27 Jun How the Commercial Real Estate Industry Can Combat the ‘Expectations Gap’
Everyone has experienced those moments of setting seemingly realistic expectations and then ultimately had forces outside of their personal control lead to disappointment. Imagine that you are in the market to purchase a new house. Once you’ve found the perfect home, you’re excited and expect the process to be nearly over. But in reality, you have issues with mortgage approval due to missing documents and closing drags on for weeks. This gap between expectations and reality and the frustration that ensues is also a major problem in the professional world, and especially within the commercial real estate industry.
We call this phenomenon the “expectations gap.” Lawyers are often viewed by broker colleagues as “deal killers” because it can take up to three months to complete the leasing process. Inefficiencies and outdated technology not only slow the deal-making process but create unnecessary tension between departments and colleagues, even though everyone is working toward the same business goals.
Where does the gap begin? The leasing team locks tenants in with a letter of intent and they assume that the deal is done. Imagine brokers’ frustration when it then takes 90 days for lawyers and tenants to agree upon specific terms and finally execute the lease, when in their minds, the deal is already done. A deal that seemed on track hits a bottleneck once it gets to the legal team. For leaders within the commercial real estate company, that lag time means they are not collecting rent. For tenants, it means they aren’t able to move into the space.
Lawyers want to be dealmakers, but are set up to fail because of the inadequate tools at their disposal.
The legal teams also feel frustration. Lawyers are generally success-driven, Type A professionals. They’re talented, hardworking, analytical and effective communicators. After toiling away in law school and entering the working world ready to add value to their new organizations, it drives them crazy that they are unable to meet the seemingly reasonable expectations of their colleagues and customers because the commercial real estate leasing process is broken. Lawyers want to be dealmakers, but are set up to fail because of the inadequate tools at their disposal.
Leases, one of the key deliverables commercial real estate attorneys produce, are expected to be completed quickly, and most importantly accurately. These hundred-page documents contain interconnected terms, requiring dozens of updates throughout for each small change. As anyone with a law degree knows, even one small error can lead to drastic legal and financial ramifications. That pressure to ensure every detail within a lease is correct results in lawyers undertaking the time-consuming task of tracking and compiling multiple rounds of edits from the many stakeholders in the leasing process. These edits arrive on the lawyer’s desk, so to speak, from endless emails, conference call discussions, and traditional tracked redline edits. Lawyers are required to spend hours reviewing leases to ensure it’s all correct.
In return for their hard work and painstaking attention to detail, lawyers are faced with upset broker colleagues, who expect leases to be executed more quickly. Brokers’ commissions are closely tied to the deal and they consider the deal as complete the minute the letter of intent is signed. They cannot fathom why there is a three-month lag between letter of intent and a finalized lease.
But brokers are not solely to blame for the gap between their expectations and their legal colleague’s reality. After all, the tools at their disposal enable them to do their job efficiently. It’s reasonable to assume peers within the same company also have access to modern tools. But that isn’t the case. Commercial real estate attorneys are often stuck using old-fashioned email and traditional word processors. While these tools have their place in the business world, they were not designed with the needs of the legal team in mind. Sales teams use customer relationship management software, tools designed with their workflow in mind. Ask that salesperson to instead conduct business using a 1993 cell phone and their efficiency will likely crawl to a halt. But because brokers do not have insight into the legal team’s processes, and lawyers are not effectively communicating the complexities of their jobs, brokers simply cannot understand why something that seems so simple as a lease can take so long to execute.
Think of it in terms of hanging a photograph. If you ask two people to hang a picture, but you give one a drill and precision level and you give the other a only a hammer, they will both likely be able to get the picture up. But it will take the second person more time to complete the task. Without knowing that the second person only had a hammer, the first may assume that the second should be able to perfectly hang the photograph as quickly. It’s not the first person’s fault they have these expectations, especially when they might not know the limitations of the tools the second is using.
This doesn’t mean that the hammer is useless, but simply it is a general-purpose tool. Word processors are similar, a versatile application that helps people in many types of jobs. For highly specialized work, however, there are better options. Using a general tool that is not built for the specific tasks they need to accomplish causes lawyers to look like intentionally slow-paced deal killers to their broker colleagues, who have access to the equivalent of drills and precision levels. The reality is that lawyers want to be considered dealmakers. How can we fix this asymmetry of expectations? It all starts with effective communication.
For a cohesive and collaborative commercial real estate organization, it’s vital that every player within a deal clearly understands the roles, responsibilities, and limitations of themselves and others on their team. Leasing and legal teams need to communicate openly about expectations around a deal and establish feasible goals based on the tools available to each. This practice will help create a sense of understanding between departments, increasing the well-being of the organization.
Aside from building bridges between departments, commercial real estate companies can simply set their lawyers up to succeed in the first place. Investing in the right technology, like lease automation software, is an important step in combating the expectations gap. But beware: not all technology is created equal. Examine how the solutions you’re considering were created. Did someone with knowledge and expertise with commercial real estate processes help in the creation of this tool? Will the tool help with the entire process, or just part of it? Asking these questions will help ensure that your team gets what they need to be successful, instead of wasting time, energy and money.
The right tools are necessary to enable Type A, perfectionist lawyers to stop spending hours on monotonous document review and instead get back to value-added work like creative thinking and problem-solving. They can be the dealmakers they want to be, and they will be able to meet the expectations of others in the organization.
The commercial real estate industry can, and will, conquer the expectations gap within commercial real estate leasing. With inter-team communication between colleagues and the right tools, brokers and lawyers can get back on the same page and efficiently bring leasing deals over the finish line that drive the bottom line.