How One Startup Broke Into NYC’s Cutthroat Commercial Real Estate Market
TheSquareFoot’s story of gaining traction in New York commercial real estate
In a frank journal entry on Forbes, TheSquareFoot co-foudners Jonathan Wasserstrum and Justin Lee discussed their experience in NYC’s competitive commercial real estate market.
The startup, which offers online searches for commercial real estate and profits on a commission model, encountered trouble when trying to break into Manhattan real estate. Commercial real estate deals are huge—they’re generally on a corporate scale, with multi-year leases signed for multi-floor spaces in towers worth tens of millions. There are only so many tenants who can afford these spaces, and only so many brokers who can serve them.
Knowing that, it’s not surprising to learn that NYC’s real estate brokers have their own channels for prospecting tenants, and they’re already trusted by landlords to bring in the right people. When TheSquareFoot entered the market, they had a hard time getting in contact with landlords at all. The industry was entrenched in its ways, and there was no reason to take a risk by dealing with a then-unheard-of startup. Landlords and their agents would rather interact with brokers that they knew and trusted, rather than show offices to companies that weren’t likely to generate a big return.
At the same time, TheSquareFoot offered a valuable service to potential tenants. While they weren’t offering a solid value proposition to New York’s established property owners, small businesses and startups found it much easier to browse listings through TheSquareFoot’s platform. They, too, would have had the same problem that Wasserstrum and Lee did: it’s hard to get brokers to pay you any mind when you’re a no-name company that’s going to rent a couple rooms at most. The startup offered a useful service to their customers, but they weren’t making it worthwhile for landlords to list their spaces.
The secret to their success was to learn as much as they could about what landlords wanted, and to convey that information transparently to their customers. Searching for office space is an intimidating process, especially if you’re new to running a business. No one has the bankroll of large companies, and the average startup seeking office space is going to know even less about NYC’s real estate market than TheSquareFoot did.
As a result, a big part of their value proposition was that they offered their customers information and peace of mind. Even if it was hard, they would handle negotiations and keep their customers in the loop every step of the way. That way, prospective tenants would know why a landlord might be holding off on offering a lease, or they would know why they’ve been losing deals.
It’s hard work, but by serving the large market of startups and small businesses that usually gets ignored by the commercial real estate market, TheSquareFoot developed a loyal following that’s bound to pay dividends. At the end of the day, what really matters is having a solid product and doing your best to serve your customers. If you do that, you can make a splash in even the most old-fashioned of industries.