The commercial real estate industry (CRE) has changed significantly since the turn of the century and as it continues to advance the industry and its demands change as it adapts. What will the role of brokers in CRE hold for the future?
It used to be common for a brokerage to have only 2 or 3 PC’s for the whole office and for the company to have 1 generic email address with no active website. Systems were basic, stock records with landlord and tenant details were kept on excel spreadsheets, printed out and carried in a flip folder. Landlords were constantly contacted to confirm availability of properties and the details relating to the properties. Agents spent most of their time in their allocated areas building relationships with landlords and subsequently looking for potential tenants and purchasers. Marketing consisted predominantly with signage, large boards on specific properties, and smaller corex boards for general branding and to show presence in an area. Print ads and pamphlets were also used in advertising.
Only residential properties were marketed online at this stage, mainly via property portals (Property 24). Private Property was exactly that, a portal for homeowners to market their properties directly to buyers online. Residential agencies soon started building their own branded websites but applying this to commercial agencies was far more complicated because the sites were all based on residential fields and specs, in fact even today a lot of them still are. There wasn’t the need to focus on SEO or Google Adwords which would later become such a necessity.
Offers were completed by hand and signed on site and usually faxed or hand delivered to sellers and landlords. Fax machines were an integral part of the business, offers could be sent and returned by fax, which were also an important marketing tool. Weekly ‘fax shots’ were done to areas marketing 1 or 2 specific properties within an area in order to raise interest. Addresses weren’t used in marketing and only the basic specs were given, if you wanted more info or to view the property then you had to contact the broker.
Brokers were gatekeepers to information, if you wanted to lease or buy a property then you spoke to a broker. They knew what was available, becoming available, achievable rentals, sales prices, cap rates, what was happening in specific areas, and even in the industry in general. They had the relationships with the funds as well as the private owners and could access any info as needed.
Fast forward to today. The basics of brokering remain the same. Focusing and specialising in areas, holding key knowledge relating to property and owners, marketing properties and brokering deals between clients. However due to technology, or ‘proptech’, data is far more readily available and accessible. The internet is constantly being fed data via landlords, brokers and developers and clients have access to this not only on property sites and portals but via social media and business networks. Properties are marketed aggressively and comprehensively online via agency websites as well as directly via landlords on their own websites and on multiple property portals and online classifieds. Addresses are openly displayed and clients have easy access to all the technical property specifications at their fingertips. Applications like Google Earth give the user the ability to view properties online with aerial and 3D views. Virtual tours also give the client the ability to view a property thoroughly without leaving their PC. Never has the client been more well informed and never have they had such easy access to property related data as they do now.
As a broker, just having the info is not enough of a value add to a client anymore. They can get the info easily. Brokers need to have the experience and knowledge and be able to apply that experience and knowledge in a valuable and relevant way, a way that can help a client make an informed decision on which properties may be right and in which areas to look. E.g., Knowing that the average achievable rental in Jet Park for instance is R55/m² doesn’t mean that a property can’t achieve R65/m², and why it could potentially achieve that rental rate. Knowing that vacancy rates in Linbro Park are low doesn’t necessarily mean that if you build a 10 000 m² warehouse it will be let in 3 months. What type of occupiers are in the area, what percentage are tenants as opposed to owner occupiers? What is the demand like for distribution centres as opposed to mini units? Which areas are new occupiers moving from? What are the trends in the industry? Why are warehouses being let far quicker than factories? This type of information isn’t such common knowledge and can only come from experience in an area.
Going forward we believe that there will be a shift in the industry with much higher barriers to entry and the need for brokers will be for more of a consulting service to both landlords and tenants/purchasers as opposed to marketing properties alone and trying to merely push stock. This will require better educated, more experienced brokers with extensive training. These type of services although available here, are not as common or even sought after as other countries like the USA where services like tenant representation are common. Analyze what the client needs, audit their existing lease, find the right property, structure and negotiate the deal efficiently with the landlord. Services like these add real value to a client and can save them substantially over the term of a lease. In order to offer these services brokers will need to prove their worth and competency to be compensated for it in return. Brokerages themselves will not only need to gather as much data as possible, they will need to analyze, interpret and train their brokers according to the data.