For a commercial building owner or investor there is one universal truth. They need Tenants to be successful. Quite simply, Tenants pay the rent and income is the best way to value commercial real estate. So finding exciting, creative and useful ways to engage new Tenants AND retain existing ones is the lifeblood of a commercial property. Whether you are the first owner or the tenth, it’s essential to understand the symbiotic relationship between Tenant, Landlord, Management and the Brokerage’s role in the process of getting and keeping a building leased.
So how does technology impact this mission? There has been over $3B invested into real estate technology in just the past 2 years (CB Insights). So while the vast majority of funding has gone to major residential platforms and brokerages like OpenDoor and Compass a good chunk is being spent on CRE Tech as well. As an ownership group (or another stakeholder like a leasing agent, manager or investor) it can be daunting to understand the vast improvements occurring in the industry and more importantly, which ones are worth your dollars and time. It starts and ends with innovation. Scratch that.
Innovation that matters.
Although there is an amazing amount of innovation occurring in commercial real estate on a daily basis, how “innovative” is it really? Who here has the heard the pitch from a tech-enabled brokerage firm, or new CRM sales lead come up to you with a straight face and say “the commercial lease is going away, we’re gonna disrupt and change this industry, change with us!”
For owners and brokers (as an industry brokerage veteran and owner myself) we all usually ask one simple question. What is the ROI?
What does your solution do that is going to make it worth our time, money and effort to embrace this “new tech”.
I’m here to tell you, often it’s not much, or it is very hard to quantify. Innovation is our sector seems to come with a distinct lack of understanding of how our unique business operates. Commercial real estate is still heavily steeped in relationships, service and domain knowledge. It seems like a whole lot of this innovation is just a technology led attempt at overhaul. The CRE business doesn’t need a total overhaul, it’s extremely successful. However, like all industries it can leverage the right technology that solves real problems in efficiency, analytics and data.
And I think we would all agree, the lease isn’t going away, as long as debt and financing are critical infrastructure to commercial property valuation and transactions than long-term leases, credit and term will still rule the roost.
Owning, leasing and investing in real estate is a challenging, competitive and yes, somewhat antiquated industry. Commercial property ownership demands a higher barrier to entry, a higher level of investment, so why are we so far behind?
Why has residential real estate found so many technological improvements to amplify sales, leasing and overall efficiency in their corner of the business, while many commercial brokers and owners are still reliant on wooden signs, print magazines and outbound cold call phone calls to drive leasing efforts?
Traditional marketing solutions in CRE have not been improved upon for a decade. Leasing agents are usually using one (or both) of the two following ways to market your properties
“Traditional” forms of marketing: Signs, magazines, print advertising, cold-calling, etc…
“Digital” forms of marketing: Listing sites, e-blasts, blogs. Again, very passive approaches to lead generation with limited information for the Tenant community.
Existing solutions are failing our industry on a massive scale, and collective huge checks to do it. We MUST demand better than these outdated, ineffective and passive marketing efforts.
Both of these forms of marketing have are failing to do what needs to be done. They are structured to inform brokerages. They DON’T target or engage the main consumer of your properties, Tenants!
Imagine how insane it is that most tenants (70%+) end up driving around and calling a sign as their search experience. They’re frustrated by the online solutions, so they get forced offline. How’s that experience? Worse. Would you like to call a car dealership to assess which cars are available and what they cost? How about a hotel or a house? Yes, it’s a terrible UX. We need to think about businesses and prospective tenants as consumers and provide them the information at step one, what something costs (generally) and if its available (always) so business decision makers can align themselves with properties instantly.
Exiting sites are effectively just digital signs, they’re selling clicks and impressions with no guarantee of quality of traffic or search. In fact, most sites charge an exorbitant fee to search, almost guaranteeing the users are just researchers or other brokers in the industry.
Signs, magazine and print publications are fine. But this is the year 2019, we can do better. We should be spending our (and your) marketing dollars in a SMART and ACTIVE fashion.
Shameless Plug: We solved this problem! Visit us to learn more about how we drive ROI, 100% guaranteed to our leasing customers…online AND off.
Our business is about quality, NOT quantity.
Now, it’s not the broker’s fault (even though everyone loves to blame them). Leasing space is hard and the marketing tools at hand are expensive and often ineffective, but they’re ubiquitous. Brokers have been held hostage by bad, outdated and useless “tech” for decades. That’s changing though. Real solutions that operate within the realities of the business of marketing and leasing commercial buildings are arriving…for lead gen and beyond.
So, let’s review some operating assumptions in the industry and how they service the whole ecosystem. Tenant, Broker and Landlord.
In CRE, a common referral for a client is upwards of 20% for a representation assignment or listing. As brokers, we’re happy to pay for a quality opportunity for business. Yet, the average building owner and their representative is spending thousands upon thousands per year prospecting to uninterested parties, from a marketing perspective they are throwing money at the wall and hoping it sticks to a Tenant. It’s not just the marketing either, the quality of the lead itself is important. We asked brokers, managers and owners what were their pain points in finding Tenants for their buildings..
- Broker’s spend an inordinate amount of time “qualifying” potential users that were a mismatch for their lease assignments from the first inquiry. This led to frustration and wasted efforts. On a commission-based income, time is all you have. The byproduct of ineffective, untargeted marketing is that is lacks the ability to align needs and wants. It forces bad interactions, and bad leads.
- In addition to wasted time, leasing agents felt the representatives of small businesses were often unqualified, quasi-residential or family residential brokerage representatives with little to no additive quality to the lease process. To top it off, they pay them 67% of the total commission as well, in some cases for just “staying out of the way” to get the deal done.
- The concern with where marketing dollars are spent is very real. 70%+ of brokers want to maximize dollars spent (or fees paid to house) and are not encouraged by the current online tools. Signage and referrals are still viewed as the best marketing opportunities…in the 21st century! Clicks, impressions, e-blasts etc…are nonsense. To an individual broker, time and efforts when working with potential users is about quality, not quantity. There’s a theme here…
- Managers and owners felt information was often parsed, leading to surprises when Tenants moved out and failed to renew. Oftentimes they were willing to make changes and to listen to their Tenants but the information either wasn’t collected or it was too late. Retention saves an owner up to 70% on a commission basis, per deal. Put simply, retention is important.
- Property managers told us they were tired of hearing a familiar complaint from a Tenant, that they were told something from a broker or their lease was confusing, etc…they feel they bear the brunt of these frustrations from Tenants due to no fault of their own in most cases.
So we said OK, let’s get to work helping you spend your dollars more effectively. It started by building a different kind of solution, one that doesn’t start with the broker, but rather the Tenant, as a consumer. It’s a new way of thinking. It’s time to listen to what Tenants want, using feedback and transparency. Yes, I know that’s scary but hang with me here.
By building a Tenant-focused platform built to educate and empower small businesses we can provide the representatives and owners of commercial real estate with a better lead, and ultimately, a more effective and smoother lease transaction. It’s simple, provide accurate, quality information up front and you’ll interact with people who are more likely to transact.
Although Tenavox is a site built for Tenants, ultimately our hope is they find a great lease experience and make that informed decision. Imagine as an owner, leasing agent or property manager having a more informed, qualified and satisfied consumer of your real estate assets. Imagine a smoother renewal process, a cleaner management relationship. Imagine making decisions on building improvements and maintenance based on real feedback. Optimized operations based on real feedback and better decisions through better information.
Workplace as a service isn’t a fad, it’s the new standard. But knowing how to provide the great service is the key. Amenity-based leasing works because it requires owners to listen…and their users have spoken, they want more from their leases and there is no reason direct Landlords cannot do the same on a macro scale. We’ve seen amazing innovation of Tenant experience apps, like Comfy, Concierge, even VTS and more. These apps focus on empowering the Tenant after they sign a lease…which is great!
However, our goal at Tenavox is to get them more prepared and better aligned before they sign. We’re bringing amenity-based and consumer-focused experiences to search and connection. Tenavox is the front-end engine of a lease decision.
So we’ve covered how marketing is changing and tech is improving the experience of searching for a space and we’ve talked about how there are amazing solutions for powering buildings and providing better amenities to existing Tenants. However, what about the actual lease negotiations? This is the major friction point in most deals. The dollars and cents of cost, timing and leasehold improvements + commissions. What solutions exist to accelerate lease negotiations?
The last piece of this puzzle is the money. Tenants rarely understand that the Landlord is taking almost ALL of the risk in a deal. They are out of pocket for a big chunk of cash on commissions (unrecoverable in most cases if there is a default) and TI (improvements almost always happen deal to deal for a space). We have not given commercial property owners an adequate source of financial collection to improve decision making. We’re seriously using sources and uses print-outs, tax returns and personal guarantees (which are rarely worth anything). In challenging markets, Landlord’s take on more risk because they are pushed by the economy to lease a space (like in Houston).
Landlords need a solution that allows them to make fast decisions and to offload risk to third parties in a transaction. That’s right, we need financing of deals costs. Solutions like LeaseLock have been nothing short of revolutionary in residential real estate, so again, where is our commercial solution? Why haven’t we seen innovation here?
Well, residential leases are typically one-year, so they are very appropriate for bonds. We also collect personal credit profiles extremely well in this country while business profiles can be lacking at best. Cash and financial history (bank accounts) are the best way to assess Tenant health (as well as age) before making a lease. Landlords in CRE deserve a way to make decisions faster and with more confidence, so do Tenants.
The next wave of solutions will not only enable Tenants to quickly assess whether a property is right for them, it will allow them to “pre-qualify” for a space before going out and touring. Imagine the strength and speed of negotiations when a Tenant not only has alignment with a building on size, needs and timing but comes loaded with a third-party pat on the back for $50,000+. Being able to offload risk and deal costs, along with better financial transparency from a potential Tenant is rocket fuel for a lease deal.
Note: We’re building the rocket and in my next post I’ll be introducing that solution for Q1 2020 and I’m excited.
So let’s start thinking about quality and less about quantity. Understanding the full picture, the way tenants search for space, brokers market vacancies and how Landlords make leasing decisions is the key to providing a comprehensive solution. Leveraging tech at every stage of a lease decision can help owners and brokerages lease space more effectively and keep their existing Tenancy. The CRE world is changing, let’s start using real solutions.
To learn more about we’re doing to revolutionize the way Tenants find, connect and ultimately lease space from agents and owners visit us at www.tenavox.com or contact Josh at firstname.lastname@example.org or Marissa at email@example.com