The Real Deal New York

Commercial brokers furious with city’s big landlords for “skipping the middle man”

February 19, 2013 11:30AM

Commercial real estate brokers are livid that the city’s big  landlords are disregarding the broker’s “exclusives” with retailers by attempting to land tenants on their own, sources told the New York Observer. Large retail owners, including  Joe Sitt and Jeff Sutton, are being accused of “skipping the middle man,” which is “totally not kosher,” a president of a top city brokerage told the Commercial Observer. “It puts the retail brokers in a difficult spot and it is morally incorrect.”

While not technically illegal, the tactic has become a continuing issue that is upsetting many of the  city’s retail brokers, even as they try to entice tenants into the landlord’s buildings.

“In several instances the large owners have flown to Europe to visit with the retail tenants in an attempt to bypass the brokers and sign the tenants,” the same source said.

The new generation of building owners, armed with in-house teams, feel that they have the “prominence and dominance” to skip over brokers, Faith Hope Consolo, head of Douglas Elliman’s retail and leasing sales division, told the Observer.

“The Rudins and the Silversteins would never do that,” Consolo added. “This new guard seems to feel like they’re invincible.  They feel they are immersed in Asian and European markets.”

However, while the Observer article said Sutton was not paying brokers commissions, in a number of recent deals — including deals with Express, Alexander McQueen, Armani and others– he did. Sutton’s Wharton Properties and Sitt’s Thor Equities did not return the Observer’s calls seeking comment. [NYO]Christopher Cameron

  • boogerhead

    Don’t the landlords have to abide by the contract regardless of WHO lands the tenant? I don’t see why Faith would be so pissed about it. Did the broker refuse to reach out to these prospective tenants? Maybe they were in Europe or their kids were and saw a store that would work for the site in NYC and decided to inquire? I’m surprised that the brokers would care.

    • NUNU

      @7e713892c8712b9b3a8ad71c78d5c122:disqus , you need to understand the business principles. It is more about what goes around, comes back around. Those large retail space owners that are dishonest probably don’t have any morality. In any middleman business type, it is important to be a man of your word, because when you aren’t, you get burned on the long way. You will come to a point where you have the spaces but the bad reviews from the Brokerage community can just leave you with ZERO tenants.

      • Cleo

        so being badmouthed by a broker will turn all the brokers against you regardless of whether the complaint is groundless – that sounds like the brokers really do have too much power and owners have to deal directly with the retailers. I have dealt with the in house real estate departments and I got the feeling that they wanted to use brokers because individually, they were getting kick backs. There are a lot of sites that don’t get rented out that are actually better than the spaces that the broker represented retailers do go with. It makes you wonder.

      • Cleo

        It sounds like the brokers don’t care so much whether they get paid regardless but whether they get to control who rents the space which means they could be collecting hidden fees to make sure that their tenant is the only choice the owner has – in that case, we have a huge problem with the brokers not the owners. The brokers should be happy to collect a fee for doing no work, It sounds like they are forgetting who the owner is.

  • nyc broker

    there is nothing wrong with the landlord seeking their own tenants but i guess when someone like faith and the tool try to screw brokers on deals thats ok…..


  • retailbroker in NYC

    I don’t know about Jeff Sutton who I heard started out as a middle man/ broker, so he should be someone who respects the rules of brokerage. As for Joe Sitt, my experience has been very positive. I bring him deals and he pays me very well. Is’s a pleasure doing business with him.

  • realworld

    Let’s be honest, brokers are significantly overpaid, not because their work is not valuable but because their fee structure is insane. The lease negotiation process does not very radically from tenant to tenant (okay larger longer term deals with larger tenants can be a little more detailed) but the broker is paid based not on the work done but on the level on rent paid and the term of the lease. And they get paid in advance, leaving the landlord with sole exposure if the tenant vacates mid-term. Imagine paying your laywer more for each subsequent for a document, or the taxi driver more and more for each mile driven. It is about time someone started to push back. the winners are the tenants, who will pay less for their space, and the consumers, who will pay less for the tenants’ products.

    • Cleo

      the fee is totally negotiable and they are lying if they say that everyone signs the same agreement – do not sign a contract with a fee structure – your broker will return at the lease renewal and demand another fee (google it!)

  • Seems to me the brokers would have better luck with landlords by showing why it’s more profitable for the landlords to use brokers than to try to do the job themselves. The article makes it sound like the brokers are appealing strictly on moral grounds.

  • janineayoung

    Most importantly, the owners are not really giving the tenants a discount to maneuver this way. They already built the commission into the price, and now they are doing away with paying out the commission by acting as Broker and Landlord. Tenants would be much wiser to move forward with their Broker of choice!