Social Networks And Sales Transactions In South African Office Markets

Scarcity of information on office transaction opportunities contributes to office markets being illiquid. Asset and vendor identity is problematic since information is privately held and highly localised in geographically dispersed markets. DiMaggio and Louch (1998) and Rangan, (2000) demonstrate how social networks resolve market uncertainty where conversional mechanisms which rely on publicly available information are not practical. The research question is how social networks are used to resolve uncertainty in commercial office sales markets.METHODOLOGY: The paper adopted an exploratory research approach. Data was collected through in-depth face-to-face interviews with opportunistically sampled commercial real estate brokers in Johannesburg, South Africa. Data was organised using NVivo (1999) ® and employed constructivist theoretical thematic analysis.FINDINGS: Social networks seem relevant in high-value office sales transactions involving sophisticated clients. Brokers use social networks to access private information on clients’ acquisition and disposal criteria, manage information on transaction activity as per clients’ interests, pool potential buyers, channel business opportunities, and build relations and trust. Transaction are likely to be publicly marketed when they involve unsophisticated clients or unknown buyers.RESEARCH LIMITATIONS: There is descriptive validity threat relating to factual validity of respondents’ accounts. There are also interpretive validity threats on accuracy of respondents’ interpretation of contexts, and researcher’s interpretation of responses. Introducing non-mainstream real estate concepts and using an opportunistic sample presents a theoretical validity threat of a plausible theoretical framework associating social networks to office sales transactions.RESEARCH IMPLICATIONS: This paper contributes to understanding how social networks address information asymmetry in sales transactions where conventional mechanisms are not able to cost-effectively do so.