Gentlemen* prefer brokers

 Abby here! I may have mentioned before that my career as a retail real estate broker began right after I graduated from Georgetown. I'd spent four years studying, learning, and doing quite a bit of socializing. Lucky for me, I was beginning a career where all my hard work chatting up strangers at Smith Point was a transferable job skill. 🍻

To be a great broker, you need strong relationships with other brokers (and not just because some can get you into hot new restaurants). It didn't take long on the job to learn exactly why, and I've written about it today. Enjoy!

It’s okay. You can stop pretending now. I appreciate the effort and that you don’t want to hurt my feelings, but I promise you won't. I already know that plenty of people don’t like brokers.  

Despite our being, generally speaking, enthusiastic extroverts with great fashion sense, people (especially new retailers) have felt a palpable “you can’t sit with us” vibe over the years. From questions that feel patronizing to straight up ghosting, it’s not uncommon for new business owners to feel perplexed and defeated.

I’m not here to defend rudeness, but I will explain why retailers sometimes feel like brokers don’t want to work with them. It’s because brokers don’t want to work with them. They want to work with the retailer’s broker.

Longtime readers of this newsletter know that I’ve made many spirited appeals about the immeasurable value a great broker, but I haven’t really explored one of the most important, often unspoken benefits: brokers prefer working with other brokers.

This is not because brokers get nervous and clammy when forced to engage with civilians who don’t know the difference between KLNB, CBRE, TSCG, MEP and ROFR or who can’t recite the Starbucks Exclusive Use clause by heart. Admittedly, this might be part of it, but it’s not the main factor.

The fact of the matter is that a broker’s job is to make deals between landlords and tenants and to secure them with signed leases. Job performance = deals made = leases signed. So understandably, in the course of doing their jobs, they WANT to work with people who make their job faster and easier — namely, other brokers. Here’s why:

🤝 Representation on both sides increases the likelihood of a deal actually happening

Many new retailers don’t realize just how many deals die during negotiations and never get signed, but the sad truth is that the vast majority of initial site tours don’t actually result in a lease. It’s not uncommon for brokers to spend months working on deals that fall through, and there are as many reasons deals fall apart as there are stars in the sky. 

Some of those reasons can’t be controlled for (e.g. the space doesn’t have sufficient electrical capacity for the use, the tenant negotiated a better rent deal down the street), but some of them absolutely can be prevented by using a broker (e.g. the tenant didn’t understand the expense of their buildout in the first place, the tenant used a litigator instead of a retail leasing attorney to negotiate the lease).

A represented tenant:

• Understands the process (or has someone who does)
• Knows how to respond to proposals
• Doesn’t stall out over standard concepts
•  Has someone managing expectations on their side
•  Is less likely to chase a deal they can’t actually execute

All of which increases your likelihood of signing the lease you’re after.

🍎 The landlord’s broker is not a real estate teacher

A retailer without their own broker puts the landlord and their broker in a lose-lose situation. The landlord and their broker have more information than the newbie retailer, and they know it. They’ve got two choices…

The landlord can try to explain each concept to the retailer as they go. This approach is obviously problematic whenever the retailer’s interests don’t align with the landlord’s. Why would a landlord or their broker tell a prospective retailer they should be asking for rent abatement after they open? ❌ LOSE.

The landlord can keep it moving and negotiate with the tenant like they would with any other… but this approach is icky at best, and fatal to the tenant at worst. No one wins when a tenant can’t operate because they naively agreed to impossible deal terms…that tenant can’t pay rent. ❌ LOSE.

An experienced landlord team knows that a tenant with their own broker is on much stronger footing to make good, sustainable decisions.

👔 Representation changes how seriously a retailer is taken.

The pro retailers are represented. Starbucks, Lululemon, and name-your-national-retailer ALL use brokers… even though they have their own in-house commercial real estate departments. The in-house team’s job is complementary, but very different from the broker’s job.

Arguably, established retailers would fare far better than start-ups without a broker – nationals have the required expertise, at least some of the real estate network and much more objectivity than an owner-operator. They have the clout to buck the system and force landlords to work with them directly if they wanted to… and yet, they still use tenant brokers.

To reverse that analysis, as a start-up retailer, you simply don’t have the expertise, the network, or the reputation to compel landlords to work with you directly. Unless you are an AI, you’re unable to handle your negotiations with objectivity, and you’re missing the specific experience to engage with sophistication. That’s why you engage a broker — they have ALL of this and they use it to your advantage. 

🤝

So the next time you hear a business owner say, “ugh, I called the broker about that space, but he’s totally ghosting me,” don’t respond with, “what a jerk! Someone should steal his golf clubs!” Instead, forward this newsletter to them and say, “it’s okay, he just doesn’t want to talk to you…let’s get you a broker.”