Half of our tenants think they have to pay a broker hourly, like an attorney

Tenants use OfficeSpace.com to do their own space searches and learn about the commercial real estate market.  These are typically business owners and entrepreneurs.  We talk to them regularly and one thing that always amazes us is that about half of our tenants looking for space believe that their broker will charge them an hourly rate, like an attorney.

When we hear this, we explain to them that actually, there’s no out of pocket expenses and that the landlords pay out a commission once a lease has been signed.  However, since we know what the downfalls are with respect to skewed incentives because the landlord is paying commissions to your broker, the question arises, why don’t we make a change and properly align clients interests with broker incentives?

What would happen if this were the norm?  Would deals get done faster because the tire kickers would go away and we’d work with only the serious and motivated?  Would tenants pay less in rent, receive better terms or get a bigger TI budget because the landlords wouldn’t have to pay the tenant brokers commission?

Would this reduce a lot of frustration that brokers have when a tenant just goes silent.  We’ve experienced or heard of the horror stories of the broker who is left at the alter.  In the real estate world, this means that the broker diligently worked on a deal for the tenant:  the tours are done, negotiations concluded and a deal is reached.  And just when the lease is supposed to be signed, the tenant disappears, just goes silent.  At least in this scenario, the broker would get compensated for their work which seems fair.

What do you think?  Why isn’t the industry moving this way, especially since some tenants already think this is the way the industry works.

How Much Red Before Going Green?

Federal Building

In the days of “Occupy Wall Street” where social media and the internet showcases the delivery of various political and social viewpoints to the masses at the speed of thought, never before witnessed in our history, we are still slow to push forward some initiatives that would greatly help this country.  This occurred to me while reading a very interesting post from a Sustainability Roundtable member http://www.sustainround.com/category/corporat-leadership/sustainability-initiatives/.

I am talking, in particular, about Green Building and Sustainable Development in our cities.  This notion of incorporating green building practices in retrofitting and new building developments has been bantered about, and vehemently debated throughout the country for over a decade and yet we are still at the beginning stages of a wholesale build-out.

I can’t help but be confused by all the differing reports from industry experts regarding the true cost of building green.  The extremely conscious city of Portland in the beautiful state of Oregon is no exception to the differing opinions on how much green initiatives to be incorporated into the development plans of the city.

No doubt, on a national level, the awareness is growing and some states and local municipalities have already implemented Energy Performance Regulations requiring various levels of disclosure and reporting.

The big question in my mind is, where is the bottleneck that is preventing this renaissance?  There are many incentives and subsidies that help diffuse the pain of high capital costs, as well as, the recurring operational cost savings from a “greener” building.

In the latest Sustainability Roundtable: Management Best Practices http://www.sustainround.com/wp-content/uploads/2011/08/SRInc_SRER_Leased-Space_ExecSumm.pdf

publication, they outlined three recent trends:

  1. The most respected statistically normalized studies consistently demonstrate that green buildings create value through leasing (5%) and sale price (5-7%) premiums.
  2. When consultants are not overpaid, green buildings and, specifically, green building certification, are in fact far less costly to achieve (0-2% additional cost) than many real estate professionals assume.
  3. There is increasing recognition of the health and productivity benefits of green buildings.

Another key takeaway from the report stated, “leading companies are moving to a more sustainable leased space to lower operating costs, reduce environmental risks, increase productivity, improve recruiting and retention, implement corporate sustainability mandates, and enhance brand and reputation.”

It all sounds great but I am neither a civil engineer nor a city planner, so where is the Beef?  What else needs to be done in order to motivate a faster change?  Your voice is welcome!

Is re-founder even a word?

is Re-founder even a word?I’m not a stickler for grammar, but I want to know if this at least makes sense.  A quick search for re-founder brought me to dictionary.com’s definition – “one who refounds” but “refound” has no definition.  Okay, not so helpful but then I stumbled upon linkedin and bingo, someone who has the title refounder, and that’s what I’m talking about.  I may find myself explaining this to people more often than I want, but basically what this means for me is that even though OfficeSpace.com is a 15 year old company, we’re back in start-up mode.  That’s really the most concise way I can think to explain what we’re doing with this “new” company.

We’re taking a good look at our business and our opportunities for growth.  Evaluating the office space market, there are great resources for brokers, landlords and property managers but limited options if you’re an actual tenant looking for space, even fewer options if you are a tenant looking for smaller spaces.   Our goal is to change that and create an effective marketplace for both tenants and landlords/brokers.  We’ve been busy at work over the past year, our small team of 7.  Stay tuned, we’ve got some exciting new stuff that should launch in the early part of 2012.

Susie Algard, re-founder.