homes. A home buyer can use the sites to find properties and make a direct deal with the owner because they don't have to do any work. Escrow and Title companies handle everything for them, and the states (at least the one I live in) has so many laws and disclaimers that protect both parties in a residential deal because they are considered *consumers*. Also, in residential you are dealing with clients that are looking for their \"Dream Home\" and will go out and do the shopping on their own in that small little part of town they always wanted to live in. A Business owner doesn't have time for that so he calls us up with his requirements and we get to work finding him what he needs in a strategic location. Only one thing matters in CRE, the bottom line. \n\nCRE has been adapting since the 1900's. When the industry first began, it was mostly due to large companies no longer willing or able to afford their in-house real estate departments so they began outsourcing to freelancers that eventually made enough money and teamed up with other freelance brokers and thus the brokerage was invented. \n\nFor a long time (prior to the internet and good applications with easy UIs) large brokerages dominated the industry. Now small botique firms have almost just as much access to information.\n\nYou are absolutely correct that there are still dinosaurs in the industry doing things the hard way. Shit, my boss does everything on paper and still has a ridiculous amount of file cabinets with folders of deals from the 80's. There is a large age disparity in brokerages, 35-40 year old brokers are practically as rare as unicorns. But the new guys in my age bracket who grew up with windows 95 and google since toddlers, are in a great position to take over and thrive in the industry. I see all these new tech companies - I swear there's a new one every week - but they all have inherent flaws. Take Diggsy for instance. Pretty good idea, they realize the next generation will be looking to the computer for help locating a property because they don't know the first thing about real estate with the exception that it is probably something they will need if they want to be a \"legitimate\" business owner. So Diggsy skims a little bit off the top, but then what happens? That new business owner just made a business partner and a friend for life who they will call anytime another issue pops up regarding real estate. You really think that after they worked face to face with a broker they liked and trust they are going to go back to a faceless internet site to be matched up with a new random broker?\n\nI feel like I'm rambling on now, but I want to mention one more thing. In your article, the first thing you mentioned was that you tried to get a license because you wanted to save money on the commission. That is the definition of penny smart pound foolish. You probably wasted numerous hours studying for that test and spent quite a bit of money in the process. And what was the end result? I hope it worked out for you because when most people try doing things on their own to save a buck they wind up losing thousands (like the doctor in my original post). I'm not trying to be disrespectful in anyway, my own father is the worst as they come in regards to cheaping out on things. I'm just happy he gave me a good example of what not to do and I was able to realize at a young age that you let professionals do what they do best. A quick google search and reading a few books is going to get you nowhere near the level of expertise as someone who wakes up and does the same thing every single day of their entire working life. I remember I used to love when my friend's dad (who was also my baseball coach) would say, \"Know your role\". As a kid I thought it was funny because I thought he was saying it to mean shut up. As I grew up though I really took that saying to heart and started to realize what it meant. Nobody in this world can know everything or be an expert in all topics, so it's important to find something and do that one thing well, and when shit goes wrong on something you have no experience with, pay somebody to do it for you. There's too much opportunity cost and time at stake to try and learn to do something on your own and then find out later that the job was done incorrectly and now more time and money needs to be dumped into it. This is why I think the idea of the client being in control of the CRE industry is a farce. What I'm truly worried about are all the REIT and institutional investors that hold onto their properties long term and do their own in house leasing and sales. They are really starting to restrict the amount of properties held by private owners and the more they take over the percentage share of the product, the more the big firms will start taking back and reclaiming their dominance in the industry.\n\nP.S. If you take a look at that source you used for the avg. income of brokers, there is one market that stands out at having the lowest average, Hawaii. Why? Because they only do lease deals. Nobody can buy land in Hawaii because all of it is owned by native hawaiian families.... [The more you know](https://i.ytimg.com/vi/aTWPunzbjoo/maxresdefault.jpg).\n\nP.S.S. I don't know if you were aware, but the guy you responded to in the comment section of your article, Rod Santomassimo, wrote one the the best damn books on commercial real estate. Allen Buchanan is also a very well known broker too, his Tuesday Traffic Tips on youtube are Top Notch. I could not thank both of those guys enough as a young broker. You were blessed in your comments section by two of the CRE greats.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "d2rfl0l", "text": "Technology is much slower to replace brokers in Commercial Real Estate because the deals are often more complex and the comps are unclear compared to residential. How could land be redeveloped? What's the highest and best use in the current market? How will upcoming zoning changes impact things? What are market lease terms? None of these can be answered on zillow.\n\nHowever technology will continue to help brokers do a better job and maybe fewer of the best brokers can manage more properties or transactions as a result of technological efficiencies.", "replies": [{"id": "d2rrdwk", "text": "You are right, real estate is an art and a science. The art of the deal will always require a human hand. The problem is, the human doesn't have to be a broker, at least not in the way we use it the term today. Tech companies that can get to buyers or sellers first will be able to employ their human capital. I don't know about you, but I see more and more \"for sale by Redfin\" signs going up in my town.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "d2lgy7v", "text": "Came off like a veiled sales pitch.  ", "replies": [], "depth": 1}]