admin / June 1, 2022
White Paper from SVN — The Law of Supply and Demand
Time’s Up for Non-Cooperation in CRE
The Law of supply and demand
By Kevin Maggiacomo
The clock is ticking on what is a systemic issue in commercial real estate investment sales: Non-cooperation and misaligned incentives create a loophole where brokers’ interests take precedence over sellers’ interests, resulting in an environment where most sellers are selling for less than fair market value. This model and way of doing business means that money is being left on the table by brokers and, more importantly, their clients.
In this white paper, we argue that:
- Today’s typical way of selling CRE assets is illogical and driven by misaligned incentive structures, instead of sound economic principles
- The CRE industry urgently needs to embrace cooperation to drive shared value in the future
- Cooperating proactively with the brokerage community is the most effective way to increase demand for CRE assets on the market
- Savvy brokers have the chance to embrace efficient, modern, and informed ways of working to achieve the best price and the best terms for their clients. We should know — SVN has been working like this for over 36 years.
Read the full White Paper Here (click to download)
The law of supply and demand
The residential real estate industry has got this. This part of the real estate world has long embraced the notion that increased exposure to a property can boost that property’s selling price. Residential real estate brokers are comfortable with the fact that they can’t possibly know every potential buyer for every property they sell. Their response is to widen the net by cooperating with a network of brokers who have relationships with buyers. They know that this approach means shared value for everyone. This dynamic comes down to one of the essential and fundamental laws of economics: the law of supply and demand. If the demand for a product or service is driven up, higher prices will follow. Conversely, reduced or sluggish demand for something means lower prices.
AT SVN WE ARE CONVINCED THAT, JUST AS IN THE RESIDENTIAL REAL ESTATE MARKET, COOPERATING PROACTIVELY WITH THE BROKERAGE COMMUNITY IS THE MOST EFFECTIVE WAY TO INCREASE DEMAND FOR COMMERCIAL PROPERTIES FOR SALE
To carry this logic over to the real estate world, more offers on a property means a higher sales price for the seller. So far, so obvious, correct? The principle of supply and demand is something we all see playing out every day. Today, global supply chain issues are making a plethora of items scarce, driving up global competition and demand for those products and consequently resulting in higher prices. At SVN we are convinced that, just as in the residential real estate market, cooperating proactively with the brokerage community is the most effective way to increase demand for commercial properties for sale. Empirically, this plays out in practice time and again.
Stay tuned for a new featured topic each week:
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The law of supply and demand
- Leaving money on the table
- The unfortunate power of misaligned incentives
- What does cooperation look like? & What do SVN® franchisees say about cooperation in CRE?
- Why now? & What you need to know
About SVN
The SVN® brand was founded in 1987 out of a desire to improve the commercial real estate industry for all stakeholders through cooperation and organized competition. SVN is now a globally recognized commercial real estate brand united by a shared vision of creating value with clients, colleagues and our communities. When you choose SVN, you mobilize the entire SVN organization of experts and all our trusted relationships to act on your behalf. This shared network is the SVN Difference. To learn more, visit our website, www.svn.com.
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