How Tenant-Only Broker Representation Will Shape the Future of Real Estate. Guest Post Michael Kushner.

How Tenant-Only Broker Representation Will Shape the Future of Real Estate. Guest Post Michael Kushner.

How Tenant-Only Broker Representation Will Shape the Future of Real Estate. 

Tenant-only broker representation is quickly growing in popularity and moving into the mainstream of real estate. Now more than ever, people looking for space realize they need a broker to solely represent their interests. It doesn’t take much more proof than to examine the success of the two premier exclusive tenant rep firms that are now part of multi-billion dollar companies. The Staubach Company, founded by Roger Staubach who pioneered the specialty of tenant representation, was acquired by Jones Lang LaSalle (JLL) and did $6 billion in revenue in 2015.

Studley, another firm offering exclusive tenant representation, was acquired by Savills, a global real estate powerhouse that did £1,283.5 million in revenue in 2015. If this trend continues, and I expect it will, other brokerage firms will need to adjust their practices to provide what clients want – fair and exclusive representation. Here is how I predict tenant representation to shape the future of real estate.

Technology will change the role of a tenant representative, but not replace it.

With technology making it easier than ever for potential tenants and buyers to find available properties, the future role of a tenant representative will be less about helping someone find space. Rather, tenant representatives will be sought out to provide advice, negotiate and exclusively represent the interests of the tenant/buyer.

Successful tenant representatives will use technology to streamline and automate the ways in which they research properties. This will allow them more time to reinvest in providing clients with their expertise and non-conflicting representation.

Large brokerage firms will need to “pick a side.”

In November 2016, the California Supreme Court upheld a lower court ruling that a listing broker had a fiduciary responsibility to both the buyer and the seller in a “dual agency” transaction. This case dealt with the 2007 sale of a Los Angeles home that was marketed as 15,000 square feet, but in reality was 11,000 square feet. The buyer reasonably felt like the brokerage company had pulled a fast one on him, especially since the house was both listed and sold by Coldwell Banker.

This court decision has potentially far-reaching impact on how commercial and residential real estate brokerages do business. While some may be able to continue doing business as usual and make their disclosures a little more apparent, the large brokerage firms may find it more difficult to do that and still be able to adequately represent both sides of a transaction. Essentially, large brokerage firms will need to pick a side. Will they represent the buyers or the sellers?

I predict we will see more real estate brokers choose to exclusively represent one side or the other so that they don’t risk the appearance of (or real) conflict of interest that just might result in a costly court battle.

Clients will get smart about seeking out exclusive representation.

Potential buyers and tenants are getting smarter about bringing their own representation to the table. Because of recent news stories and court cases, like the one mentioned above, light is finally being shed on the questionable practices of brokerage firms that represent both sides of a real estate deal. In nearly any other industry, this conflict of interest would never fly. Finally, real estate is catching up and buyers and tenants are seeking out exclusive representation to ensure a fair deal.

For many reasons, the growth in tenant-only broker representation is a good thing. It means tenants and buyers are getting equal representation in real estate transactions. It means companies are recognizing the conflict of interest in representing both sides and making changes to offer better transparency and disclosure clients. Finally, the growth in tenant-only broker representation means real estate professionals can and should specialize. People don’t want a Jack of All Trades, they want an expert who exclusively represents one side of a deal.

How Tenant-Only Broker Representation Will Shape the Future of Real Estate.

 

Michael Kushner

  • Boxer Property

    Great guest post, Duke. Also interesting to see how CRE tech is evolving as more and more firms start providing tenant-only rep services.

  • Boxer Property

    Great guest post, Duke. Also interesting to see how CRE tech is evolving as more and more firms start providing tenant-only rep services.

  • Nice article. The California case is interesting to watch. While acknowledging this potential for conflict is in grained in SVN’s philosophy, we need to educate owners (as well as the brokerage community) on how transparency is in everyone’s best interest.

  • Nice article. The California case is interesting to watch. While acknowledging this potential for conflict is in grained in SVN’s philosophy, we need to educate owners (as well as the brokerage community) on how transparency is in everyone’s best interest.

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