Why get a Commercial Real Estate Broker?
Hiring a Broker is the most effective and efficient way to purchase or rent real estate, of any kind. Brokers are hired by the client and work specifically in your best interest. They are responsible for monitoring needs and comparing to what is available and presenting it to you, the client. If you find a space that you are interested in, your Broker will act as mediator between parties involved in deal and ensure that you spend the right amount of money at the best terms and conditions. By hiring a broker, you can relax knowing someone is contractually, legally responsible to represent you in the deal, and focus on your own business venture.
What should I consider when hiring a Commercial Broker?
- Proper vetting includes ensuring that a firm has solid references and a solid transaction history. Demonstrated knowledge of the market is a must.
- Check who else your broker represents. At a minimum, make sure they disclose any conflicts of interest.
- How busy are they, will they have sufficient time and resources to meet your needs?
- Ask brokers what services you’re paying for. How closely are the principals going to be working on a deal?
When a Tenant is represented in finding space, who is responsible for the fees (commissions) once the deal is completed?
It varies depending on the terms of your lease, but about 97% of the time the Landlord will be responsible for transaction costs (you want to be sure this is included in your lease)
How much advance time is needed to lease a space?
It is never too early. You should generally know if you are looking to renew a lease or look for a new space 12 months before your current lease ends?
7,000 sf – 10,000 sf = 24 months advance
20,000 sf – 30,000 sf = 36 months advance
That said, it is rarely too early to meet with a broker, review the existing lease, and start thinking about growth, contraction, flexibility, and cost savings for an organization. A lack of time will always cost money, sometimes substantial.
What are the different Lease options?
There are three types of leases available: Full-Service Gross, Triple Net, or modified gross.
- Full Service Gross means that your quoted rental rate is inclusive of all taxes, common area maintenance fees and insurance costs associated with the property. However, you must consider that most Full-Service leases will not include your internet and phone service charges, and some may or may not include janitorial fees as well.
- Triple Net (NNN) means that your quoted rental rate is only a portion of what your monthly cost for the space will be. There are “triple net” fees that come along with this type of lease to cover the property taxes, common area maintenance fees and insurance for the property. This additional triple net number will also be quoted on a per square foot rate and these fees generally run anywhere from $3-$15 per square foot above your base rent. You will also be responsible for your janitorial costs, phone, and internet charges.
- Modified Gross is a hybrid of Full Service and Triple Net leases. You will have a base rent just like a Triple Net lease, but you will only be responsible for paying your own utility costs like water, electric, gas, etc. You will be responsible for phone, internet and typically janitorial.
What are some hidden costs I may find in a Commercial Lease?
Some typically unexpected costs include wiring, triple net (NNN) expenses, insurance premiums, escalations, rental bumps, operating expense and real estate tax pass-throughs, tenant improvement allowance shortfalls, sublet administration fees, after-hours HVAC charges, moving expenses, architecture and engineering fees, construction administration fees, and a myriad of miscellaneous others that landlords may include in lease agreement
We are going to stay in our current space and renew our lease, so we don’t need a broker.
Market conditions and rental rates are constantly changing over time. What your organization negotiated five years ago regarding renewal options, might not be the best deal for your organization today. By working with a broker to review your current lease and renewal options, you might be able to negotiate a better lease rate, options to expand or contract in your current space or even get funds from the Landlord to improve the space with new carpet and paint.
Someone on my Board of Advisors/Directors is a residential and/or commercial real estate agent, so we will just have them find/negotiate our new space.
Board members are great assets to organizations and can provide excellent guidance and direction for a myriad of issues. In many cases, however, organizations need to be cognizant of conflicts of interest when using the services of Board members. Double check your bylaws and bid protocols before requesting the volunteer services of your board members. Organizations will often hire an outside broker to work in conjunction with the board member to provide a more objective view, as well as take some of the burden away from the volunteer member who might not have the time to devote to the project.
We have a good relationship with our landlord, and he/she is giving us a great deal, so we do not need a broker.
If your landlord says we are friends and he is giving you a good deal, engage a tenant representative real estate broker to benchmark the “good deal” against deals recently made in the marketplace to make sure it is true. Let the broker do the work to show you if and on what terms a better deal can be made in the marketplace. Remember, the Landlord’s business is real estate and she in the business to make money. Negotiate wisely and strategically.