Commercial real estate brokers are in abundant supply and accordingly it can be difficult to understand the need for and the differences between various brokers.
While a tenant is not required to use a commercial broker, the fees for the broker are paid by the landlord, so it doesn’t cost to employ their expertise. Most landlords would prefer that a tenant didn’t use a broker - they want to negotiate against a novice. It isn’t just about saving on the brokers fee, it’s also to avoid changes to the boilerplate lease document, which is extremely pro-landlord. In fact, a competent broker can improve the landlord’s proposed terms by an amount in excess of the commission paid by the landlord.
So yes, make use of a broker! But which one? Here are some tips:
* Don’t hire your landlord’s agent!... This sounds like a no-brainer, but many tenants believe they are friends with the landlord and/or his agents… this is akin to sharing the same divorce attorney!!
* Don’t hire another landlord’s agent!... This will eliminate about 90% of the remaining brokers, as at the end of the day, if they represent landlords, they will not push as hard against lease terms that they consider “market”. Tenants should not aspire to a “market deal” (as defined by the landlord community), but rather a “below-market” deal!!;
* Don’t hire a broker who boasts how big his firm is!.. This is probably someone who works for a large landlord firm and is reliant on the firm’s business;
* Don’t hire a broker that solicits by phone or at your doorstep!.. It’s amazing to consider that in 2015, many tenants engage a broker they found via an initial phone call or sales call.. Would you hire a banker, lawyer or accountant that cold-called you or made door-to-door sales? Probably not!;
* Ask around… chances are someone you know and trust can recommend a broker that they have recently used with satisfaction;
* Ask for and check references! This also sounds like a no-brainer but most tenants don’t do this either.. Most brokers have fancy client logo marketing pages prepared but few include a contact person and telephone number...what does that tell you?;
So who’s left? Not very many, but most likely the type of broker who only focuses on client service delivery to the extent that his clients speak highly of his service and create a steady flow of repeat and referral business for his practice.
That’s the right commercial real estate broker!