Cooperation in Commercial Real Estate Drives Results
The SVN Difference: We believe in sharing fees to give incentive to a wider network of buyers. With an expansive network comes higher visibility and increased demand, resulting in a higher value for clients.
Broker cooperation works. Over ten years and almost 15,000 transactions, the data shows that average selling prices and prices per square foot increase while cap rates decrease when different brokerage companies represent buyers and sellers. Furthermore, while the effect of cooperation varies between different asset classes, all four asset classes – apartment, industrial, office and retail – achieve better results when brokers cooperate. Given that the majority of $2.5 to $20 million dollar assets are sold with debt or other encumbrances in place, the net proceeds benefit of cooperation is even greater than the 9.6 percent that the survey calculated by only looking at final selling prices.
Interestingly, looking at cooperation rates over time indicates that clients and brokers know this. As the market’s down period was established in the Great Recession, real estate transaction cooperation rates steadily climbed up from their pre-Recession lows. As the market has continued to heat up in the commercial real estate recovery, cooperation rates have spent two years (2014 and 2015) falling downwards. Apparently, while clients demand the best possible price in down markets, simply getting what seems to be a good price was evidently good enough in the up market of 2014 and 2015. At the same time, it is not a stretch of the imagination to believe that some brokers are taking advantage of higher velocities and selling prices to reduce their cooperation rates, reduce their fee sharing and, ultimately, increase their incomes at their clients’ expenses.
Click here to read the full SVN Cooperation Report
SVN, a commercial real estate brokerage franchisor headquartered in Boston, MA, is one of the industry’s most recognized brands based on the annual Lipsey Top Brand Survey. With more than 190 locations in 500 markets, SVN Commercial Real Estate Advisors provide sales, leasing, and property management services to more than 5,550 clients worldwide. The Florida team
consists of more than 90 Advisors serving locations throughout the state. SVN Advisors represent clients in office, multifamily, retail, industrial, self-storage, hospitality, marina, mobile home park and land transactions. All SVN offices are independently owned and operated. For more information on SVN Florida, visit www.svnflorida.com. For the latest news, trends and issues related to the commercial real estate market, visit SVN Florida’s blog http://svnflorida.com/real-estate-blog.