You will find an office as easily as a hotel. Technology replaces brokers and reduces costs
– In the commercial real estate market, there is more and more talk of one common bag of incentives – financial and non-financial, both for an agent and a tenant. At the end of the transaction process, someone always gets more from this bag. So far, real estate agents have scooped most in the form of commissions. Currently, the trend is for a tenant to get more at the expense of a broker’s commission – says Konrad Okła, the creator of the Realko24 platform, which connects tenants with landlords on the commercial real estate market.
“A tenant does not pay a commission” is a myth
A commission for a real estate agent working for one of the global real estate companies is usually between 5 to 10 percent of the contract value. Let’s see on an example how this translates into finances.
The owner of an office building in the center of Warsaw wants to rent 2 thousand square meters of area to one of the corporations present on the market. The monthly rate per square meter in this building is EUR 20. Thus, the rent that the company will pay costs EUR 40,000. If the contract is concluded for five years, its value is EUR 2.4 million. With a range of 5-10 percent, the commission on this contract for a broker will be EUR120,000-240,000 and, in theory, will have to be paid in full by the property owner.
– It is obvious that landlords want to compensate part of this expense, and this affects tenants. The cost of the commission incurred by a building owner is usually included in the rent, although no one talks about it loudly, and most tenants do not even realize it. Within a few years, a landlord recovers all or a significant part of the commission that he had to pay the real estate company he hired – explains Konrad Okła, who himself worked as a broker on the commercial real estate market for years.
– After all, a landlord does not care if he pays a higher commission to a broker or gives additional rent exemptions to a tenant. What really counts for the landlord is the account balance. Therefore, the higher the commission, the less incentives a tenant can be offered – he explains.
The creator of Realko24 emphasizes that if the transaction fee was lower, it would be beneficial for both landlords and tenants. The former would not have to artificially inflate the rent and thus would have a better offer for tenants. Tenants could receive lower rent or other incentives, for example the first two months for free or additional office equipment in the form of projectors, screens, modern glazing, free catering, etc.
Technology serving tenants and landlords
In the era of new technologies, a broker is not an essential part of transaction on the commercial real estate market. Tenants will find a hotel they need using Booking.com. Thanks to Airbnb, they can easily search and book an apartment for a short period. Similarly, with the help of the online platform, tenants can find an office, warehouse or retail space with parameters that interest them, without leaving home.
Importantly, modern technology, by replacing a broker in the rental process, allows one to significantly reduce transaction costs. This in turn means less expense for a landlord and better conditions for a tenant.
– Times are changing and the crust that the commercial real estate market has grown over decades is beginning to crumble, also thanks to the trend popular in recent years, the so-called PropTech. The largest landlords note the need to cut commission expenses. Competition is increasing, capitalization rates are decreasing, money is counted more carefully. Rental technology has become a necessity for those who want to offer tenants more attractive conditions, including lower rent – emphasizes Konrad Okła.