National vs. Local Commercial Real Estate Cos.

Why you don’t need a large national firm to sell your commercial property!

When choosing a commercial real estate company, there are more options available today than possibly any point in time. So the question is “Should I choose a national brand or a smaller, local commercial real estate firm?”

In decades past, the fragmented nature of commercial real estate markets created unnecessary complications for investors. If you were a buyer on the west coast, how could you gain access to financing, local knowledge, and deals in the southeast? This ultimately, as you likely guessed, led to the consolidation of many regional firms and creation of what we now know as national commercial real estate firms. These firms touted their ability to provide information, access to capital, and most importantly transactions anywhere in the country if not the world thus simplifying matters for investors.

So does this “advantage” of national firms still apply today?

Before I answer that question, let me provide some context about the Purvis Commercial Group. I created the Purvis Commercial Group as a hybrid commercial real estate group. As we are affiliated with KW Commercial, we are officially part of a large national brand with more than 2,000 commercial real estate brokers. However, as an independent group we specialize only in aiding clients buy and sell multifamily, net lease, and medical office properties. This keeps our focus on fewer asset classes in order to achieve our clients' goals.

Why Choose a Local Commercial Real Estate Firm/Team?

Technology Advancement

Let’s debunk the primary reason for using a national firm. That is national firms provide access to deals, access to capital, research/data, and nationwide buyer reach. Advances in technology, essentially wipe this advantage off the map.

First, local firms and investors alike have access to most, if not all, active on-market properties via online platforms such as Costar, Loopnet, and Crexi to name a few. These platforms allow for almost instantaneous marketing of multifamily and net lease properties while providing industry standard research.

Second, these same platforms allow both national and local commercial real estate firms to build out vast databases of buyers. These databases ensure that your commercial property gains the greatest amount of exposure to the desired buyer pool.

Last, access to capital markets and financing has never been more abundant. An online search of possible financing options will seem never ending. Further, whether you’re looking for capital market solutions from CMBS’s, Fannie Mae, Freddie Mac, traditional financing from large banks, smaller regional banks & credit unions, or private investors, brokers at national and local firms should be able to provide many contacts willing and eager to facilitate the transaction. This is a critical service in the completion of most deals and one that should not be taken lightly.

Fewer Conflicts of Interest

The commercial real estate broker at the national firm works for you, right?

That may depend on the situation. Many of the large national firms also have large corporate clients. And these large corporate clients have commercial real estate needs too. In fact, they have constant real estate needs. Acquisition, disposition, leasing etc… The fees from these corporate clients will always be greater than the fees generated from your transaction. Oftentimes, many multiples greater than fees your transaction can generate. As such, the loss of one of these corporate clients can have a significant impact on the national firms profitability. So if you are on the opposite end of a transaction with one of these corporate clients, are you comfortable with that thought? Are you completely secure in your representation?

Also, many of these national firms offer their own in-house financing option. As a former commercial banker, that always felt a like another conflict of interest. Part of a lender's role is to aid in necessary due diligence as a neutral third party. Can the in-house lender really be considering neutral?

Greater Client Attention

You’ve worked hard your entire professional career. You’ve amassed an amount of liquidity, net worth, and a real estate portfolio you are proud to own. So let me ask you a question.

“Did you work this hard to be another number for a largely faceless corporation? Of course, large corporations always care so much about their clients!”

Wait…? Does that make sense? I didn’t think so either.

Let’s face it, large corporations care about their bottom line first and last. Take a look at any national commercial real estate firm’s website. What you’ll see are hundreds of properties. Does that corporation really care which of those properties sell as long as their financial metrics are achieved?

This leads me into the final, and possibly most important, reason to work with a local commercial real estate firm: Client Attention.

First, generally speaking a local firm will take on fewer assignments. Let’s face it they don’t have the staffing for hundreds of property listings. That’s great news for you, the seller. This equates to greater attention on your property and goals. Your ten to fifty

unit apartment building doesn’t have to compete with a property ten times the value for your broker’s attention. So you’ll get the attention you deserve and your goals are more likely to be met.

Second, better splits at local commercial real estate firms once again equals more attention for you, the client.

Whether working with a national or local firm, the commission rates are very comparable in most cases. However, those national firms take a larger percentage of that commission before the agent is paid. This is usually called “the company dollar.” This is the amount, may or may not be capped annually, the company/office makes on the transaction. The company dollar is intended to cover the extremely large overhead of brokerages. The larger the brokerage; the larger the overhead.

Local firms will, generally, have lower costs and most likely an annual cap on the amount of company dollar paid. This will invariably lead to better splits for the commercial real estate broker. Thus, the local firm’s broker will have to complete fewer transactions in order to reach a given income level when compared to the national firm broker. Again, the local commercial firm can deliver greater attention to both your goals and property!

National CRE Firm	Income Goal: $300,000	Avg. Transaction: $750,000	Avg. Commission $22,500	Agent/Firm Split: 50/50	Transactions Needed: 27
Local CRE Firm	Income Goal: $300,000	Avg. Transaction: $750,000	Avg. Commission $22,500	Agent/Firm Split: 80/20	Transactions Needed: 17

If the question is, “ Should I choose a national brand or a smaller, local commercial real estate firm?” In the end, it's completely depends on what you, the client, expects. Some commercial real estate investors enjoy the cache that comes from saying they work with the largest company in a given market. As we've discussed, these corporations work with some of the largest global brands. However, I believe there are many compelling reasons to choose a local commercial real estate firm. As I've illustrated, technology advancements have permanently closed the national/global reach and information gaps. Also, there are likely fewer conflicts of interest that must be navigated. Lastly, and most importantly, a local firm is significantly more likely to provide greater attention to your end goals as a commercial real estate investor. They won't have hundreds of properties that you'll be competing with for attention. Finally, the local commercial real estate firm will have

superior commission splits allowing the broker to focus on fewer clients and assignments.

So should you choose a national or local commercial real estate firm?

Contact Us

Wes Purvis

Director & Founder

Purvis Commercial Group

Coldwell Banker Schmidt Realty