Are You Getting Your Broker's Worth?
What does the broker really do to earn his/her commission on a commercial transaction?
Exactly what do you expect him/her to do? Well, the reality of it is if you don't know what to expect from a commercial broker, you either get what you expected (which is little more than a tour) or get the unexpected (which usually shows up after the lease is signed or escrow closes).
Confused yet? Most tenants are by this time. After all, just what does that broker do to deserve all that commission?
For most tenants, a broker's job is to find the best property or space and negotiate the best market deal so you can brag to all your friends at the country club about the great deal you got.
Well, if you want a tour guide, we can direct you to Universal City. Why not have the broker negotiate leases and purchases? This may sound crude, but it reflects the low expectations most tenants have of their brokers.
A good broker is like an extension of your management team. Here's a few questions to ask about a broker before choosing someone to represent you. A little care could end up saving you thousands of dollars and hours of wasted time.
Does the broker understand my business?
That’s the most important question to ask before choosing a broker. Only by completely understanding your business, where you are, where you are going, and how you plan to get there, can the broker really help you with your facility planning. Having the best market knowledge is important, but not nearly as important as most brokers make it out to be.
Let's say you are the president of a growing computer hardware company. You've just been introduced to a great potential client. After your initial introductions, what is the first question you ask? Is it, “How big a computer do you want?" Or is it something a little more rational, such as, “Would you tell me why your firm is looking into a new computer system?”
Do you help your new client look at just immediate needs, or do you help him address long term growth?
Do you install your base system then modify it as you see fit, or do you custom develop the system to meet their needs in the most economical manner? After the computer is installed, are you there to help them if a problem comes up or adjustments are needed, or do you simply sit back and wait until the computer is rendered unusable, and show up to sell them the next system all over again? A good broker will address both short term and long-term concerns of the client.
"So Mr. Smith, I see from my tracking on this property that your lease is up in three months, and from the looks of it, you're outgrowing the 8,500 square feet your presently in. I've got a great deal in one of the buildings I represent that's about 10,000 square feet. That should give you some good breathing room, and since I know the landlord very well, I can get you a great deal. Why don't you and I go see the space tomorrow to start the ball rolling?"
Sound familiar? Well here's a simple checklist of some issues that your broker should address:
Review firm business, marketing, and financial plans.
Define goals and objectives of your firm as they relate to real estate.
Establish priorities such as image, location, control, and economics.
Work with management to project growth or expansion needs.
Chart people counts and common use areas to help establish base size requirements.
Discuss staff adjacencies.
Formulate facility needs as they may relate to potential requests for proposals or intents to lease/purchase.
All this is done before the broker even does a property search or walk out the door with you (yes, your broker should survey the entire market).
Just as you plan your business, your broker should help to plan your real estate. After all, it is the largest non-revenue producing line item on your budget. Don’t just look at your rent as a necessary evil.
There should be no additional charge for any of this work. That's part of what you pay that commission for.