June 3, 2019
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Magazine

Stories of a commercial real estate agent, pt. 2.

This is the second part of the conversation with a former commercial real estate agent who decided to share his professional experience. He talks about uncomfortable industry facts that hardly anyone is aware of – and they should be known to both tenants and landlords.

What do you think makes the commercial real estate market particularly vulnerable to abuses?

Wherever there is a lot of cash and jumps in earnings, there are also abuses. A lot of entities count on luck and fast, high profit, instead of focusing on real work and adding value. Fraud also occurs because people simply do not know how this market works.

And how does it work? What especially draws your attention?

From the agent’s point of view, I can say that it is a very lucrative market – but for a few. It is profitable, but only in leaps that take place once in a while. Often someone does not make money for months, and then he gets a deal of the year. Even in large agencies there are people who for a few years are working for a ridiculously low basic salary, and, at the same time, they wear suits worth 10,000. Unfortunately, it must be said directly that leaps in earnings do not facilitate work when it comes to customer loyalty and professional diligence. Most brokers will go for options that are the most lucrative for them, and not necessarily the best for the client.

So the customer will sometimes be tempted to a more expensive option, which is not necessary needed by him…

There is no need to hide that various strategies are used to make the client rent the areas on which you earn the most. The whole atmosphere is created: conference rooms, elegant decor, catering …

And where do these differences in commissions come from? Probably, customers are not usually aware that a broker, who is supposed to be their ally, on one location can earn twice as much as on another, even though they are very similar to each other.

It is due to fact that one developer has to rent faster, and the other can do it slower. One is richer, and the other is poorer. One has a larger budget for brokering, and the other has a smaller budget. Hence, there are differences. And it is true that customers are usually unaware of them. In the professional diligence clauses of brokers, it is said that the commission should be transparent, that is, the client should be informed about it. In practice, this is very rarely happening, and tenants tempted with the slogan “the tenant does not pay commissions” mistakenly think that the topic of commission does not concern them and they do not have to be interested in it. Most consider themselves winners if they do not pay commissions – at the same time, they do not realize that brokering affects the cost of the entire rental process and must be reflected in the rent, which will be paid by them…

So what would you advise such a tenant?

First of all, to ask from whom and how much this broker takes. What rate are you paid by a specific landlord? What do you recommend and what commission do you get from it? The tenant should demand the right to inspect the agency agreements, having this guaranteed in their cooperation. It would be perfect if the broker had an equal commission with each landlord, but it just does not happen. Only technology begins to introduce this equality in the commercial real estate market, it guarantees a certain objectivity. In the world of brokerage, money is often more important than honest judgment.

Source: Realko24