In these times of rapid technological advancement, fears of robot overlords abound. Ok, ok…less hyperbolic. Software is replacing inefficient/unproductive labor; the professional services industry is not immune, and real estate industry folks are scared. With Zillow’s acquisition of Dotloop in 2015, their launch of Instant Offers, and Redfin’s flat brokerage-fee announcement, sweat is forming on the brows of many real estate pros. Will residential brokers go the way of the travel agent? What about Commercial brokerage? Our industry is notoriously slow to adopt new technology, and trends about a decade behind our residential cousin. Are we as likely to be disintermediated as they are? Is this a good thing for the marketplace? Is this a good thing for consumers of our advocacy services? My thesis: efficiency, transparency, access = good; bypassing brokers=asking for trouble.

We can already see signs that the side-stepping of brokers in commercial real estate(CRE) is a real possibility. Many of the largest disturbers of the CRE status-quo are outwardly friendly towards the brokerage community. WeWork, Regus, Liquidspace, Breather, etc. all make an effort to entice brokers to refer their clients to a shared workspace. A co-working space can be the best solution for a tenant with serious time constraints and massive fluctuations in headcount. Catering to an under-serviced sector of the market; this is good capitalism…Unfortunately (or fortunately, depending on who’s reading), a few of these players are positioning themselves to disintermediate brokers, whether they are willing to admit it or not. This is a bad thing for most tenants. Hear me out!

Let us begin where the rubber meets the road in an office leasing transaction; with documentation, and the negotiation of business terms. What habitants of WeWork, Regus, LiquidSpace etc., are faced with is something akin to a license agreement. These documents appear to be etched in stone. Liquidspace champions “Flexible Terms,” on its site, but follows that header with the reassurance that their technology will “Remove the burdens of lease negotiations.” What a nice thought…You don’t actually want to negotiate the rate or terms of your lease do you? If you are a 30-person business buying a license from one of these organizations, you could be looking at a >$1 million bill each year…Is that worth a bit of back- and-forth? On one office leasing transaction management platform, griddig, Teams can fully execute a Letter of Intent for an office lease. There are ~30 possible items to be negotiated on their LOI tool…Forget the actual lease/sublease document, 30 potential business terms to be discussed prior to bringing in legal counsel! Without the expertise of a broker, how would a tenant know which buttons to push? Which items to address, and what to ask for? Which are financially significant, and relevant to the tenant’s business plans? Having an experienced broker will give you the advantage of being able to read between the lines, and anticipate problems before it’s too late and you’ve signed on the dotted line.

We can assume that some leverage will remain on the side of tenants, regardless of how much technology changes the tenant/landlord relationship. The basic market forces will always be at play. But here is an important question to consider; who is controlling the information upon which business owners will make their leasing decisions? Zillow is notoriously inaccurate, CompStak, Loopnet, and other free sites in the commercial real estate vertical have equally unreliable data. Furthermore, who benefits the most from the restriction of information to the public, besides the multiple listing services/Costar? You guessed it, Landlords! With less information, and less context, you will be less likely to make an aggressive offer, and not have the supporting evidence to push for a better deal. Let’s pose another important question; who are the greatest investors in the aforementioned space-sharing companies? Right again! The institutional owners of real estate, developers, and multi-national landlord brokerage shops…To spell this out, the people who want office rents through the roof, are funding the office-space-as-a-service effort, and would control most of the relevant data in this scenario.

Tenant-representation brokers are a necessary balancing force in the marketplace. Tenants need someone to do the leg-work of combing the entire market for alternatives, leading the team (architect, general contractor, real estate counsel, furniture vendor, etc.), creating a bit of competition amongst lessors for your tenancy, bringing down the anxiety levels, and anticipating problems before they happen. Business owners don’t have the time nor the expertise to manage the process themselves. Every business has unique challenges, priorities, and financial objectives. One size does not fit all in an office lease, so the cookie-cutter solutions provided by co-working giants will not disintermediate us all. I, for one, welcome our robot overlords…