Ritchie: Cabinet of cooperation
A Santa Clara County vendor disparity study released last week found that local, minority-owned businesses amount to only about 15% of the county’s total payments. File Photo.

When I first came to downtown San Jose from downtown San Francisco in the cold winter of 1987 to help my eccentric, hyper-charismatic father tend to his sprawling and struggling West Coast eight office commercial real estate (CRE) brokerage chain, I was amazed at how friendly and cooperative the local commercial brokers were.

I was not a broker per se in SF prior to that, but worked for a major developer that built four office buildings with just two of us as employees in charge of the marketing and leasing to all the brokers. I got a bird's-eye view of the landscape of brokerages and agents as they welcomed us into their inner sanctums as a generous commission paying landlord. I would say that experience helped shape my long-term philosophy on what works and does not work in this competitive business.

San Jose has lock box keys — what in the world was that? The idea that agents would share access to their own commercial listings without being present for tours was a mystery to an SF boy where if anything the competing broker would try to lock you out. And, wait for it, there is a nonprofit trade association for the benefit of the local brokerage community? That monitors the lock box system and has an annual awards and development tour event? Indeed, there was and is: The Association of Silicon Valley Brokers. Nothing remotely akin in San Francisco.

This cottage group of volunteer brokers still runs on a shoestring budget with one part-time administrator. Founded in 1976 by the pioneer tech CRE brokers in the Valley—who interestingly were mostly Vietnam War vet commercial pilots who looked out the cockpit flying in and saw the future in those empty orchards—the organization has been a steward of cooperation. The board is made up of mostly the owners, leaders and managers of each competing firm, and there is no better tonic to the acid of business than sitting at a table and breaking bread monthly.

I am still on the board and have served as president in our annual rotation maybe five times. We have two big events each year, an awards banquet in March and a golf tournament in September. We turned the events toward local charities some 20 years ago and have proudly raised more than $2 million in that period from generous industry donors. We give to good solid local groups dealing mostly with housing and homeless issues, domestic violence and veterans needs, the latter a nod to the founders.

I have quipped that a commercial real estate transaction in San Francisco is 80% broker dagger play and 20% client satisfaction. In Silicon Valley it is flipped at 20% knives out and 80% happy client. I give a lot of credit for this due to the existence of the Association of Silicon Valley Brokers, as well as a much more overall collegial business climate in the Valley, something to do maybe with the deep agrarian roots here. In SF it’s about who you know, here it’s about what you know.

I have watched the blazing inferno of the residential brokerage dark star the National Association of Realtors with interest lately. Apparently, its empire of forced membership to get access to home sale listings on both seller and buyer sides—the “MLS”—has now turned on the association in court and is sawing off its back porch in several class action lawsuits that claim it is a form of commission price fixing. Woe be it that we would have such a problem in the commercial real estate brokerage industry where every commission is uniquely negotiated and often again after it is signed. Our craft is not for the faint of heart.

But the real iron fist of the National Association of Realtors is controlling the data and that has profited the group enormously. Sadly, in the CRE industry our collective efforts in the early information age to have our own form of a commercial MLS all failed after many industry and private for-profit attempts. Except for one: CoStar/Loopnet.

Subscriber-only database CoStar and its sister public-database LoopNet have an absolute textbook monopoly on CRE data and research and often act that way. That being said, I am a big fan, supporter and extravagant subscriber, though it is expensive.

When the first market-based research and listing services came out in the mid-1990s I was all in as a smaller firm that could never support an in-house research department, that was the competitive bludgeon of our national and international competitors. The leveling of that playing field serves only to enhance us smaller firms’ advantage and I dare state there is no more reason for the giant firms to host expensive in-house research departments, CoStar owns it all.

But in simple math I calculate that we as the collective CRE firms in the Valley spend more than $3 million per year for CoStar/Loopnet services for what arguably could be done in the seamless App+AI economy for less than $250,000 per year as a trade association endeavor.

Perhaps we take a page out of the cabinet of cooperation and do try to create again our own system, or perhaps a hybrid with CoStar as a partner that slashes the communal costs and creates data perfection. We could all benefit from both of those.

Lucescamaray Blog columnist Mark Ritchie is the owner of commercial real estate brokerage firm Ritchie Commercial, and has spent his entire career in commercial real estate. His columns appear every second Wednesday of the month. Contact Mark at [email protected].

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