Written by | Charlie Westbrook
We are a mixed-use brokerage – meaning we sell and lease both commercial and residential properties. We firmly believe that in order to offer our clients the best service, we need to be able to offer pointed advice about highest and best use, regardless of whether the use is a commercial one or a residential one. This is the primary reason One South adopted a mixed-use model.
But an interesting offshoot of being mixed-use is that we get to see up-close and personally how each side operates relative to the other. The way real estate is brokered in both worlds differs tremendously, and not always for the better. Being intimately involved with how both sides of the aisle work, it exposes us to what each side does well … and by the same hand, what each side does not do so well. Trust me, each side could learn a lot from each other.
At One South, we spend a great deal of time applying best practices from one side of the aisle to the other and use it to our client’s benefit.
Searching Differs Greatly
One of the most critical (and confusing) difference between residential and commercial real estate is how one goes about searching for available properties.
Searching for properties in the residential world employs a system that is far more structured and collaborative. At any given time, upwards of 90% of the available residential properties can be found in the Multiple Listing Service (MLS). The MLS is a mandatory database organized, maintained and monitored by the Richmond Association of Realtors through an exhaustive set of rules. Accuracy and compliance are enforced by fairly stringent fines (or suspensions) which manages to keep the database extremely well organized and current. Anyone who has had the pleasure of having direct access to MLS will tout its virtues, especially when compared to the alternatives.
Now, on the commercial side, search is far more … uhhh … nuanced. Commercial properties can be found in one of several databases, or not at all. And unlike the residential database, the penalty for incorrect, incomplete or dated information is pretty much nil. There is no mandatory participation by agents, no collective sharing of listing data, and no enforcement body to make sure what information is available in the databases actually resembles reality. Yet despite all of the shortfalls, properties still sell.
The Impact of Fragmented Search
Now, in actuality, the perceived lack of organization and/or participation by brokers in the sharing of listing information has two totally different impacts. On one hand, the lack of a central database forces the public to lean more heavily into the brokerage community for information. Yet on the other hand, it encourages owners and investors to either connect with multiple brokers simultaneously or reject the notion of engaging a single broker for fear of missing an unpublicized opportunity.
So while forcing the public to reach out to find out what is available, it simultaneously undermines the willingness of a potential client to commit to a formal arrangement for representation.
Where to Search
Regardless of the impact, here are the 4 primary sources a potential commercial investor needs to search:
CoStar is a closed database reserved for brokerages, appraisers, lenders and developers … the public cannot access it. From a technology standpoint, it is a very robust system and it offers high level of functionality and it blends search, analysis, research and reporting. But since it is still a voluntary database, the underlying information is still questionably accurate. CoStar, for their part, does try to maintain the highest level of accuracy possible but many brokers and owners are reticent to fully disclose all of the terms surround tenants, occupancy and availability.
NOTE – One South Commercial is a paid member of CoStar.
LoopNet, which is owned by CoStar, is more of the public facing database of commercial properties for sale. LoopNet is an open database and allows for pretty much anyone to create an account and either search or place in it properties for sale.
LoopNet’s catch is that it limits visibility based on free versus paid memberships. If the listing agent has a paid account, then free members can see the agents listings. Conversely, if a searcher has a paid membership, they can see every listing available, regardless of whether or not the listing agent is a paid member. Make sense? Effectively, to be entirely available, one side of the other (or both) must have paid membership.
Like CoStar, LoopNet is elective and users suffer no penalty for dated, inaccurate, or missing information.
NOTE – One South Commercial is a PREMIUM member of Loopnet.
The Central Virginia Regional MLS also contains commercial properties. As many agents have practices that touch on both residential and commercial properties (especially here at One South), we use the Commercial MLS more than the strictly commercial brokerages.
Another benefit to the Commercial MLS is that it syndicates to all of the national portals, unlike either CoStar or LoopNet. Properties in the Commercial MLS are pushed out to a network of well over 100 sites that contain for sale data. For many, this is of great benefit and creates awareness across multiple platforms.
NOTE – One South Commercial is a member of Commercial MLS.
The ‘Whisper’ Network
The least publicized network in Richmond (or anywhere, for that matter) is what we like to call the ‘whisper’ network. The ‘whisper’ network works like this … a property owner mentions that he/she might be interested in selling but refuses to formalize a listing agreement. Owners typically know the two to three brokers that work their specific asset type and will let them know that, for the right price and terms, their property could be had. It is up to the broker to identify the correct buyer/developer and make them aware of the opportunity. Sometimes it can take years before a deal is struck.
Being in the circles where these whispers are heard takes time, effort, and constant diligence. Most property owners are business people and have no real attachment to their property more than they do any other asset. A reasonable offer at the correct time will usually receive serious consideration.
NOTE – One South Commercial excels at the ‘whisper’ network.
In addition to the databases mentioned above, several other smaller, more niche bases sites exist. 42 Floors, CityFeet and everyone’s favorite bastion of inaccuracy, Craigslist, all sometimes carry commercial properties for sale or lease. Generally speaking, these all carry far less traffic than the ones referenced earlier. But sometimes you get lucky …
Know the Databases
The last point about search is knowing which database (or network) will bring the highest price and best terms. The public assumes that all databases have the same information … this could not be further from the truth, especially when multi-family properties and land are concerned. To fully cover your bases, searches should be conducted in every available database.
Furthermore, certain property types overlap databases and should be placed in each in order to achieve maximum exposure for the owners. Know that each broker community tends to work with different sets of investors and knowing who works with whom largely determines the correct database strategy.
So the bottom line is that if you want to cast the widest net, you really need a brokerage that is connected to all of the relevant databases … CoStar, LoopNet, Commercial MLS, Residential MLS, 42 Floors, CityFeet, Craigslist and the ‘Whisper’ Network. Having a firm that can access each is critical in order to find the property you are looking for.