Poor Performance Exposes Weakness in CBRE's Exclusivity Monopoly

The landscape of real estate marketing has transformed in recent years. Historically, office leasing relied on prominently displaying signs from major brokerage firms like CBRE, securing exclusivity in marketing the assets. Subsequently, these firms took on the responsibility of presenting the space to potential tenants—a process that could span years, without financial risk for the brokerage firm, as property owners bore the associated expenses.

In the contemporary digital era, tenants are progressively turning to online platforms to discover new spaces, compelling property owners to adjust to this shifting landscape. Technological advances have given rise to platforms that facilitate searches, virtual tours, as well as showcase photos and videos—all strategically crafted to enhance and simplify the overall process for all parties.

However, within the corporate sector, a mere fraction of property owners are embracing digital platforms. In an inquiry conducted by the REsource team, industry executives pinpointed CBRE's formidable monopoly as the main impediment.

An industry executive, choosing anonymity due to an ongoing contract with CBRE, underscored, "CBRE imposes numerous prerequisites, notably exclusivity, hindering our ability to explore alternative promotional avenues. At the end of the day, our property stays unoccupied for a prolonged duration. Compounding the issue, even if we secure a tenant through alternative channels, we are still compelled to remit payment to CBRE."

When asked why he maintains the contract, the executive cited pragmatism, "Regrettably, opposing CBRE leads to harm to the property's reputation and obstacles to tenant visits. It resembles dealing with a mafia. They insist on exclusivity, and if resisted, they tarnish our standing in the market. Furthermore, even with exclusivity, their commitment to managing our assets is lacking."

Another industry executive, operating in the Vila Olimpia region, shared a parallel experience. "We held an exclusivity contract for a significant development in the southern zone of São Paulo in the past. The performance was disappointing, exacerbated by the company charging a commission even when demand originated from third parties. Many companies and brokers were hesitant to work for half a commission, resulting in a cost of one and a half commissions for us."

Claudio Hermolin, who serves as the President of Sinduscon Rio de Janeiro and Vice President for the Southeast region of CBIC – Brazilian Chamber of Construction Industry, in addition to being a Board Member and Partner at Primaz Corporate, revealed that CBRE misuses exclusivity as a “market reserve” to favor specific clients. "Prominent companies persistently pursue exclusivity contracts solely to remove a property from the market." He commented, "In practice, they fail to provide a distinctive service and neglect to define exclusivity. Instead of aiding clients in problem-solving, they keep them tethered during the exclusivity period, leading to frustration and dissatisfaction."

The concept of market reserve comes into play when a brokerage firm favors specific clients or assets, impeding potential tenants from exploring competing properties. A broker, opting for anonymity, commented, "Unfortunately, it's a widespread practice, particularly with CBRE, where their goal is to retain all properties in the portfolio while only arranging property tours at the most advantageous developments for themselves."