Startup companies revolutionizing Commercial Real Estate
By: Anthony Ramamsumiran •
real estate revolution
Every year thousands of tech startups launch in the U.S, this is fantastic news for commercial real estate (CRE) brokers. When you think about it, all of these start-ups could end up very successful and with success comes expansion. It is paramount that brokers keep existing relationships good with these startups to keep them using their service if growth happens.
With an ever-evolving demand for commercial property, CRE’s are starting to have to re-think their strategies. Traditionally brokers are trying to sell long leases i.e. 5 or 10 years because this is where they make the most money. Startups are not trying to make agreements for that length of time because more often than not they would need some flexibility in the length of the lease and how much it would cost over time. It is a startup after all.
A startup company could be off putting to some CRE’s but there is a wealth of potential such as repeat business if growth occurs, a wealth of opportunity for referrals and experience in working in a really undervalued sector. Brokers looking to target this sector have to understand the unique preferences startups might require.
One thing that is probably at the top of a startups list is flexible lease terms. A startup being volatile is pretty standard as they find their place in their sector. They can experience growth, get bought-out or completely fail. As mentioned briefly above, duration and size are bound to be up for debate. Without knowing where they will be in a year, flexibility is a must. Depending on funding or sales success, expansion is always a possibility. A broker should be willing to accommodate this as the potential is always there which is always more lucrative for the CRE.
A fair price point is also important to a start up, this might sound obvious but access to cash flow might be limited so commitment to a long lease isn’t in their interest. In cities such as New York, office space will come at a high premium. Office space at an average has an annual price tag of $14,800, that’s a lot of a startup. Alternative cities are becoming more popular over the past few years because of the attractive costs for the startups and their employees. These alternative cities provide the potential of becoming a long-term head office with lower costs and more employee friendly facilities.
Startups have made CRE’s think alternatively in regards to office space. The need for office space in the heart of a city is in demand. Local amenities are also heavily favored making the startup look like a desirable place to work. Desired office space near research universities and other startups are always high up on the list.
Startups recently are taking standard workplace culture and throwing it out the window and CRE’s need to adapt to these requirements. If brokers can attract startups and cater to their needs, it will be heavily beneficial to them. The startup community is a tight knit group and this could lead to a wave of new business due to the untapped potential.