Now that you have a better idea of what lies ahead, you may be wondering if you need an advisor or if you can handle this on your own. Let us be very clear. Unless you are a small company looking for short term “swing” space, it is NOT advisable to attempt the leasing process on your own
“But won’t the landlord cut me a better deal because he won’t have to pay a brokerage commission?”
In short, NO. Despite what you may hear about the great deal another company got (or think they got) by going direct to their landlord, landlords will almost never cut you a better deal because you do not have a broker. It is much more likely that they will take advantage of your inexperience and cut themselves the most favorable deal possible. Whether it’s rent, concessions or build out, they do leases every day and you don’t. Not using a broker in fact will almost always cost you money. Big money. The goal is to use your advisor to your advantage.
Qualified advisors can save you enormous time and money by:
- Analyzing your company’s real estate requirements (functional needs, cost constraints, employee and customer access)
- Educating you on market trends, and comparable transactions
- Investigating available listings and determining which are appropriate for your needs
- Scheduling tours with listing agents
- Conducting a formal auction on your behalf
- Negotiating complex lease terms with landlords
“Okay, so I need an advisor. What are the characteristics of a qualified advisor?”
- Market Experience and Network: There is no substitute for experience. A qualified advisor will have worked for years in your local market, and even submarket, often as both a listing agent and tenant representative. As a result, they will have personal knowledge of individual submarkets, buildings, and landlords as well as a sense for historical market trends. In addition, they will have an extensive network of service providers (lawyers, architects and general contractors) that they can recommend and call on to assist you with your leasing transaction.
A qualified advisor should be able to demonstrate experience and a strong network to you by specifically sharing who the best landlords, architects, general contractors, buildings are and why for your specific requirement, and to provide references for all of the above on request.
- Technical Competence: A good broker understands the important business and legal terms of a lease, as well as the financial impact on your business, both from a cash flow and a tax perspective. They understand the construction process and construction costs. They understand building operating expenses and what is reasonable and what is not. They demonstrate deft negotiation skills by representing your interests while also taking into account that you are the one who must live with your landlord after they make the deal. As with your lawyer, select the resume, not the headshot.
A qualified advisor should be able to demonstrate technical competence by providing examples of past analyses he/she has provided to previous clients and walk you through them in detail. Further they should be able to provide references (including sample RFPs and LOIs) from past clients as to specific instances of where they were able to negotiate favorable terms with a landlord.
- Integrity: The best advisors are committed to transparency in their business and in their industry, including your knowledge of how they get paid. They are upfront with you as to their expected commission on your deal and consistently make it a point to prove that they are acting in your best interest, not theirs or the landlord’s.
A qualified advisor should be able to demonstrate integrity by 1) sharing with you the details of the commission agreement between him/her and any potential landlords, 2) specifically articulate why he/she is recommending a building, a landlord, or another professional, and 3) provide side-by-side cost analyses for every property you consider.
- Professionalism: A qualified advisor should be someone you can “work well with,” but also knows how to get the job done. For you that means they have not only have the requisite skills and experience, but they take your needs and requirements seriously and treat not only you and your employees with respect, but your vendors and your future landlord as well.
A qualified advisor should be able to demonstrate professionalism by providing a number of past referrals from clients, vendors and landlords alike… with specificity in their comments related to sincerity, earnestness, punctuality, manner, politeness and hard work.
- Availability: Increasingly in the industry, advisors work in teams. Depending on the size and complexity of your requirement, teams could range anywhere from 3 to 6 people. Beware of the bait and switch… that polished 30-year veteran who came to your kickoff meeting may not be the broker who actually works on your deal and may be hard to reach after his firm wins the business.
A good broker is attentive to client needs and doesn’t pass off the critical elements of your transaction to the inexperienced junior brokers on his team. Firm resources and capabilities are great, but ultimately you are hiring the experience and expertise of the senior broker. Make sure they are available to work on your deal and to personally respond to requests in a timely manner.
“I already have an advisor. Anything I should be on the lookout for?”
Unfortunately, not all brokers are created equal. In addition to lacking most or all of the qualities listed above, other indications you may not have a qualified advisor include:
- Never mentions commissions or shows you his brokerage commission agreement
- Focuses on “speed” during the tour, the proposal, and the close. Their focus is short-sighted on making money quickly, not about repeat business or future referrals.
- Limited technical expertise. They cannot reliably explain real estate value, loan amortization, general contractor fees, rentable vs. usable space, contraction options, renewal options, or termination options and payments… in terms YOU can understand.
- Overcompensation with “other” services. They are long on expensive dinners, tickets to events, and gifts for your family members, but short on what actually matters.
In sum, you are paying a great deal for your advisor’s services. Select your advisor like you would your doctor or lawyer. Do your homework. Ask for referrals and follow-up.