CRE deal-making is much rooted in numbers. The clients are much savvier, the stakes are often higher, and the numbers can make or break the deal. So where does the human relationship fit in? Are they important? Or is it all just a numbers game?
Some argue that numbers are king; relationships are irrelevant. In a perfectly rational world, that can be true. Unfortunately (or fortunately, depending on your POV), we don’t live in a rational world. We should have learned that in Economics 101. There is many a theory that sounds great on paper, but just doesn’t work in the real world.
Tenants just don’t want to do the preliminary work of searching, organizing, negotiating, etc.
Relationships, no matter what business you’re in, matter A LOT. Sometimes, it’s to get you in the door for a pitch or that referral that matters. Other times, relationships close the deal…because quite frankly people just don’t like dealing with schmucks, no matter how good the deal looks in numbers.
But, more than the soft skills of being personable, dealing with humans requires other humans. Rarely is a deal so amazing on paper that a tenant is ready to sign on the spot. There are always numerous steps to navigate. That takes a lot of time. Time tenants don’t have. A rep or broker with relationships can move a deal faster, and leave us alone to run our business.
On the flipside, who wants to spend time looking for space? The amount of time it takes to search any website is time spent not working on your business. Tenants, developers, owners have relationships with brokers and tenant reps so they don’t have to do the searching, no matter how amazing your filters are. It’s just human nature.
In a good precedent for commercial real estate, several years ago, residential real estate technology companies were predicting the demise of the residential RE broker. Because a tenant can technically do the transaction online from search/view to signing, they don’t need a broker. So why then, several years and startups later, is the residential broker thriving? It’s simple. Tenants just don’t want to do the preliminary work of searching, organizing, negotiating, etc. People have jobs, lives, and professionals whose job it is to do that for them.
Which side of the debate do you fall on? Do relationships matter in commercial real estate or is it all about the numbers?