Everything You Need to Know About Working with a Tenant Broker
Navigating the realities of finding office space can present business owners with some tough choices. Thankfully, learning the basics of the leasing process and understanding how to best work with a commercial real estate broker and a landlord can save business owners a lot of time and money and create opportunities for growth with the future in mind.
What’s the trick to finding great office space without risking financial ruin? Education—dispelling the myths associated with the industry to teach office space seekers how to regain control.
What You Need to Know About the Leasing Process
As a business owner, you need to understand the commercial real estate leasing process. If you start looking for space with no clue, it’s hard for a tenant broker to work effectively for you and your business.
Yes, it’s the tenant broker’s responsibility to educate you and locate spaces you may be interested in, but knowing how the process works will help it go much more smoothly. Here are some basic factors you need to be aware of:
- Timeline: While locating a new apartment might take a few weeks or a month, securing commercial office space can take 3-9 months, depending on the situation. Be sure to allow plenty of time because the negotiation process can take awhile. If landlords know you’re pressed for time, you also won’t have much opportunity to bargain.
- Get a broker: Licensed tenant brokers complete dozens of leases per year, and have expertise in the market and the nuances of the lease signing process. Best of all, tenant brokers are free for tenants — they are paid by the landlord. If a tenant broker expects to be paid by your business for facilitating your move, you should consider other options.
- Know what you want: Figure out what you’re looking for and tell your real estate broker. They should know what location requirements, space amenities, pricing, and square footage you’re looking for so they can present you with the best options.
- Build out: Most landlords will not make repairs or modify a space before potential tenants look at it. That’s because they know different tenants have different needs. They are often willing to update a space to meet the next tenant’s requirements or provide a Tenant Improvement Allowance (TIA) so the new tenant can manage the project him or herself.
Finding and Working with a Tenant Broker
Finding an excellent tenant broker and maintaining a good business relationship is crucial for winning in the commercial real estate world. Sometimes tenants start thinking they know the commercial real estate market better than the broker and landlord know it, but the real estate market is tricky. A tenant broker’s job is to know the ins and outs of the market and serve as an advocate for you and your business.
Finding an excellent broker you can trust not only helps you get this transaction done more efficiently but also provides you with a business advisor whom you can continue to update regarding your business. Business is unpredictable. Your business may grow more quickly or more slowly than expected, presenting you with the challenge of finding a new space to meet your needs or monetizing your current, partially unused space. A broker who has worked with you and understands the struggles you’re dealing with can come to you with creative solutions. You never know when you’re going to need them.
Trust is the most important quality to look for in a tenant broker. Identify one who has worked with four or five companies that you respect. Then ask those companies about their experience working with him or her. If you hear all good things, chances are the trend will continue. The tenant broker is not going to sacrifice that excellent reputation to cut corners when working with you.
When you do choose a tenant broker, be sure to be honest about what you’re looking for and ask plenty of questions. However, make sure that you do not employ multiple brokers. They all have access to the same list of properties, so you won’t get access to more inventory that way. Also, a landlord who receives calls from multiple brokers all supposedly employed by you is not going to trust you. The last thing a landlord wants is to have to pay commission to more than one broker.
See from a Landlord’s Perspective
Part of understanding the commercial real estate process to get the best solution for you and your business involves learning to see things from the perspective of a landlord. Not all landlords are the same. Succeeding in the commercial real estate realm is less about the space itself and more about the relationship your business will have with the entire building. Understanding how that landlord works is really, really important.
Thankfully, having a good tenant broker will help you get the inside scoop about how different landlords work. Chances are, your tenant broker has worked with your potential landlord before and can tell you what kind of situation you are getting your business into.
So, from a landlord’s standpoint, here are three priorities:
- Stability: Real estate is a very old-school game. If a landlord had a choice between leasing space to a company that’s been around for 40 years or a new company that has just raised a million dollars, which one will he or she choose? Chances are, the landlord will sign with the company that’s been in business for a long time because it has a good track record.
- Diversity: Landlords want to diversify the markets they work with. They don’t want to, for example, fill a building with only technology-related companies. Even if you’re willing to pay top dollar and have a great business track record, you may still get turned down for a space if you’re not working in an industry the landlord is looking for.
- Value: Landlords are often looking for businesses that are willing to sign leases that last two years or more. Again, that’s more stability and also less turnover and work for the landlord in the long run!
If you don’t remember anything else, remember this: hiring a tenant broker will save you time and money and provide you with a business partner who will support your endeavors for years to come. It’s worth it to invest the time now in finding a good one to help you navigate the difficult world of commercial real estate.