Corporate Real Estate is “NOT” a Relationship Business – Part One

Time and again, I hear  “Corporate real estate is a relationship business!”.  Brokers, landlords, and corporate real estate executives, will tell you that they get things done based on relationships.  Is that really true? In the days of corporate transparency requirements and Sarbanes-Oxley compliance regulations, are corporate real estate transactions really based on personal relationships?  Or, is there a deeper meaning that most people miss?
 
In an article entitled “Great Companies or Great People:  Who Do You Hire?”  I wrote that companies don’t hire companies, people at companies hire other people.   The fact that people hire other people based on more than just relationships has proven itself to be true over and over again.
 
So, if people really do hire other people, not companies, and since human robots have not yet infiltrated the corporate real estate industry (other than a few people I’ve met!), then business MUST be conducted on the strength of relationships between people….right? Wrong!
 
Certainly in many instances, personal relationships are the reason for getting things done. But, could personal relationships really define an industry, especially one that is as huge as commercial real estate and one that is such an important and primary driver of our nation’s economy?
In days gone by, commercial real estate brokers won business from prospective clients by wining, dining, entertaining, and befriending them.  The more creative and sometimes the more expensive the entertainment, the more successful the broker would become.  The broker with access to the best sporting events and concert tickets, the one who took prospects on the best fishing trips or to the fanciest restaurants, or the one who told the funniest jokes and showed-up often enough at the client’s office with donuts and coffee, could be counted on to win assignments from corporate executives.  Now, it still holds true that people prefer to do business with people with whom they feel comfortable, and very often with people they like.  But, friendship is no longer the sole foundation, or even the primary one, for engaging service providers, especially in big business when a lot is at stake!
Look at it this way;  Let’s say that you’re the CEO of a company, and you have a new and critically important initiative underway.  This project is so important that the future of the company could hinge on the successful outcome of the services provided to you.  Everything you’ve planned, all your years of hard work, all of your energy and resources have been brought together for this one very, VERY important moment in your company’s history.  Your next moves will impact the company’s future, and perhaps, your career.  You will need to hire a professional, or a group of professionals, with the precise experience, proven expertise, sound judgment, logical approach, depth of resources and integrity, and ethics to get the job done right.  Whomever you hire must recognize the importance of your assignment and its potential impact on your ability to complete your company’s intended mission. 
So, who do you hire?  How do you make that choice when everything hangs in the balance?  Do you hire the guy who takes you to ball games and tells great jokes or, the service provider you trust the most, the one who has successfully represented other companies in similar circumstances, the one in whom you have the greatest levels of confidence in his or her ability to complete your company’s project, accomplish its objective, and protect your interests?

 

Did you just ask yourself “What if the guy with whom I’m friends is also the best qualified”?

Read next week’s blog for the rest of this discussion.  In the meantime, send me your thoughts!

 

 

 

 

 

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16 Responses to “Corporate Real Estate is “NOT” a Relationship Business – Part One”


  1. 1 Bill Jamison July 11, 2009 at 6:54 pm

    Mr. Zezas:

    It’s about time somebody said this! Great blog! I’ll keep reading.

  2. 3 Chris T July 12, 2009 at 4:57 am

    So true! As a lifetime entrepreneurial broker (independent) I have many times successfully won business from international conglomerates and national companies to handle acquisition/disposition assignments based upon my experience in transacting similar business assignments. In most cases I’m am also competing with teams from national brokerage companies.

    However, having said the above, I am finding that in the last couple of years it has become much more difficult to compete as an independent with many national and international companies having signed up national brokerage accounts with the national reach brokers to service their national and sometimes international transactional business. This is particularly true when the client has a dedicated real estate executive to handle real estate as apposed to an executive such as CFO or COO dividing time between their other duties and real estate projects.

    It appears over the last decade companies have wanted a much more sophisticated level of service (including market data) from their real estate professional that can sometimes only be delivered by having in house support dedicated to providing the resources now demanded by clients. In many cases this is only accomplished when a company can commit resources to supplying this sophisticated level of service or as part of their national platform have services within their organization that can deliver to the client these services.

    I think the High Hold Silver days of the lone ranger are now gone!

    • 4 realstrat July 13, 2009 at 8:31 pm

      Chris:

      Thanks for your thoughts. Everyone is seeking to secure more business, especially in the current economy where fewer transactions are available. So, the competition has heated up across the board. But, reading between the lines, I see a real need for your service quality in companies that do not engage large national or branded real estate brokers. Look closely around your market and you’ll see that a surprising number of companies will recognize that personal yet, sophisticated services offered at independent real estate companies like yours, can be as valuable, and often times considerably more benefitical, than the services offered by large competitors. Wehn it comes to competing for those accounts, the playing field tends to even out a lot more.

      If this wasn’t true, then only large companies would exist in all industries, and there would be no such thing as small companies. Hoping to hear from you often! Good luck, and keep up the fight!

  3. 5 Peter H July 13, 2009 at 8:16 pm

    The business is a relationship game, just not one that is won by providing tickets to ball games and expensive dinners. Relationships that lead to assignments are ones that are built on trust and competence.

  4. 7 Scott Greene July 13, 2009 at 8:17 pm

    While I agree that the relationships do not ensure the next job, I do believe that in the scenario presented, if there is no relationship and no experience with the person or the company, there is really no way to make an informed assessment of the company. You can ask for referrals, but who really provides a bad referral? You can ask your colleagues, but in this career making or breaking situation you described, are you going to leave this in the hands of someone else. I maintain that this job or project will go to the company that you know first hand…

    • 8 realstrat July 13, 2009 at 8:37 pm

      Scott:

      Thank you for writing your ideas. We’re on the same page. It’s been our experience that the relationship is what most often gets service providers invited to the dance. Sometimes, service providers get invited to present their services having no relationship. Many believe that is just an opportunity to help others win the assignment.

      A relationship, on its own, won’t get you hired. The relationship may form a foundation for getting you heard. But, if a company’s service is bad, they’re dishonest, disreputable, can’t get it together, don’t build confidence in their abilities as viewed by the prospect, or can’t be trusted, unless they’ve got a brother-in-law working at the client’s office or photos of the president with his assistant, a relationship alone won’t win the day!

      Scott, I hope to hear from you again, and would welcome hearing about your successes!

  5. 9 S.L. July 13, 2009 at 8:20 pm

    I feel that relationships are extremely crucial in conducting business in today’s commercial real estate environment. I agree with the point about hiring somebody you trust with a solid reputation and credible experience, however that should be developed through relationship building. Our best clients are the ones we can take to lunch or play a round of golf with. The undevided attention these opportunities offer provides the client with face time – knowing who they are doing business with. That develops trust, and it may not be a personal relationship – rather a business relationship, but nevertheless, when things are slow, spend time with your clients and understand their real needs!

    • 10 realstrat July 13, 2009 at 8:41 pm

      Scott:

      You’re right on target! Nothing better than staying close to people you know, especially those who can open doors to new business opportunities. And, while face time and personal connections form the basis of solid business relationships, they do not, by themselves, deliver business. When a prospect decides the he or she can trust us, and can feel confident that we will deliver what we promised, that’s what usually puts it over the top. Thanks for sharing your ideas. I hope to hear from you often, and would welcome hearing how you might have won an account based on having built trust and confidence. Good luck!

  6. 11 Geoffrey July 13, 2009 at 8:44 pm

    Relying on relationships can easily backfire, especially when the relationships are too close. Look what happened to Vernon Hill of Commerce Bank and his relationships with familiy members that provided real estate services.

    http://www.nytimes.com/2007/06/30/business/30njbank.html?scp=3&sq=commerce%20bank%20vernon%20hill%20real%20estate%20broker&st=cse

  7. 13 Jodi Summers July 13, 2009 at 10:56 pm

    Growing up, my dad always says “There’s no room for emotion in business.” Golf, and games, but essentially, a business relationship is a business decision – who can get the job done most efficiently, with the least amount of stress.

  8. 15 Biff Ruttenberg July 14, 2009 at 4:08 pm

    I think that Chris T was right on the point. As a co-founder of a boutique real estate disposition firm, we have relationships with large lenders, and their senior credit officers and management are our referral sources. They understand what we do and where we add value in the middle market. The large, often bankruptcy-related cases rarely come our way as there is a high degree of “CYA” that can only come from a large, nationally known firm.

    Competence is important, but national reputation seems to be, perhaps, even more important.

    • 16 realstrat July 16, 2009 at 7:03 pm

      Biff:

      At the end of the day, quality people who are truly in control of their own destinies, hire other quality people based on the services that will be delivered, and not based on job security. Thanks for your thoughts. I hope to hear from you again.


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THIS WORK IS DESIGNED TO PROVIDE PRACTICAL AND USEFUL INFORMATION ON THE SUBJECT MATTER COVERED AND REPRESENTS THE OPINION OF THE AUTHOR. HOWEVER, IT IS PROVIDED WITH THE UNDERSTANDING THAT THE AUTHOR IS NOT ENGAGED IN RENDERING LEGAL, FINANCIAL, ACCOUNTING, OR OTHER PROFESSIONAL ADVICE TO THE READER. IF LEGAL, FINANCIAL, ACCOUNTING, OR OTHER PROFESSIONAL ADVICE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL SHOULD BE SOUGHT. THE AUTHOR SPECIFICALLY AND EXPRESSLY DISCLAIMS ANY LIABILITY THAT MAY BE INCURRED AS A RESULT OF THE USE OR APPLICATION OF THE INFORMATION THAT IS CONTAINED IN THIS WORK.

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