Why you need a Real Estate Broker
By Matt Hirsch
Sr. Vice President & Director of Medical Brokerage
Controlling costs and mitigating liabilities has never been more critical to ensuring the viability of your organization than it is today. One of the greatest costs to a company is its real estate occupancy costs.
How do you negotiate a good deal? Have you ever felt like you could have gotten a better if you had been a savvier negotiator? Well, stop your second guessing and call a real estate broker to come assist you…it will save you time and money. I promise.
Similar to residential real estate, a commercial broker’s fees are typically built into the asking price/lease rate, so not having representation doesn’t really save you anything (in fact, it may end up costing you more in the long run). If you elect to not have representation, the budgeted commission goes to the broker negotiating against you and their fee is based on maximizing the value of the transaction. In other words, saving you money costs them commissions.
Working in the field of commercial real estate, we are continually exposed to new opportunities, creative deal structures and other ‘non’ advertised incentives which provide tremendous leverage for the tenant/buyer in the market. Knowing what Tenants are paying in the building or market gives you the ability to negotiate a deal from a position of strength.
Because every deal is unique, we can help structure a deal that caters to your organization’s needs. For example, a start-up company can structure a deal where the rate is ‘back loaded’ to give the new business an opportunity to ramp up revenues before a market rate can be achieved. Perhaps you need some money to reconfigure the proposed space – how much help can you expect from the landlord? What if the cost exceeds the allowance – are there other mechanisms to wrap this into a transaction? While there is no one right way to complete a deal, having a broker on your side who knows the right questions to ask is inherently valuable.
It happens every day, but I am always perplexed when a tenant/buyer decides they can handle locating a property and negotiating a lease on their own. Commercial real estate is not rocket science, but there are HUGE pot holes that tenants can hit if they are not careful. Most services of tenant/buyer brokers are usually paid by the landlord/seller, so it is always hard for me to understand why someone would decide to go it alone in an arena in which they (tenant or buyer) have limited experience, the stakes are high, the amount of market information available on commercial real estate to the general public is limited and the lease structures are complicated.
Here are just some of the reasons you should consider hiring a commercial property agent to assist you in securing your next property:
- Expertise. Good commercial property brokers scour the market on a daily basis. They know the owner of many of the properties in the area and know which landlords are willing to negotiate and which ones are difficult to work with.
- Cost of Service. Commission costs are typically already built into a landlord’s rate. If you elect to not have representation, the budgeted commission goes to the broker negotiating against you, not toward the betterment of your deal.
- Time Savings. A good agent knows the market and does not have to start from scratch when looking for a property or attractive opportunity.
- Negotiation. Structuring leases or purchases can be complex. It helps to have someone on your side armed with knowledge on structuring a deal and/or market conditions.
- Space efficiency. Some buildings are more efficient than others. Common areas can consume enormous amounts of space and increase your rent dramatically. A good agent can guide you away from buildings with excessive common area charges (or at least provide an apples to apples comparison) and provide additional insight on how best to plan your office layout.
- Data and Tools. Most commercial property agents spend hundreds if not thousands of dollars a month for reports and market data on sales and leasing trends in their markets. This can be invaluable when making site selection decisions, discovering where your customers are and how best to logistically position your business.
- Integrated Services. Legal, interior design, office layout, architectural services. Would you know where to go and who to trust to help you properly set up your business or practice? Leverage the commercial broker’s network to help you accomplish your goals.
One final note: Please seek legal advice when buying and leasing. It is not unusual for a 2,000 square foot lease to run as much as $100,000 over the entire term. Relatively speaking, a quick review by an attorney can be well worth the investment.