An Open Letter to the Brokerage Community From 42Floors
Last week, my company launched the first version of 42Floors, a commercial real estate web search site designed for tenants. Before we go any further with the progress of our company, I wanted to take some time here today to open up a discourse about how technology and the commercial real estate industry can work together. For 42Floors(or any other technology company focused on the CRE industry) to ultimately be successful, we have to create a long-term relationship with the brokerage community – one built on mutual trust.
In commercial real estate, relationships are paramount. Brokers understand they have to be invested in their clients for the long term, providing counsel even when there is little or no commission at stake. Every CEO searching for 100,000 square feet once searched for 1,000 square feet. And that CEO will repay a broker’s long-term investment in the relationship with loyalty. It’s a service model that has worked for decades. We want that service model to continue as real estate joins the rest of commerce online.
While I am now a licensed real estate broker, but I have spent much more time as a company CEO searching for space to lease. As a tenant, I understand the value brokers bring to real estate transactions. Just as I trust my lawyer to advise me on legal matters, my broker advises me on what is often one of the most expensive and complex transaction my company will make – the signing of a long-term lease.
It’s through this professional consultation that a broker serves my interests with information that I as a tenant do not have: access to off-market availabilities, recent transaction comparables, stacking plans, leverage and experience to negotiate the best deals. As a CEO, it would have been irresponsible for me to enter into a transaction without that professional guidance.
But a new generation of business people, of which I am a part, lives and works online. The internet is not going away. The commercial real estate industry has been slower to adopt the internet than other industries, but the outcomes are still inevitable. Internet companies like ours won’t cease until a quality online search platform exists.
Now is the time to be forward thinking. I urge you to be proactive. It’s time to take a hard look at the state of your technology platform. In what format are you storing your listings internally? Do you have the ability to create applications on top of that data? Can you power your own mobile applications? How does the quality of your website meet the expectations of your clients? How are you positioned to compete when other firms start upgrading their applications?
The brokerage community needs new technology. For too many years technology innovation has been controlled by a few companies; and these companies have been slow to innovate. The brokerage community needs and deserves competition in online technology platforms to help them better serve their clients.
We are already working with several of you on powering your own internal platforms. We’re providing you with the websites, mobile applications and iPad applications that will empower you to serve your clients at a much higher level.
We are also going help you be more efficient, especially when it comes to smaller lease transactions. We will give tenants the ability to view the interiors of spaces with outstanding photography. Giving tenants these tools during the initial search phase allows you to go on better targeted tours and close deals faster. This sector of smaller tenants looking for spaces consumes just as much time as much larger deals. We can all benefit with more efficiency in the initial discovery phase.
As our website attracts prospective tenants, we provide referrals to brokers who can serve them as they move forward with a transaction. Over the next 10 years, this type of internet model will be an important and growing source of acquiring qualified leads. The most proactive brokers will take full advantage and the result will be more time serving clients and less time prospecting.
Our focus is not on commissions. We make money by selling products to tenants. Our marketplace will launch next month, providing tenants with easy access to every product and service provider they need for their build-out: streamlined purchasing of desks, chairs, interior design services, etc. We’ll sell these products to smaller tenants and take a transaction fee from our participating service providers. It’s a model that allows us to grow while keeping the broker’s commission intact.
So what’s next? We are reaching out with an open hand to partner with you in a long-term relationship. With the internet, the possibilities are endless. Some of you have already engaged with us, others need more time. Make no mistake; this is the next chapter of commercial real estate services. And it has already begun.