Now is the best time in history to open a small business. Technology has done an amazing job of providing microservices that allow business owners to create a “tech stack” that can support their day to day activity. Everything from incorporation to marketing to accounting has its own “killer app” that is both user-friendly and economical enough for any small business operator.
But what about commercial real estate? Back in 2016, I wrote an article asking the question, what will be real estate technology’s impact on boutique brokerages. At the time, I had a hunch that the innovation happening in PropTech would help smaller brokers better compete with the big firms. For as much innovation that has happened in the brokerage world since then, I am sorry to say that the landscape hasn’t changed much. Small brokers are still saddled with an array of costs from expensive subscriptions and time-intensive processes that put them at a disadvantage compared to the large shops that often have dedicated teams that can be utilized by the entire organization.
This has led to a bit of an oligopoly that the oligarchs are quick to exploit. Most people that want to break into commercial brokerage are forced to gain their experience working for one of the large companies. These organizations know this and often require new associates to work their way into the industry by doing most of the low-value activities like cold calling and campusing. These fresh bodies have no choice but to work incredibly hard with only a slim chance of a commission from their activity. The commissions that they do collect are often split ungenerously with the brokerages as a way to pay their dues to the industry gatekeepers.
This situation isn’t unique to CRE. Most accounting departments require “big 4 experience” which creates a bit of a sweatshop mentality for the companies lucky enough to be considered the big 4. Both industries see their new hires as expendable, putting them through the gauntlet before they can be seen as a valuable part of the team. And we wonder why there is such a lack of fresh ideas in the commercial property sector.
But, we might finally see this landscape changing. One company that has made it their mission to empower the independent brokers and small firms is Biproxi. They have created a free listing site for commercial properties and are building out a suite of tools around it that include transaction workflow management and a marketplace for vendors and services. Their co-founder Gordon Smith told me, “the so-called middle market for commercial real estate is huge, much bigger than the Class A stuff that tends to get all of the press. We think by supporting the teams working these smaller deals we can really help bring the industry forward in an impactful way.”
It’s true. An independent analysis done by a brokerage firm in Boston shows that spaces under 10,000 SF make up 83% of the annual office lease volume in that market. The sales of buildings is likely even more lopsided as marquee buildings don’t often change hands (there are only so many hands that can afford them, after all). And, as much as the top few brokerages tower over the thousands of smaller brokers by revenue, they don’t add up to be a fraction of what the long tail does when it comes to transaction volume.
So maybe the PropTech revolution has not left the small brokers behind. It has just taken a while to get to the point where it can provide the kinds of services the big firms offer their associates without needing a huge team or inflated budgets. Technology has a way of eventually leveling the playing field but when it starts out as a steep slope, sometimes that takes time.