“The best brokers are not just intermediaries—they are strategic partners who create value by running a disciplined, competitive process."
A note of thanks to The Real Estate Research Institute for supporting the important research we cover today.1
Brokers in commercial real estate transactions are ubiquitous, but do they add value for the principals they represent? We assumed so - c’mon, some of our best friends are brokers - but now we have an insightful working paper with data-driven answers, so we can specifically ask: In general do brokered deals sell for higher prices than they would have without a broker? Answer: Sorry, no.1 But that belies a more interesting and nuanced set of truths, including why brokers are still likely accretive to pricing for the Haystack’s readers even if neutral to pricing in the main.
At a high-level, real estate’s structural illiquidity relative to stocks or bonds creates an information asymmetry problem that brokers are supposed to fix. Basically, no real estate principal trades enough individual assets to know the market well, leaving them exposed to mispricing risk. Brokers, in theory, bridge this market intelligence gap. Also, principals are not as skilled in coaxing buyers up in price, brokers would tell you.
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