by Pete Julius
Why develop them, what are the obstacles and how do you create them?
Recently, we were hired by two separate economic development organizations to present on how to build partnerships between economic developers and local real estate brokers. It has been an increasingly popular trend. Since our presentations, we have had numerous inquiries on how to set up this type of partnership. We have worked in both economic development and real estate for a little more than 10 years. Our presentations were derived from our experience and conversations with 15 professionals within the economic development and real estate fields. This article will focus on explaining the importance and need behind developing this type of partnership, and identifying some of the major obstacles and how to overcome them.
The main reason for developing this type of partnership is that both economic developers and local real estate brokers target the same audience-corporate real estate executives. In addition, economic developers and brokers attend the same conferences, such as Corenet Global and Industrial Asset Management Council (IAMC), in hopes of luring the same prospects to their local community. If you are targeting the same audience and attending the same conference, why not market the local community together? Doesn’t it make sense? Wouldn’t it be nice to be able to save marketing dollars and resources by working together? It sounds good. But if it is such a great idea, why are there not more mutually beneficial economic development and local real estate partnerships?
Major obstacles deter economic developers and local real estate brokers from establishing mutually beneficial relationships. First, there is a major lack of understanding of each other’s business and core competencies. Economic developers and local brokers must understand each other’s business to identify synergies. One of an economic developer’s main goals is to improve the community by generating quality jobs. The goal of brokers is to sell or lease property, which is the end game of an economic developer’s job. In addition, economic development organizations are typically bureaucratic, while local real estate firms are not. Second, there is a tendency to fear that someone is going to run off with the other’s prospect. This is a natural instinct, but each partner must learn to trust the other. Trust is the key to the success of any partnership and must exist to alleviate this fear. Third, understanding how economic developers and brokers are compensated or rewarded is critical. Economic developers are rewarded differently than real estate brokers. Economic developers are typically measured by the number of jobs generated or by an increase in the local tax base. Their reward is then based on the attainment of these objectives. Brokers, as most of you know, are rewarded with a commission on the sale or lease of property. These are two very different reward systems that often cause conflicts. Now, how do you get around these obstacles to form mutually beneficial partnerships?
The very first, vital element in any successful partnership is that each partner must be willing to engage in such a relationship and see the value of the partnership. In addition, each partner must benefit from the partnership. This precedes the need to understand each other’s business, which is the next step in establishing a working relationship. Once there is an understanding of each other’s business, the new partners can identify synergies and areas of expertise. From this they learn how to efficiently and effectively work together and identify what resources and information can be shared. This process will also help build trust. Trust will help to form a very strong partnership by diminishing fears and assisting in the development of a strong foundation. Trust can be gained by identifying and addressing areas of conflict early in the formation of the partnership. Periodic meetings and an exchange of staff members for some period of time will assist in accomplishing all of these objectives. In addition, getting local brokers to sit on economic development boards and persuading them to help fund local economic development efforts are also very beneficial steps to making this type of partnership work. These partnerships can be built on previous working relationships or started from scratch with a small, mutual project.
There is no standardized procedure for establishing economic development-local broker relationships. Review the case studies to generate ideas for establishing your own partnership.
Resources
• Society of Office and Industrial Realtors ( www.sior.com )
• International Economic Development Council ( www.ideconline.org )
National Association of Industrial & Office Properties (NAIOP) ( www.naiop.org )