No one ever got fired for buying IBM. That was the saying to justify buying PCs from IBM in the late 1980s. The same could be said for Xerox and of the Big 8 accounting firms, goodness, I’m dating myself bigly!! What does this have to do with negotiating office and warehouse leases? Learn all this and more on today’s podcast.
“Back in the day” – gotta love it when a pod starts with that line, right? But truly, back in the 80s the joke was that an employee would never get fired if they hired one of the bigs to do internal work – like hiring Xerox for your copier needs. Buying IBM computers. Or hiring one of the Big 8 accounting firms. But do you still think that rings true today?
What’s funny about that is that IBM doesn’t even make computers anymore and there aren’t 8 giant accounting firms anymore either. But, yes, I absolutely think this is still true. People that work for large corporations who make decisions about what consultant to hire or product to buy for sure thinks about the perceived risk of hiring or buying the wrong one. If it goes bad for some reason, can they be criticized for using the wrong one? What’s the safe decision? And are we seeing this in commercial real estate?
We absolutely are seeing this in commercial real estate. I know a guy who quit using the independent real estate advisor for his company when it grew bigger than what he thought the independent guy could handle. Was he right? A most emphatic NO! I know the company he quit using and the one he hired. He thought the biggie could provide better information on comparables and that the landlord would give them a better deal because they were big. Both assumptions are false. I’m totally convinced he would have been in better hands with the boutique. I’ve felt this way for a long time and let me tell you why.
All the big shops have excellent CRE professionals and we do business with a lot of them. But there are a few reasons why I think a boutique firm is a better way to go. Boutiques aren’t full service. Lots of people talk about how they are full service as if that’s a good thing. But it’s not. Why? Mainly because of conflicts of interest. When I was an asset manager and we listed a building for sale, the details of our leases (we called it the rent roll) mysteriously ended up in the hands of the tenant rep group of the listing company. And when I was outsourcing our leasing to the asset services divisions, I was told that they would put a tenant rep on my account because they know deals coming down the pike before anyone else and I’d get a crack at them before other landlords.
Another reason is the experience of the person actually handling the assignment. Let’s say a company with 25 locations in the US hired one of the biggies. They will be assigned an account manager to be their primary contact. That person works with all the agents in the various cities to get the deal done. But the individuals in each of those cities are often junior agents who aren’t that experienced. In a boutique shop, all the work will be handled by a highly experienced agent. If it’s in the client’s best interest, they will partner with the best person in the local market to help with the transaction – they aren’t required to use someone in the same company. This concept really rings true for me-knowing someone is in charge of my account who is highly experienced and the buck stops with them – regardless of what name is on their business card – would give me a greater confidence than just having a big company name.
In my prior life working with landlords, we hired investment sale brokers to sell our properties. Our listing agreements were specific to the individual and said that if that individual moved to another company, our business went with them. We did that because we were hiring the experience and the relationships of that individual, not the company. That’s what was going to get our building sold at a good price.
Most of the independent brokers I know once worked for one of the biggies. I often ask them if they miss it. The answer is always no. I also ask if there is anything that the big companies did for their clients that an independent can’t go – again, the answer was no. I’ve mentioned before on this podcast that after 9 years on my own as a corporate real estate advisor I joined a regional firm because I had always wondered about that question – what are they doing for their clients that I’m not doing. I quickly learned the answer was nothing.
So, the moral of the story is to use an independent boutique brokerage company – but only if you want to know your agent has no conflicts of interest and is highly experienced.
Bob Gibbons is a Real Estate Advisor & Tenant Advocate (also known as a tenant rep) with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.