The Value of Connections - Evidence from the Commercial Real Estate Market

Abstract The effect of brokerage connections is examined in a study of investment property transactions across the United States over the last decade. We find that connections in general (brokers’ Rolodex) does not matter after accounting for fine level listing broker and buyer fixed effects (i.e., fixed effects for the pair of listing brokers and buyers combined). What matters is if the deal was completed with a connected buyer as transactions in which the listing broker brought a connected buyer to the table sell at a premium. A series of additional tests highlight the robustness of the results.