A lot of businesses, especially small start-ups, find themselves faced with the question of whether or not to hire a commercial real estate broker to help them find and lease an office space. Since the commercial leasing process can be long and requires attention to detail, there are a lot of benefits to working with a broker. Here are some questions you might have if you are thinking about hiring a commercial real estate broker, as well as suggestions for how to navigate this process, as outlined in the article “Commercial Real Estate: What You Need to Know Before Leasing”:
Why Should I Work With a Broker?
Commercial real estate is a different animal than residential real estate. It can be a challenge to even just find out what spaces are available. There are also a lot of zoning restrictions to deal with. Commercial real estate brokers can help give you an insider’s view of these nuances, and given that often it is the landlord who pays the broker’s fee, there is really no major reason not to take advantage of this resource.
How Do I Choose a Commercial Real Estate Broker?
The first criteria for choosing a broker is looking for a tenant broker, as tenant brokers specialize in working with potential lessees, versus agents who represent landlords. Tenant brokers typically want you to sign a representation agreement, which makes them the exclusive person who can show you the property. It is not a bad idea to sign this when looking for a small space, as it gives the broker an incentive to find you a great space. However, if you are looking for a larger space where commission is involved for the broker, you might not want to limit your broker options with a representation agreement. If you find yourself in a small town that does not have any commercial real estate brokers, you can still take the reins on your leasing process by going through public tax records to find building owners and contact them directly.
Where Can I Find Commercial Real Estate Brokers?
Once you have decided to work with a broker and you know what you are looking for in a broker, the next step is actually finding one. If you are already working with a commercial real estate attorney on your lease, they should be able to recommend several brokers for you. If you are not working with an attorney, talk to other people you know who have rented commercial property and are pleased with their leases to get a referral. You can also use the internet to find lists of large commercial real estate firms.
What Are the Potential Downsides of Working With a Commercial Real Estate Broker?
There are a few potential pitfalls to keep in mind when deciding to work with a broker:
- Brokers do not focus on pointing out terms in your lease that you should negotiate or could be bad for your business.
- Commission for brokers is based on the percentage of the lease cost, so brokers will most likely try to push the more expensive spaces.
- In general, be aware that the less expensive your lease, the less attention you will probably get from your broker.
With these issues in mind, you might consider working with a real estate attorney as well who can help you with the nitty gritty lease details.
There are a lot of benefits to working with a broker, especially if it is your first time leasing, but be sure how to educate yourself on how to choose the best broker for your business and be aware of a broker’s biases and blind spots!