Commercial real estate is an investment, and we don’t know a single person who invests strictly for the fun of it. When you are in the process of buying or selling CRE assets you do so under the assumption that you will ultimately see a return. After all, maximum value is the name of the game.
Realizing maximum value in a commercial real estate transaction can involve quite a few variables, from absorption rates to financial market fluctuations. While some of these things are out of your control, think local government factors or market conditions, is there a way to ensure returns in every single commercial real estate transaction? Keep reading to find out.
How to Guarantee the Highest Commercial Real Estate Returns
Just like us, our colleagues, our competitors, the industry at large and every client we’ve ever serviced…the Research Department at SVN International Corp. wanted to know the answer, and last year they set out to find it.
They worked with Real Capital Analytics to comb through over 15,000 transactional sale records collected over 10 years across 10 states, and the answer they found was undeniable.
In their published Cooperation Study Report, SVN found that cooperation in commercial real estate drives value, increasing returns 9.6% per square foot on average when compared to deals where brokers didn’t cooperate (i.e. one-sided deals).
The report included key data points supporting the pricing advantage of cooperation in commercial real estate transactions.
Key Takeaways from the Cooperation Report
- The 15,000 transactions covered the sale of commercial real estate properties valued between $2.5 and $20 million, in 10 major domestic markets, over the course of 10 years.
- The increased value due to Broker cooperation was broken down by commercial real estate sector. The report shows multifamily assets saw the highest price increase and industrial assets saw the smallest price increase from cooperative deals.
- The study showed that it doesn’t matter whom a Broker cooperates with. Commercial real estate selling price increased from the act of cooperation, whether with a colleague or a competing firm.
- Cooperation increased asset visibility, which leads to increased competition from expanded, and sometimes unexpected, buyer pools.
To view and download the full report, click here.
Is Your Commercial Real Estate Broker Losing You Money?
The short answer: Yes, if they don’t cooperate on their deals. We just told you the magic answer to seeing increased returns (to the tune of 9.6% more per square foot) was cooperation. Seems so simple doesn’t it? So why do so many of today’s Brokers want to do deals alone? It’s a stigma that has been haunting the commercial real estate industry since inception.
As a commission-based industry, and one that continues to grow year-after-year, many Brokers develop a lone wolf mentality. Self-serving and not focused on the client, they think their talents are enough and don’t want to have to split their earnings.
Since no Broker can possibly know every single buyer in every single market, by no t cooperating and going at it alone they are severely doing a disservice to their client. What does this result in? Low visibility, low amount of offers, no competition among buyers and a low sale price.
50% of the Commission | 100% of the Time
To avoid leaving money on the deal table it’s important that you work with a commercial real estate Broker who is involved in his or her real estate community and maintains working relationships with competing brokerage firms.
That’s our philosophy here at SVN | Southgate Realty…on every single deal. By working with the entire brokerage community, including our competitors, we guarantee our clients increased visibility, which leads to increased offers, which results in increased value.
By adhering to the idea that value is driven by cooperation we set our clients up for success…to the tune of 9.6% more per square foot! If you are interested in learning how our business model can increase your bottom line, contact us today at 601.264.4622.