Crain's New York Business
By Shira J. Boss
October 16, 2000
The Internet aids many brokers in targeting a neglected market:
Two years ago, executives at real estate brokerage William B. May
International sat down and decided that the time had come to swim against
Few companies, including their own, were paying much attention to small
"The larger brokers find that companies needing 8,000 to 10,000 square feet
are not cost-effective for them to handle at times," he says.
After years in which it was difficult if not impossible for the small-fry
users of space to get the attention of real estate brokers, the tide has
begun to turn. Increasingly, small-space users need not resort to word of
mouth, notes posted at the corner deli or the help of a novice broker.
These days more and more brokers are challenging the old assumptions and are
targeting users of small amounts of space. Increasingly, they are doing so
via the Internet, which allows them to reach out to large numbers of small
tenants incredibly cheaply and thus to make up in volume what what they
sacrifice in big commissions.
Several on-line services , such as Cityfeet.com and Offices2share.com, have
sprung up in the last year advertising shared spaces, sublets and short-term
offices for small companies. Some even advertise space in specially built
prewired office suites that come complete with shared common areas and even
Helping to feed the market has been a greater availability of space via
sublets. With rents as high as $100 per square foot in midtown buildings,
tenants are looking for ways to trim their expenses. They are carving out
spaces they can go without and subleasing them to small operations happy to
find any room to call home.
By far, the biggest changes, though have come about as a result of the
Internet and the on-line services that it has spawned.
A couple of years ago, for example, Jeffery Landers took his traditional
commercial real estate business, Landers Commercial Real Estate Inc.,
on-line with a searchable database of Manhattan. Quickly, he noticed that
many of the site's visitors were looking for six- to nine-month leases for
under 1,000 square feet.
At first, he rejected those deals as unprofitable. Then, as the requests
continued to accumulate Mr. Landers had second thoughts. "After a few
months, I said 'Wait a second, something is going on here.'" In response he
relaunched his Web site as Offices2share.com, and geared it toward subleased
spaces as small as 80 square feet.
"These are the types of spaces below everyone's radar," Mr. Landers says.
"Brokers don't want to deal with them, and many landlords don't want to deal
In fact, some of them are shared spaces, posted by companies looking to
lease extra space to a complimentary business: A law firm rents to an
accountant, or an Internet company rents to a Web designer. "I've seen
out-and-out barter," Mr. Landers says, referring to free rent in exchange
At present, searching the site is free. Mr. Landers plans to begin charging
$60 per month for listings soon. By doing that, he will be moving closer to
the pay-per-use model pioneered by Manhattan-based Cityfeet.com, which links
landlords and tenants looking for spaces under 10,000 square feet. On both
services, the landlord's contact information is listed on-line, so the
site's work is done once the listing is posted.
The listings themselves were originally free. Cityfeet.com, though has just
started charging a $60 fee to list space, and Mr. Landers plans to levy an
identical charge beginning in January. Cityfeet.com also makes money from
referrals to brokers, movers, furniture providers and other services.
"It's hard to get a broker excited about leasing an 800-square-foot office
and conference room, but you put it on our site and people call you," says
Guy Shannon, Cityfeet.com's founder and chief executive. "We want to be the
eBay of local real estate."
Since it began 17 months ago, Cityfeet.com has expanded to 22 employees. In
February, Mr. Shannon plans to roll out his service in other cities. He
expects to post his first profits within a year.
A third company, TenantWise.com Inc., is more of a hybrid. It's
combining on-line listings with traditional brokerage services. Companies
shop for spaces on the site, then TenantWise.com sets up appointments
and takes a commission that is subject to some negotiation.
The basic model is to charge the landlord 80% of what a usual commission
would be. Of that amount TenantWise.com takes half, and the other
half is returned to tenant in the form of free rent or some other break.
"We had been doing high-touch, low-volume work, and now we're doing
low-touch, high-volume work," says M. Myers Mermel, CEO and founder of
TenantWise.com, who previously handled real estate investments for the
Corsair Group, a Manhattan-based commercial real estate firm.
Even some big-name brokers are easing into the small-space market. Julien J.
Studley Inc., for example, hopes to tap the under-5,000-square-foot market
with a pass-word-protected site that its clients can use to search for
spaces themselves. Shifting most of the initial legwork to the tenants frees
the brokers' time for closing deals.
Copyright 2000 Crain's New York Business, Inc. All rights
All information used by permission.