16 Jun Landlords court brokers with events, incentives
Brokers say the gifts don’t sway recommendations to their tenant clients.
Levi Smith, principal of the P.A. Commercial brokerage, said the events “make things easier for people.”
“The landlords are thinking that by paying money, you’ll be higher on the list for the showing or tour, which isn’t necessarily true,” he said. “If you’re listening to your tenant, you can narrow it down to five or six buildings. Either the landlord is going to be there or not. Whether they gave you a $50 or $100 gift card to see their building doesn’t make a difference.”
Rob Meneghin, a senior associate in Southfield-based brokerage firm Advocate Commercial Real Estate Advisors of Michigan LLC, said the events have been non-factors in his interactions with his tenant clients.
“In my experience, there has never been a correlation between completing a transaction and receiving a $100 gift card.”
Barbara Crane, a San Antonio-based broker who is president of the CCIM (Certified Commercial Investment Member) Institute, a commercial real estate trade organization, said that landlord incentives for brokers “are nothing new.”
“It’s also important to note that the use of incentives at all is very much market driven,” she said in an emailed statement. “If the market is booming, incentives aren’t even necessary. In a market with heavy competition, however, they’re employed to draw interest from brokers to tour the property. That’s where their influence begins and ends. No raffle item, party favor or branded souvenir will influence a broker’s assessment of the attributes of competing properties under consideration by their client to whom they owe a fiduciary responsibility.”
And she said there are no ethical concerns about the incentives.
“The primary goal of any CCIM (designated) broker is to match the client with the right space. That’s done by running appropriate financial and market analyses to provide a data-driven decision to the client. It’s an objective analysis free of any outside influence. Strong ethics is a cornerstone of the institute and CCIMs worldwide. Strong ethics, intimate knowledge of the market and sophisticated and comprehensive analyses are among the primary reasons clients seek out the designation in markets they’re looking to do business in.”
Jennifer Cordon Thor, associate professor of management in the Oakland University School of Business Administration, said the gifts themselves don’t necessarily pose ethical problems. But they could if they are not disclosed to tenants.
“It depends on how upfront and honest the brokers eventually are with their customers,” she said. “When you retain a broker to show you properties, you are doing so based on the assumption that they are going to take your needs into account, your knowledge of the market, and show you what is best for them. The act of giving the gifts isn’t necessarily unethical. It’s if these gifts influence the decision on what properties they ultimately show to their clients and customers.”
She also noted that “this is going on in all kinds of businesses, not just real estate,” particularly with regard to so-called “social media influencers.” There have also been concerns in the pharmaceutical industry, she said.