Previous Post
Tweet about this on TwitterShare on TumblrPin on PinterestShare on LinkedInShare on Google+Email this to someoneShare on Facebook
Read on Mobile

Commercial Real Estate Brokerage Will Collapse. This Is Exactly How It Will Happen.

large_110076905

They are out there now.

“Technology” companies.¬†Companies that provide “technology services.”

“Services” that you pay for to help you do deals.

They provide tools and marketing brokers need.

They aggregate create demand and generate leads.

They create lead generation via internet search and do lead vetting like Lending Tree does for mortgages.

Think about the residential side, it’s been a standard for years.

What’s coming next.

Technology and leads is what will be offered as the “fix”…….for now.

Lead generation and management of those leads just like residential.

They say they will be providing the technology at a lower or almost no cost.

Big questions.

Do brokerages invest in tech or tech development now?

Maybe maybe not. Most think not.

All of this technology is and will be provided by a 3rd party.

What happens when this “technology” is not branded by the brokerage?

Then there is no brand value.

What if they provided broker specific branding without the brokerage brand?

Does the brokerage value then become a commodity?

The answer is YES.

Guess how you are helping?

You are feeding the beast by giving away the data.

A simple fact is that the brokerages can’t stop this. Well they can, but.

The building owners are the ones that actually own the data. NOT the aggregators.

Oh and I say it for the 1000th time. Brokers not only give it away they are stupid enough to PAY to get it back.

What is the easy decision?

Pay for the best quality marketing technology and lead generation/management there is.

Or pay for a platform that provides none of the above and holds the precious (data) commodity hostage for a price that has no signs of going anywhere but up. Forever.

How can brokers/brokerages fight?

First is to maintain the knowledge that only a local broker has.

No one knows the brokers back yard better than they do.

But what about the ability to create a seamless transaction?

Is that not the brokers job?

What about a transaction that is written negotiated financed and closed online.

That by definition has and will become the clients/users “experience.”

It’s an experience that they are now used to. It also an experience that they demand.

That online “experience” is now being created by the “technology” companies.

What are you going to do to “own the experience” online and off?

You need have a better answer than the one you are thinking of now!

Is X becoming a brokerage?

I get asked this more now than ever before.

My answer has been “go ask them yourself.”

Think about it.

What if you had $10 million dollars and 25 people generating leads?

What would you do?

The smart answer from technology companies is “no we are not going to be a broker or competition.”

That’s what you want to hear right?

That should scare the shit right out of you.

And here is why.

What value is left for you to provide for the client?

They are getting people to sign up and give them information about where when and how much space they want and can afford.

They are qualifying the client.

They are the point of contact between the “owner of the data” and the transaction.

They are also able to “coach” them thru the transaction.

They are able to provide “services” around the transaction for the client.

They are also able to if they want to decide who can “service” the client and when that “service” is needed.

Ok stop. I know what’s in your brain. “THEY NEED TO HAVE A LICENSE.”

Step back for a minute. Do you think they give a shit about licensing and regulations?

What are the models they follow again? Do I really need to name them?

Why does a market place or a software marketing technology company need a license?

Take away that stupid argument and what happens?

Live in the now.

You are the only one that thinks a “license” matters. Today. Only you.

That’s all you have as a competitive advantage?

( As a quick side. I explained the licensing and continuing education for brokers and brokerages to some “tech” people. They laughed. They laughed hard.)

All they need to do is collect the money.

Collect the money from whatever piece of the transaction the want.

So let’s say they do decide to slip into your kitchen.

What if they did become a brokerage?

What stops them?

Nothing.

They are doing it all.

Would you join them?

“No way” you say. “Hell just out of principle and that’s just tech bullshit.”

Really?

They are generating and creating leads doing deals and making money all the way down the VALUE CHAIN.

Do your babies need some shoes?

What if they decided to “align” with a major world-wide brokerage or two or three or ten?

Does it matter what “business model” they choose?

Why worry about data.? You don’t do you? It’s now a commodity anyway.

Worry about the value chain of the transaction.

All of these “tech” companies are using the data (as a commodity) to disrupt the exact thing you value the most.

The actual deals.

Here is how you are helping them even more.

You don’t invest in technology.

You don’t invest in technology that helps you market

You don’t invest in technology that helps you generate and manage leads.

You don’t invest in technology that manages the client thru the entire transaction.

You don’t invest in technology that will create any value at all throughout the entire value chain.

WAIT! WHAT?

Did you just read the last 5 lines?

And of course I can hear you saying “Duke what in the hell are you saying? Did you not just spend five minutes of my life telling me that technology and the companies using it are basically killing me?”

Yes, I did.

But.

Commercial Real Estate Brokerage Will Collapse. This Is Exactly How It Will Happen.

 

+1 Hey Josh….Chill.

 

 

photo credit: <a href=”https://www.flickr.com/photos/pgoyette/110076905/”>paul goyette</a> via <a href=”http://photopin.com”>photopin</a> <a href=”http://creativecommons.org/licenses/by-nc-sa/2.0/”>cc</a>

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Next Post

Written by

  • Andrew Bermudez

    Hey Duke, more people should blog like you. The way you break up text makes it super easy to read. (CRE brokers take note).

    Anyway. Completely agree with except that’s not the way the world actually works. Brokers bring a lot of value. Tech vs flesh, flesh always wins in the advisory business. Think about it, do I want to email support@abcbrokerage.com, or do I wanna talk to an expert whenever I have an issue?

    I hate companies that have these types of systems. Easy for them, hard for the customer. Yes, I am one of those tech companies that drive new customers to brokers, but we work in unison. Bringing all our diverse talents to bring catchy harmony together. Without a guitarist, no bassist has a band.

  • CREOutsider

    I get that “tech” people don’t care about licensing, but they should – especially if they’re providing advice or acting, even electronically, as a representative or facilitating a party in a real estate transaction. All the residential sites – Zillow, Redfin, ZipRealty and even FSBO sites – are all licensed/work with licensed agents.

    Most state laws prohibit unlicensed individuals from soliciting, providing advice or services or representing any party in a real estate transaction. In NY, because the state is so litigious, most brokerages here won’t let non-licensed admin staff contact owners to update listings or provide listing info to inbound callers. I suspect that’s why CoStar bugs agents first and doesn’t call owners directly if they can avoid it.

    Lead gen is another story. Insurance and the financial services industries have been electronically qualifying prospects for years. The qualifying platforms, though, are either run by an insurance/financial services company or an approved third party/affiliate type program. And leads are handed off to licensed agents/institutions.

    All that said, it’s conceivable that someone could create a fully automated real estate transaction site without licensing of any kind and make the user agree that they are acting as their own agent and to absolve the site owners of liability. There’s certainly some people who would agree to that. Just hope no one sues.

  • David Music

    The mistake everyone is making is thinking that this is an advisory business. It’s not. Let’s use the Uber example – taxis are regulated but did that stop Uber? Hell no! It did convince local regulators that their regulations were stupid and needed to change. What kind of advise are most clients looking for? Can I hire the right people, does it meet my business needs (retail counts, similar businesses nearby, competitors nearby), what do the financials look like, am I getting a good deal? All of that can be automated. Will it cost clients some more? Sure, but it also makes their life easier (in their minds).

    We get our value. But we also know that finding real estate is a pain in the ass. Our goal should be to simplify the client experience – because that’s what technology does. They don’t want 10 sales meetings before they choose someone, they want to go to the right place the first time. They don’t want to be told how hard the process is, they want it to be done right the first time and be made to look like superstars.

    Duke is exactly on point – we aren’t fighting people who understand our value proposition. We are fighting people seeking to make their life easier because a buck or two extra on the deal is worth it for simplicity and an easy outcome. Will they need someone to walk them around a building – yes, but guarantee that person is a hand selected, salaried partner on the website focused on customer service and not closing a deal. Building owners will love this too because it’s less negotiation and possibly more money for them (until the tech gets good enough to have market rates based on an algorithm).

  • Duke Long

    David,
    There you go. Brilliant.

  • Thanks Duke. One of the biggest mistakes brokers make is thinking clients need help finding sites. Sure, national retailers who are willing to sign leases in new developments need site selection. So do most other larger users of space. Most clients, especially the small users, need advisory services. Most brokers don’t return calls, let alone provide tenant representation to small users. I’m providing more and more advisory services hourly for smaller users that find their own sites, but need help negotiating and avoiding the minefields. Brokers should embrace the technology that can provide leads and find a way to stand out from crowd and become an authority in their space. Lead gen sites like Andrew’s will partner with licensed agents or just get licensed. There are thousands of brokers throughout the country willing to lend their license to a tech company for a royalty. Just look at the 100% commission residential brokers. They have hundreds of agents paying a fee to hang a license. The brokerage model is broken. As an agent, its time to evaluate who provides more value, your broker or a tech company that makes it easier or more profitable for your to do business.

  • Hello Duke,
    Which lead generation service do you recommend for someone like me? I am a tenant representation commercial real estate broker, I specialize in office space in the western suburbs of Chicago. Thanks!

  • TaiwanesefreedomMerica

    Good Article Duke. I’m partnering with my dad in brokerage right now and he has been telling me the same thing. In fact a lot of brokers often give false information to technology sites such as Costar for this reason. Our business model has been adapted well to this issue so far. We specialize in a unique niche that has not been covered well by technology and is mostly in off-market deals. Think of property types such as self-storage were owners do not want to mass market that their property is for sale (for fear their manager, who often will be fired will find out).

  • Thanks for the article Duke! As a tenant rep broker, I never give my info to CoStar. http://goldengroupcre.com/

  • Rod Santomassimo

    Duke, great article. All CRE brokers should consider this required reading.

  • Janice Sangster-Phalen

    Redfin, the discount brokerage commission, well funded, tech real estate company with a feed from the MLS. Walk into an open house with your Redfin app open and ask the hosting agent how much will you discount the commission to have him/her put in an offer. Who do you think gets the deal? The discount or the best offer? Is Redfin losing or making money for investors? Zillow and Trulia merged, why? CoStar bought Loopnet, has this really worked to benefit the brokers? NO! Benefit the building owners? Benefit the shareholders? Benefit who???? If CoStar prides itself on verified data, it can’t keep up with contacting brokers that don’t want to share confidential information, or just withholding information.