Musical chairs is no game to tenants - office building construction in Manhattan, New York, New York - Third Quarter Review

In the present market, brokers are continually faced with the problem of having too many tenants for too few spaces. Since the New York region is experiencing an unprecedented tightening in the office market, brokers are beginning to experience the feeling of the musical game we played as children, only this time the chairs are the buildings and our customers are not moving to a happy tune. Tenants find themselves with no place to sit.

Inasmuch as solid activity has been continuing in the Downtown market as well as Midtown, we have all been scrambling for available space for our customers at a frenetic pace. Most of us see more lightening before any major speculative office building construction starts in Manhattan, so this cycle is not, unfortunately, reminiscent of the early and mid-eighties. Asking rents for Midtown office spaces are still rising - and rapidly, we might add.

Mitchell Steir was recently quoted in the New York Times as saying "I find it troubling to be in a market where you can have a handshake on a deal at $40 before lunch, and then the owner goes to lunch, talks to his friends or employees, and comes back and announces that the price is $45."

If we must respond to this rapid change of pricing once a handshake is given, inevitably something very negative about our industry will be conveyed to our customers. Even if we are only functioning as messengers in relaying contradictory price information to a decision-maker, we are contemporaneously reflecting this same poor image of some of the people we do business with (albeit only a few) back at ourselves. By having to convey to the customer that the handshake he was given did not represent a commitment, but rather a pretense, we are portraying our industry as one which can't be trusted - and this semblance of our profession is one none of us wish to be reduced to.

As we all respond to the pressures of satisfying customer's office space requirements in a market where demand outweighs supply, brokers must find better ways of handling the space we manage and the information we send out to the brokerage community at large.

Notwithstanding the case cited above, we also have the dilemma of fluctuating price increases prior to "the handshake." This too can be most disconcerting. Inasmuch as we all subscribe to the major listing service companies (and at Hart of New York we update our system on a daily basis), it would be a good idea for those of us who control space to be particularly diligent about forwarding the information to the listing service in a timely manner. In conjunction with this, we must work more aggressively to see that the senior account managers at the listing services increase the speed at which their clerks feed the information into our systems. We believe it would be beneficial to all of us to begin contracting with the listing companies to update the information more frequently - given the nature of the present market, and the technology and speed in this information age available through the Internet. Once a month is no longer enough. (The listing service companies will undoubtedly vicariously profit as the brokers benefit from the more frequently updated status reports.)

Another way we can improve the communication process to better serve our customers is to better communicate! While some people find it difficult to return the myriad calls they receive pertaining to space availabilities, we must be cognizant of the customer's perception of our industry when it cannot only take a long time to receive necessary information about a space or building, but said information changes (usually not in the customer's favor) shortly afterwards!! In an age of voice mail, e-mail, and any other mails yet to be discovered, perhaps the response time in receiving pertinent details can be improved.

By giving each other the same respect, professionalism and cooperation we demonstrated in the early Nineties, we will be able to maintain the sense of community which is vital to our profession in up markets as well as depressed. The brazen words "take it or leave it" will come back to haunt the one who speaks them. What goes around comes around, as those of us who have been through a few real estate cycles can attest to.

Further, in maintaining a courteous appreciation of other professionals, we ultimately show respect to the prospective tenants. In all other businesses, "the customer is always right." It would serve us well to remember that the tenant a broker is calling you about is "a customer waiting to be serviced" - no matter what kind of market in which we are currently working.

In so doing, even the landlords will benefit. A customer who has been shuffled around from space to space and loses a few prospective sites because of broken promises will learn to distrust all landlords. However, the tenant will surely remember the owner who treats them as a valued and respected customer, and they will wish to do business with this landlord in the future. Moreover, the tenant will remember the broker who represented them in the transaction, and this distrust and/or appreciation is likely to spread to the broker as well. One who's word was his bond and handshake could be counted on will be hired again, even in a down market. This is basic good business practice in any industry.

As tenants find their options continuing to shrink and their frustration increasing, it is imperative that we strive daily to extend good business practice to our customers and brokers alike, regardless of the size of the deal. While this increase in prices will not go on forever, we must be careful to remember that as buildings through the centuries are built to last, so too should our reputations be established on strength of character and dependability. We need our customers to depend upon us as professional pillars.

The game of musical chairs, like the real estate market, depends upon the law of supply and demand. Someone always ends up without a seat because there simply aren't enough of them. There is nothing we can do about the market, which, like music, moves to certain rhythms and cycles. But we can all - broker professionals and landlords alike - learn to change the music, so our customers will come back for another round of fair play.

COPYRIGHT 1998 Hagedorn Publication
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