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Why Does #CRE Still Struggle With Startup Tenants?

startupspacepic1

Why is this still an issue?

In the last couple of weeks, I have been on the road. Chicago, Austin, San Antonio, San Francisco, Denver and back to Chicago again. All of those cities top almost every list of places that cradle, cuddle, and help startups thrive.

Ironically, when I am in those cities, I am talking to startup companies. Commercial Real Estate Startup companies. They exist to do one thing. Solve commercial real estate “problems.” You would think that they of all people would understand space. As in space to lease for their companies. For the most part, some do and do you know why? Most have a Broker as part of the founding team. A broker who has leased sold or developed space. That broker also brings with them a network. You know what I am talking about. That same one you have. Your contact database of GO TO PEOPLE. Contractors engineers architects communications and legal people. YOUR NETWORK to get the deal done. Seems pretty simple.

Then why do I get emails like the three below? I received one each of the emails in the last two weeks.

Now, before we dig in I purposely eliminated the names of the people who sent them. I do appreciate any and (some not so much) all questions and comments that I receive.

Also, this is not in any way trying to disparage that type of interaction or by any means “call out” the kind and professional people who do reach out. This is my way of trying to help. I said, “help” push commercial real estate forward.

-Duke,

Hope all is well. I lease [_______] in Downtown Dallas and signed 3 new tech tenants totaling 300,000 SF a year ago and then we built out a 15,0000 SF coworking lounge to try and obtain smaller tech and VC companies but we have been striking out.

Let me know if you can catch up over the phone this week or next, so I can get your thoughts and opinions on why we are struggling.

-Hello Duke,
 
Thanks for connecting with me on LinkedIn. I recently started following your blog, and I loved what you had to say about the CRE Industry. I was wondering if you were available to answer some questions either by phone or email sometime soon. The focus of these questions would be around some of the major pain points commercial brokers face when leasing smaller commercial spaces under 5,000 sqft. Also, I would be very interested in some of your ideas on to make this process of leasing smaller spaces easier and more efficient for brokers. I appreciate you taking the time to read this message, and I am a huge fan of the blog.
I replied with “what are your thoughts and questions?”
 
-Duke,
 
 I understand that brokers typically do not focus on these smaller spaces  (under ~5,000sqft) because these spaces can take just as much work as a smaller space for little compensation based on how brokers are compensated within the industry. However, with more and more startups emerging and the rise of coworking spaces I feel there is an opportunity in these smaller spaces.

Some questions I have are:

What are the major concerns brokers have when engaging in these smaller transaction?  Is it typically that it is not worth their own valuable time to bring a client through all the steps of leasing a space if the commission will be very small?

Or, is the primary concern that the information about these smaller spaces is less organized and less comprehensive than some of the larger spaces which makes doing smaller deals that much more difficult?

A lot of brokers don’t even give tenants looking for really small spaces the time of day or answer their phone calls.  What does this do to prospective tenants looking for smaller sqft spaces?  Does it discourage them or make their process that much harder to find a space?

In your view is this an area of CRE worth looking at for improvement in the process?

How are some of the ways you can see a startup having a better experience finding a small initial space?

I appreciate you taking the time to think through or answer some or all of these questions.  Hope you have a great weekend!
 
San Francisco knows.
Last week in SF and I had a quick tour of a five-story building with 180 startup companies under its roof. Yes, 180. Now this was not some brick walled rehab space. I was full blown purpose built with every bell and whistle you could think of. How many are going to need additional space? Not all will but what is the potential in that one building alone? Is it just too easy to see this in SF alone. Is the market so robust that it can only be done in SF? Yes, I understand the concept of demand.
It just can’t be San Francisco can it?
One hell of a lot!  
Guess what they do? Lease space. Commercial real estate space. All over the country. All over the world!
Wait, that’s what I thought you did. What’s your company worth?
They have figured it out and created a company worth $10 billion.
What were you doing while they figured out a way to “lease space?”
I need your help.
There are still some great questions that need to be answered.
What do you think?
Don’t be shy.
So I ask.
Why Does #CRE Still Struggle With Startup Tenants?
+1 Why did I not come up with the WeWork idea?
+1 What’s $10 billion anyway?
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