How will technology impact commercial brokerage now?
Let’s talk about tech’s ultimate impact on the commercial brokerage sector.
The first dialogue in this sector centered on how tech would replace the broker—42Floors was meant to upend commercial real estate. I knew it would never happen. Brokers were, and are, too entrenched. These decisions are simply too important to trust to a pure technology solution. But that doesn’t mean the industry will remain static. I knew it was a long shot, but at least 42Floors set out to challenge the industry norm. Knotel’s recent acquisition of 42Floors (and the sheer scope of solutions WeWork, Knotel, Industrious, and others offer) is a harbinger of the tenants-first approach changing norms across the commercial brokerage sector.
These platforms have received millions in funding…
Tech-enabled online platforms putting the tenant first and brokers second—Truss, TenantBase and SquareFoot, to name three—received millions in funding. Tenants expect a fast, seamless experience from start to finish—they want powerful search capabilities, a transparent brokerage process, and on-demand flexibility at every stage.
The Automation and Standardization of Smaller Transactions
Calling all small tenants!
Before technology, new and inexperienced real estate brokers cut their teeth by calling on small tenants. Targeting smaller tenants was a training ground rather than a business strategy. Today, online lead generation and data analysis has commoditized the needs of small tenants and there are new ways to profitably focus on this market segment.
Capitalizing on SEO…
Similar to how residential agents use SEO and online lead generation through MLS listing syndication, these new brokerage platforms are capitalizing on the SEO opportunities of aggregated and automated listings. This new approach has eliminated the biggest time investment required for servicing small tenants: prospecting for new business. For the Trusses, TenantBases and SquareFoots out there, tenants, particularly smaller ones, will flock to the high level of service offered by these seamless CRE platforms.
Leveraging technology to make smaller transactions more SCALABLE
Using automated tech companies offers small tenants unparalleled cost-saving flexibility through standardized forms, automated processes, and low-risk leases. Both sides are winning here. While small tenants and short-term leases were once the bane of a real estate broker’s existence, these firms are leveraging technology in a way that makes smaller transactions more scalable.
This is where Compass enters the picture.
Once you see what’s happening here, it’s impossible to look away. Compass leapt from the starting gate, raising more money than any residential real estate brokerage had before it ($800 million raised to date). Its well-packaged and well-shined brokerage offerings caused the residential industry to take note. Two months ago, Compass nabbed Paragon Real Estate Group out of San Francisco, and on the heels of having just acquired Pacific Union (its largest acquisition to date), Compass is hiring like crazy (I heard its is aiming for 300 brokers in the near term!).
Now, Compass has identified commercial as an area of opportunity and is onboarding a strong team capable of building leasing and advisory services, led by Robin Abrams of Eastern Consolidated. It was only a matter of time before a well-capitalized and technologically equipped entrant from residential married its new technologies and industry prowess to make a play in the commercial sector. Astute brokers will take heed: There’s seemingly no end to Compass’ deep pockets, nor its eye popping growth.
Get smarter and leaner…sounds nice right?
Technology will increasingly enable brokerage firms to eliminate manual tasks and get smarter and leaner. Top brokers will thrive—there will always be a need for tenant representation brokers to help large businesses safely negotiate expensive long-term leases—but the middle and lower ranks will see significant change, even in the near term.