The Value of Connections - Evidence from Commercial Real Estate

Real estate brokers are ubiquitous in both residential and commercial real estate transactions. There is a significant literature on the role and impact that residential brokers impart on transactions acting as agents to sellers and buyers. However, there is sparse literature focused on the commercial segment and the influence that prior broker connections with principals have on liquidity and pricing. We examine the effect of brokerage connections in a study of investment property transactions across the United States over the last decade. The results suggest that, when controlling for time, market and property characteristics, brokers that have served the role in prior transactions increase the price their principals receive and reduce the time on market. Overall, the analysis suggests there is contributory value in connections in the commercial brokerage market