Small spaces, big opportunity.
I love connecting with people who are trying to solve pain points in the commercial real estate industry. Bennett Washabaugh of TenantBase.com is trying to solve one of the biggest challenges for the brokerage industry… smaller deals!
Since so many of my friends are commercial real estate brokers and owners, I hear this all the time. That small tenants, while still important, just don't pencil out for them. I get it. It’s hard to make money on them but you don't want to turn away business either.
So here comes Bennett and his team. They reached out to me last week to tell me their story and I was really impressed. I am rooting for them. Here are excerpts from our chat...
Michael: What are the co-founders backgrounds and how do you all come together to for TenantBase.com?
B: There are three founders of TenantBase; Myself (Bennett Washabaugh, CEO), Mike Zei (COO), and Andy Kish (CTO). Mike and I actually met in Chicago working as Tenant Reps in the business. When we decided to start TenantBase, one of our early stage investors told us that “in order to make this great idea happen you guys need the strongest tech lead that you can find.” This is where Andy came in. Andy and I actually grew up together in Dexter, Michigan. We both went to the same high school, attended the University of Michigan, and following our graduation Andy moved out to Seattle to work for Google. Andy was the best engineer that I knew, and he just so happened to be looking to be an entrepreneur when we called him to discuss founding TenantBase with us. The timing could not have worked out better. Having worked in the industry in several markets and in the technology space our founding team saw the clear opportunity to improve the experience in a commercial office search by introducing technology and focusing on a niche that could benefit from automation of existing processes.
M: What is the pain point you are trying to solve in the industry?
B: TenantBase is working towards serving the small space segment of the industry that is so often overlooked and underserved. Mike and I realized in Chicago that there was a pretty big problem with the way the industry transacted small deals. First, the traditional brokerage model, built on a consultative, customized service, was phenomenal for servicing larger companies but did not scale effectively for servicing a large amount of small tenant transactions. When coupled with the fact that small deals take brokers the exact same amount of work as large deals but pay substantially smaller commissions, we saw an inherent lack of attention from the brokerage community for small tenants looking for space. This was leading to an excruciating office search experience for companies seeking less than 5,000 sf of office space.
M: How does your site work?
B: TenantBase is a tech enabled tenant rep brokerage model built exclusively for businesses seeking small commercial space. Over the last 3 years since, we have listened to the preferences of our small tenant customer and have built technology that puts everyday brokerage processes into the hands of our users. We have realized that the more that we have empowered our small business customer with software the more that they 1) have liked the service, and 2) the more efficient we have become in servicing our tenant base (pardon the pun) and closing transactions. What have three years of constant learnings from our consumer base led to product wise today? Tenants seeking office space select a city, submarket, and their monthly rent budget, and then are asked a series of questions that helps build their tenant profile. These questions are all asked in terms first time tenants understand, and include the type of space they are seeking, their ideal office layout, their desired lease term, their desired start date, their desired square footage (with an easy calculator based on how many employees will be occupying the space if they do not know), and many more. The tenant then is matched with their dedicated local TenantBase broker while simultaneously being able to browse the market of space matches in a trulia or Zillow type experience. This experience allows tenants to virtually tour space, schedule tours at their leisure, see office spaces quoted in monthly rental rates, see space recommendations based on the tenants desired inputs, and even request to lease space all with the click of a button. Tenants can call their TenantBase Advisor at any time during this process, and our tenant rep brokers hold the tenants hand through the tour and lease negotiation phase to ensure that our clients sign great leases.
M: Why should a tenant use your site?
B: Our system is built upon delivering tremendous value to a very specific niche of the market. The site allows tenants to expedite the process of finding space, while providing professional, dedicated service from a local real estate expert that only works with small tenants on a daily basis. Instead of driving around and calling brokers or chasing down information on different properties, the site puts the information at the fingertip of our small tenant clients. This structure really empowers the user and provides transparency during the process which often results in them saving a significant amount of time and money finding and leasing space.
M: Do you work with brokers and do you also have your own brokers in house doing deals?
B: We are a licensed brokerage firm ourselves, and our tenant rep brokers work with local brokers in the local real estate community on a daily basis to get small deals done more efficiently. Each of our advisors has an active real estate license.
M: While others have tried, what makes you think you can both rep tenants and work with brokers at the same time?
B: Again, we are dedicated to solving a massive pain point in a very specific niche of the CRE market that has not been solved before. This pain point extends far beyond just what tenants experience when searching for space. Brokers representing buildings (landlord reps) have significant pain points when leasing small spaces as well, and this has led to an overwhelming amount of support from the brokerage community backing our solution. Brokers are inundated with small tenant inquiries from listing sites and sign calls on a daily basis, and these mechanisms do nothing to qualify the tenants seeking space. To make matters worse, there is often little to no follow up from the tenant during the deal, and this leads to wasted time on the brokers behalf as they have to educate and qualify large volumes of calls that often do not follow back up. This pattern is unhealthy for the entire community because it leads to a lack of access to the CRE market for small tenants, and leads to a liquidity problem for brokers trying to lease their small spaces efficiently. Our tenant rep service inherently solves this pain point for both contingencies. Our system qualifies and educates these tenants so that when you, as a broker, receive a call from a TenantBase broker representing a TenantBase client, you know that your time will not be wasted. Again, we integrate heavily with the entire local brokerage community in all of our operating cities. We represent large volumes of qualified small tenants, and they represent space. The only way to solve this small deal liquidity problem is by working together and having phenomenal relationships with local brokerage firms to make the most efficient marketplace for both parties.
M: How do you think the tenant market will be transformed by your generation? (The Millennials)
B: Millennials are much more familiar with smaller office space market as the rise of coworking has come about. The demand for flexible space and different styles of work environments will certainly increase as Millennials take more leadership roles in their business organizations.
We are already seeing one of the biggest changes driven by Millennials in how fast deals are moving and the timeline of wanting something done. We see the desires and search mentality of tenants continuing to move much faster. Our average search to lease is between 30 to 45 days instead of industry standard of three to six months, and this causes most of our transactions to be completed in move in ready space. Millennials, and businesses in general, are used to being able to do things themselves and having access to high quality and actionable data in every other aspect of their business. That is going to be the expectation for commercial real estate specifically as it pertains to small businesses and start-ups.
M: What's next for TenantBase?
B: 2017 will be a very big year of growth for us. We have really spent the last 3 years institutionalizing our business processes to get to this point to be able to scale our operation effectively, so now it is now time to execute. We launched our Dallas operation in February, and we have already identified new cities that we will enter in the next few months. We will also be staffing up our tech team to continue to build technology that truly solves the small deal liquidity problem at hand for both our small tenant clients and local brokerage communities. We are realizing that with our high volume brokerage model, our tenant preference data can be used to significantly benefit the entire brokerage industry in creating actionable small space solutions for our sector of the market. The next phase of our growth should be an exciting one.
Connect with Bennett on LinkedIn.