'Uberisation’ in the property industry –Exclusive coordinated brokerageEDITORIAL | National

Written by

John PreeceHead of Occupier Solutions, Australia+61 424 225 090John.Preece@au.knightfrank.com

Pictured: Virgin Active

In the course of normal pleasantries yesterday morning my UBER driver, Sanjeev, asked me whether I workedfor myself, or for a company. An unremarkable comment you might think. He dropped me at the airport, whereI used the QR code on my pre-checked boarding pass in my apple wallet to leave my bag at the quick bagdrop, and then updated some documents in Dropbox for others to collect after the ANZAC day holiday. And Iconsider myself a bit of a Luddite.

None of this would have happened 10 years ago, perhaps even five years ago.

However, we are living in exponential times, where the pace of change is faster than it has ever been before.Yet despite this, the way in which many real estate agents act is much the same, as it has been for the last 50years or more because, I am told, “if it ain’t broke, don’t fix it”.

Well, as far as I can see, the taxi industry, hotels, TV networks, and the entire employment system weren’tbroken, yet we still have UBER, AirBNB, Netflix, and freelancer, amongst other platforms, causing considerabledisruption in these established industries. Real estate is ripe for attack, and it is long overdue.

I recently had the good fortune of launching Knight Frank’s 2017 Global Cities Report in Sydney, in which I ledwith the following:

“I want to begin our session with a bold statement, a statement that will send shivers down the

spines of some property agents. The traditional real estate brokerage model is dead.”

“Like a tanker with its engine cut, it will go on for some time before drifting slowly to a halt, but thereality is that the basic, blunt form of agency which has applied in the past will simply not besufficient to survive in the world of ‘uberisation’.”

The brokerage model is not completely dead, of course. However, everyone now has an expectation of abespoke, individualised and high quality service, as opposed to being told to ‘select one of the followingoptions’ from a pre-set menu of services made available.

It is this desire for change, for a bespoke and professional service, that is driving Knight Frank’s innovativeapproach to brokerage. An approach that accepts that an agency can handle a tenant’s requirementexceptionally, and exclusively, yet still be paid a leasing fee from the landlord, without detriment to thetenant’s commercial terms.

In Australia, this is currently seen by many (dare I say most) as a conflict of interest. The market has beendriven to believe that you either represent the tenant OR the landlord, but never both. In contrast, in the US,this is common practice.

Yes, there are matters of confidentiality, and these must be handled with the utmost care. But, this reallycomes down to professional ethics and personal standards. At Knight Frank, confident in our personalstandards, professional ethics, and exceptional real estate skills, we are happy to be at the forefront of changein the industry.

In recent times, we have had a number of clients approach our business for a service which would normallyfall between Office Leasing and Occupier Solutions (because the industry tells us we are either one or theother, but never both). This is a service which is right in the sweet spot of the US brokerage market –Exclusive coordinated brokerage.

Exclusive coordinated brokerage suits those clients who already have in-house real estate personnel, butrequire the assistance and expertise of a real estate agency who can dedicate resources to sourcing andsecuring premises on their behalf, as well as, providing an advisory service regarding the commercial andoperational terms of a transaction, present financial modelling, and assist with developing feasibility andbusiness case modelling. In reality, a real estate offering for the tenant funded by a third party – the landlord.

This model will not suit all occupiers. Those who require a fully independent representative are still bestadvised to approach the market with a ‘true’ tenant representative, a service which Knight Frank OccupierSolutions is focussed upon. On a personnel level, I firmly believe that this remains the best model for alloccupiers who don’t have a specialist in-house property team.

Yet, for those with expertise in-house, but without the significant resources needed to liaise with every singleagent in every market, the exclusive coordinated brokerage model can work very well.

There has never been greater collaboration between Office Leasing and Occupier Solutions at Knight Frank.With the arrival of David Howson to Sydney as the Head of Office Leasing, Australia, we have re-aligned ourcombined strategy to focus solely on the client’s desired outcome, and not “is this a landlord or an occupierrequirement” as the industry informs we must.

It’s obvious, but this ‘outcome focussed’ approach allows us to better serve both our occupier and landlord

* Content updated on 23/05/2017* View disclaimer at KnightFrank.com.au/TOPFLOOR

KnightFrank.com.au/TOPFLOOR

clients. For occupiers, access to live market data through our exceptional network of leasing agents across thecountry is valuable to our Occupier Solutions professionals in formulating the best real estate advice. For ourlandlord clients, a deeper understanding of occupier trends and needs will allow them to better position theirassets to meet the requirements of the market.

Knight Frank have taken the time to understand our business and the co-working industry at a level which gives me the confidence to continue to work

with them for our important property decisions”.

Brad Krauskopf, Co-Founder & CEO of Hub Australia

We are currently working for a number of portfolio occupiers on an exclusive coordinated brokerage mandate.These include:

Virgin Active, who are rolling out a new premium range of health and wellness clubs across the easternseaboard (1,000 sqm to 3,000 sqm in A and premium grade buildings);

Hub Australia, the rapidly expanding co-working operator with a five year plan to dominate the Australianmarket; and

WorkInc, another co-working operator which is rapidly expanding across the eastern markets.

Our occupier clients require the high quality and bespoke service that we can provide. For many, this will bethe traditional tenant representation model, but for some, an exclusive coordinated brokerage model will bethe perfect fit.