Signs of a Fat Brokerage Category……
Maybe it’s time that somebody explains to me why a retailer retains a real estate brokerage company to source sites on their behalf.
All this time, I thought that the retailer contracted the broker for the purpose of finding and securing the best sites that meet their criteria. And, silly me, I thought that there was an implied loyalty between the two parties. In too many cases, however, I am learning that many retail companies are utilizing the services of multiple brokers. This wouldn’t be an issue, providing the territorial responsibilities are clearly spelled out but sadly, this isn’t always the case.
With the rapid growth of the site selection category over the past decade, we are finding an increasing number of new brokerage companies that, among other services, are offering a tenant representation function. Almost every one of these new firms are hungry for business. Understandably, this hunger can sometime put the cart before the horse………..a newly minted broker is out in the field making contact with landlords on behalf of a retail client before a clear mandate has been established.
While this can temporarily create confusion with the landlords, it isn’t the worst case scenario. The more serious issue is where, for what ever reason, there is no firm mandate. Yes, we all immediately jump to the conclusion that it’s some naive broker, showing a lack of judgment, stepping into a competitor’s mandate. Yes, I could write a book on the different excuses when this happens, some legitimate and some that stretch the imagination.
There is, however, a new factor that is appearing more and more often. As a sign of the times brought on by the exploding brokerage category, retailers are refusing to commit to one site selection company. Instead, they are taking the mistaken position that multiple people sourcing the same requirements will achieve better results than signed an exclusive agreement.
Ignoring the moral aspect, the fly in the ointment in these multiple representative situations is generally the landlord. In most cases, due to the unique way the brokerage is arranged, is it’s the landlord that is paying for the service. And I don’t know of any landlord that is willing to pay two brokers for the same new tenant. As a matter of fact, unless it is a truly unique, must-have, first-to-market tenant, many landlords will choose wait. Think of that next time you’re wondering where that ‘paper’ you’ve been promised has gone……………………….Have a great week……………WP