Landlords ask: Is it leased yet?

<i>Commercial owners now demand frequent status updates, brokers say </i>

As if today’s leasing market wasn’t challenging enough, New York’s commercial real estate brokers have one more thing to contend with: demanding landlords.

Whether it is an increase in the number of phone calls, requests for weekly face-to-face meetings, or a sudden mandate of updated daily reports on individual properties, all over town there are more stories of landlords who now want up-to-the-minute information on what their respective brokers are doing to fill their space.

And in some quarters, this newfound neediness is starting to grate.

“It’s a pain in the ass,” said a broker at one of the top firms who asked to remain anonymous. “Landlords are micromanaging the process and you need a lot of handholding and a lot of paper.

“But at the end of the day, it comes down to getting a tenant. You can B.S. somebody all you want, but it comes down to whether or not you have offers going back and forth.”

Just as the leasing market has shifted over the past 18 months, so has the dynamic between brokers and landlords. The explanation is simple: With greater vacancy comes greater competition, so landlords — many of whom had grown accustomed to the flush times of a couple years ago — are now casting a more vigilant eye toward the activities of their brokers.

The market has certainly dropped significantly. According to a recent report by Colliers ABR, for all building classes in Manhattan, the vacancy rate is 13.2 percent — almost double what it was in the first quarter of 2008.

Meanwhile, asking rents are down 27 percent from their July 2008 high of $71.92.

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Yet while some brokers are irritated by the increased oversight, others think it bodes well for their profession, at least in the short term.

Peter Von Der Ahe, vice president of investments in the Manhattan office of Marcus & Millichap, said because of the competition in the market, the margin for error on the part of landlords is narrower, resulting in a renewed appreciation for the work brokers do and the expertise they bring to the deal.

“Twenty-four months ago, every landlord was getting unsolicited calls by every tenant and buyer in the world, telling them that they wanted to buy their building, lease their space and were willing to pay ‘X’ for this, and give up their first-born child for that — and the implication was: ‘What the hell do I need a broker for?’

“So, from a broker’s standpoint it was difficult to demonstrate what your value added was,” he said. “Now, the pendulum has swung back.”

Documentation and paperwork appear to be clear indicators of the evolving relationship. Whereas landlords were once spending most of their time reviewing term sheets on recently inked deals, they are now seeking status reports on their properties detailing things like: Who has been called? What was discussed? Was a deal made elsewhere, and if so why? What kinds of comments are typical from the showing?

“I think it is a double-edged sword,” said Stuart Siegel, executive managing director at Grubb & Ellis. “It is a housekeeping chore that most brokers don’t look favorably on, but we understand why it has become so critical to these owners. They are saying, ‘Look, this property is a noose around my neck, and I want nothing more than to lease or sell it.’ And they want to know somebody else feels that way, and by having a few weekly meetings, they get to see the whites of your eyes and see you squirm a little in the hot seat.”

Many brokers seem to think this newfound dynamic will not endure and that when the market regains its former shiny look, things will revert back to the way they were.

But for now, brokers are trying to take this renewed attention in stride.

“We are treated much better,” Von Der Ahe said. “But it is more work, that is the rub. It is 10 times more work — and, to be honest, I don’t know if we are getting treated 10 times better.”