By John Jarvis
The business of corporate real estate, it turns out, isn’t just about the buildings
Michael Porter is a brilliant professor at Harvard Business School who collaborated on the Five Forces Framework for analyzing an industry based on its competitive dynamics. These five forces include the relative bargaining power of buyers and sellers, the threat of substitutes and new market entrants, and the rivalry of the existing industry players. I find this framework to be a fascinating way to consider the world of corporate real estate, where all of these elements are on full display, every day. Professor Porter is also well known for his thoughts on strategy, where he says, “Strategy is not a matter of being better—it’s a matter of being different.” Yeah, I like that. And so, with a tip of the hat to Professor Porter, I offer a simple premise and a very different take on the business of corporate real estate—it turns out this business isn’t just about buildings. It’s about people.
Of course, builders and developers may challenge my premise. They may say that they do, in fact, design, build and deliver beautiful buildings. Which is true, to a point, except that you can’t cash proforma rent checks. As a builder, you are going to need a tenant or a buyer, aka people, to step into the equation and buy what you are selling. Enter the tenant-side/buyer-side corporate real estate broker, whose role is to drive a robust, ethical process in order to discover the market clearing price for a particular building at a particular moment in time. And once you, as the broker, realize that this process is fundamentally about the people involved, everything changes for the better.
Business leaders will always need great buildings to house their growing teams. The very best work environments are like magnets, they exert an attractive force that draws your people in, because that’s where their teammates are and because that’s where the very best work is getting done. Like a coral reef teaming with life, your workplace is a veritable ecosystem of innovation and creativity, abuzz with activity. But without the fish, coral turns to skeleton on the seafloor, and without the people, it’s just an empty building*.
*Shout out to Phil Kirschner for the coral reef analogy, it’s a good one.
Texas Hold’em is an interesting game. It is a form of five-card poker where each player is dealt two cards face down while there are five common cards dealt face up in the middle of the table. Fascinating to realize that when the cards are all dealt, there is more known (the five shared cards) than unknown (each player’s two private cards).
This is often the case in real estate negotiations as well, where there is so much information available to inform your decisions if you just know where to look. And here’s the thing. The very best players of Texas Hold’Em, they don’t just play the cards. They play the people. They notice things—like players’ patterns, timing, tendencies and tics. Somehow these elite poker players are able to know with a high level of confidence the two down cards that the other players are holding, just by watching, and by noticing.
Professional Poker player Daniel Negreanu is one of the best at this and fun to watch as he shares his thoughts out loud while playing his hand, trying to narrow down the range of possible cards his opponents are holding.
Now back to the game of corporate real estate, where the role of the tenant-side broker is to be a strong and effective advocate for the tenant, who maybe deals with their lease once every five, seven or ten years, while sitting across from professional landlords who deal with hundreds of leases every day. The very best tenant-side brokers are able to level that unbalanced playing field and create the leverage that benefits the tenant by focusing on the people involved just as much as the building and the deal terms. Like the poker player, the tenant’s broker has an opportunity to notice things. Because those professional landlords have their own priorities, preferences, patterns, incentives and circumstance. Said another way, often the characters matter as much or more than the comps.
There it is. My different take. The business of corporate real estate, it turns out, isn’t just about buildings. It’s about people. The best tenant-side brokers know this, and they use it like a superpower.
Thank you, Michael Porter, for reminding us that it isn’t enough to simply be better, we need to be different. And in so doing, we can rise above the rivalry of existing industry players and stand out for our fresh thinking and novel ideas.
And maybe win a poker hand or two.
