December 22, 2014, GlobeSt.com
WASHINGTON, DC—A majority of respondents to a GlobeSt.com poll asking whether full-service brokerages can avoid conflicts of interest even though they represent both tenants and landlords responded in the affirmative.
Some 33% of respondents agreed that a broker’s professional ethics means he or she works in the best interest of the client and 19% noted that standard disclosures highlight any potential conflicts, keeping them at bay.
In contrast to those views, 21% stated that landlords reap the benefits in such a scenario. Another 25% said that any advantage on one side or the other is impossible to separate from the regular workings of the market.
In short, most of the respondents to the GlobeSt.com disagreed with the findings of a recent report that highlighted this issue. Commissioned by the tenant-only firm Cresa and conducted by Peter Smirniotopoulos, founder and principal of petersgroup consulting and an adjunct professor of Real Estate at George Washington University, the study concluded that tenants are facing an uphill battle in getting a fair shake from the full service brokerage when a landlord-client’s interest is also at stake.
To be clear, this was not an outlier view. GlobeSt.com found many industry players that agreed with Smirniotopoulos’ findings, more or less.
"Historically, brokers have represented both owners of real estate and users of real estate," Ann Hambly. CEO of 1st Service Solutions tells GlobeSt.com. "What has changed in the last 10 years is that the market has begun to appreciate that both owner and users cannot be well served by the same company."
Amata Realty Group CEO Ron Bockstahler noted to GlobESt.com that because many of the larger brokerage firms earn a substantial part of their revenue from landlords it makes it very difficult for them to push hard for the best possible deal when they are representing a tenant.
"Many firms try to convince tenants that they have a separation between leasing agents and tenant reps, but this is next to impossible in today’s work environment," he says.
Full-service brokers, however, have a few choice words to describe these theories—starting with bunk.
It simply isn’t feasible for both ethical and practical reasons for a brokerage to favor a landlord over a tenant, Newmark Grubb Knight Frank CEO Barry Gosin told GlobeSt.com in a rebuttal published to the study.
The commercial real estate sector is a clubby, insular community, where most of the players in the individual markets know each other or know of each other, he said.
"The minute word gets around that we do not give our best to our clients, that we favor landlords over tenants, we lose all credibility in the market."
In the end, this was the argument that resonated with the majority of the respondents.