How CRE Tech can transform a deal-driven business into an interpretive advisory
A broker receives a call from a prospective client who needs to relocate and expand his office. This is the typical discussion:
[after 10 minutes of weather, kids soccer leagues, private schools, alma-maters, the big games, and superfluous market talk]
Client: “So we need to expand our office and the building we’re in won’t accommodate our expansion. The building we’re in is okay, but we’ve pretty much come to the conclusion we should consider relocating and start fresh with a better configured office since our lease is coming up.
Broker: “That’s great, how much space are you in now?
Client: “about 4,500 square feet”.
Broker: “okay. About how much do you think you’ll need?”
Client: “Well, we’re bringing on some new people, so we figure roughly 6,000 square feet.”
Broker: “You’re in the Heights District now, where do you guys think you want to be?
Client: “If I had my choice we’d go north, but Bob’s home is on the west side and so are a few other key people. We’d like to look in the west loop area. What do you think of that area, are rates fairly comparable to where we are now?
Broker: “They’re a bit higher, but that market’s pretty tight. There’s been some consolidation though lately with the energy collapse and I know of some larger pieces we could take a look at for sublease. Plus there’s the ABC Tower that should be available in the next couple of months. What’s your timing?
Client: “Our lease expires in six months, so move-in around the 1st of March would be optimal.”
Broker: “Ok, tell me the configuration you going to need, how many private offices, exec offices, conference room, etc.”
Client: “We’ll need roughly 11 smaller privates, 4 larger exec-type offices, an open space for about 10-12 cubes, a conference room, a break room, a server room, a small reception, oh and some space for file storage would probably be important too.”
Broker: “And the conference room needs to seat what, about 10-12- more?
Client: “Oh probably no more than 10.”
Broker: “And the reception, seat 2-4?
Client: “Yeah, that sounds about right.
Broker: “What about parking? How many covered-reserved vs just surface spaces do you think you’ll need?
Client: “Four covered and the rest, say about 20 surface. Does all this sound like something you think you can find in that west loop area?”
Broker: “Sure, we’ll find something for you. Well, I think I have what I need to get started. I’ll put together some properties that have the availability and get that over to you in the next couple of days. Are you available to tour next week sometime?”
Client: “Sure, just give us a couple days’ notice and we’ll make ourselves available. Anything else you need from me?”
Broker: “No, I think I have what I need to get started. I will need to get a letter of representation signed. I’ll email that over to you and if you’ll just sign and return to me, I think we’ll be good to go.”
And so the transactional CRE process begins. This could just as well been the interaction between a waiter and a patron in a restaurant. “I’ll have the ribeye.” “How would you like that cooked?”
We go through this process time after time and even though the technology and tools of the trade are vastly improved, the brokerage practice is still largely a transactional business.
Let’s compare the difference between transactional and consultative. Transactional is executing an order. It is a mindset that inherently focuses on getting more “orders. akin to the foodservice and retail business. Oh sure, there is a concern with the quality of the service, but mainly to the extent that it promotes more orders. Consultative on the other hand is about asking the question “why, not just what, where and when. This mindset doesn’t assume everyone is an expert, it assumes the opposite and places value on the expertise, not the effort. This is the future of brokerage. Technology is both causing this shift and facilitating its transition, for those willing to embrace it.
Bottom line; it’s snowing, it’s been snowing for over a decade, and the furry rodents are feasting on the dinosaurs unwilling to adapt to the technology climate. The choice is clear, pretend we don’t need to change or get busy embracing CRE tech to thrive in a new world. It has taken longer than even I expected, but the transactional ways of traditional brokerage are going to die.
I have met and worked with some amazing brokers in my career who truly are advisors, not just facilitators connecting principals. I can’t tell you how many times I’ve read, heard (and sometimes been a party to acknowledging) the idea that the CRE industry just doesn’t “get it. Some do and some don’t, what’s new!? Part of the problem lies in the fact that our professional culture has long fostered the false idea that CRE is just common sense, thus enabling every person with a pulse to believe they’re an expert. If you’ve been in the business more than a week, you’ve experienced this person. They don’t need your counsel, just the legwork to free them up to perform their more sophisticated profession. Enough said on this, but suffice it to say these people exist and they are no excuse to remain transactional. If we want to be viewed as more than a CRE concierge, we need to start executing our services through the lens of consultancy and become experts in analyzing and interpreting information, not just gathering it. We need to be in the business of helping clients make decisions and not just supplying the options.
The primary mistake I see brokers make is investing in technology that’s all about them and not their clients. They adopt technology they perceive as making their lives easier, appearing more sophisticated, and focuses on generating more clients. Usually this centers around improved CRM, marketing/publishing, and deal tracking (aka commission tracking). These tools are all great, but do nothing to enhance their knowledge-value to the client. Even data platforms like CoStar, RealMassive, and Xceligent, and hybrids like VTS and Hightower are misunderstood as time-savers rather than avenues to enhance consultative practices.
Speaking of data, when is the last time you studied and compared occupancy and absorption rates in your market? Do you know what caused the fluctuations (and I mean what really caused them)? Do you know the breakdown of tenant mix in your market? These are just a few of the simple and obvious questions, and, yes, you can certainly get a semblance of the answers from a Costar report. But what about trends that are invisible to human intuition but screaming for attention when the right data sets are combined. We need integrated applications with the flexibility and horsepower to generate these types of creative analyses. But to achieve this we must demand that data providers like Costar free up the data to be used in any software and in any way we dream up. If they won’t, then we need to support with our money and time the emerging data providers who will. Accurate market data is essential to becoming consultative. It’s the raw materials, what we do with it will ultimately determine the losers and winners.
Then there’s the big boys, firms like JLL, CBRE and C&W, who have taken immense steps in utilizing technology to position themselves as sophisticated consultants. They have the leadership and the budgets to invest in CRE tech, attend conferences and promote their advisory capabilities. The only problem is that most of these capabilities and leadership sit at the top level of their corporate structure. I’m not too sure how much of this tech and culture evolution has affected the frontline brokers on the streets. From where I sit, I still see brokerage-as-usual even from the large firms.
Technology is the manifestation of innovation, but it’s just a tool. We have to use the tools in ways that improve our abilities and processes. Brokers should be asking “what do my clients really need that would add value to their business, to their processes, to their real estate?” and invest in technologies that support the answer. If you’re primarily a product broker, then streamlined marketing/publishing tools might be a great adoption. On the other hand, if you’re primarily a tenant advocate then areas like market intelligence, lease administration, analysis and process management is probably a good idea.
Industry specialization is another area of innovation that few service firms have adopted. For some reason, we as brokers continually label and define our practices based on CRE property types like office, retail, industrial, land, multifamily, investment, etc. I have been advocating for nearly twenty years to abandon this convention and structure our firms based on industries such as consumer goods, energy, financial services, etc. Imagine the differentiating power of coming to a new business presentation and demonstrating your knowledge of their industry’s status, challenges, growth patterns, legal issues and competitive wins and pressures. You could retire the 5-inch-thick binders full of broker bios, case studies showing how money you saved past clients and the all-important scatter-gram of Fortune 100 companies someone in your firm did a deal with 10 years ago. You could say something like “I’m assuming everyone in this room knows I’ve done millions of square feet of transactions and I’m an expert in CRE. Instead of talking about me, let’s talk about you, your industry and how I can translate my knowledge into achieving your real estate objectives.” But wait, I’m not done. What if you tied your process together through the demonstration of well-placed technology and automation directed to their benefit?
Consultative and strategic go hand in hand. Use technology to augment the speed and transparency of your transactions, but don’t stop there. Use it to expand you and your firm’s intelligence, capabilities and analyses to a much higher level. We need to stop relying solely on subpar, spoon-fed data by CoStar and expand our reach by investing in applications that allow the freedom to organize and evaluate the data in creative ways. Stop looking to tech firms to educate you on your business. The key is getting engaged and taking the time to think, ponder, imagine, have fun. Today there are literally hundreds of tech tools dedicated to the smallest CRE functions all the way up to fully integrated platforms. The technology is out there, we as brokers just need to identify where automation is needed and proactively seek it out.
I speak at a lot of broker conferences and my unifying theme is always centered on using CRE tech innovation and tools to become advisors and stop focusing on the transaction. For every engaged look I get, there are 20 blank stares. Some think that I’m promoting technology over relationships. Others don’t want to spend the money. Then there’s the group that just won’t accept that technology is going to affect their market, change their client’s behavior, or it’s all a bunch of techno hype that is years down the road. I usually tell them in the kindest way possible, the world isn’t demanding they change their ways, it’s already moved on.
I’ve read a lot of articles lately written by industry thought-leaders espousing how CRE tech companies have failed the CRE industry. I disagree. Collectively we as an industry are failing ourselves. It’s snowing. Technology is not a threat to change brokerage, it’s a guarantee. The bad news is those who don’t adapt will go extinct. The good news is those who do will not only be more successful, but infinitely better at their profession.