5 Questions To Ask A Real Estate Broker When Looking For Space

13th October 2016

By: Matt Seward

Decisions about office space have a significant impact on your business. Hiring the right broker to help you navigate the process will save you time and money. It will also allow you to focus on running your business.

Some tenants believe that hiring a broker will result in higher costs to them, or they won’t get as “good of a deal” if they negotiate without a broker’s assistance. On the contrary, tenants who negotiate without the benefit of a broker not only pay more in rent and other costs, but frequently suffer from the negative impacts to their business. Landlords routinely increase costs to tenants in many ways. The per-square-foot rental rate is just one piece of a multi-faceted, complex transaction. It is highly beneficial to have an experienced broker’s guidance.

Here are five important questions to ask a commercial real estate agent when deciding to look for office space:

1. Do you focus on a specific geographic area?

Knowing the specific details of an office market in a specific geographic area is critical. Let's use Baltimore City as an example. The Baltimore metropolitan area contains nearly 79 million square feet of office space in 1,734 properties (not including university, government, and other institutions that own and occupy their properties). Baltimore City, alone, has nearly 21 million square feet of office space in 171 buildings. In order to know the details, trends, and complexities of a market with 21 million square feet of office space, a broker should focus a vast majority of their activities on that specific market. Landlords have different agendas and strategies. So, a Tenant must be provided proper advice in order to make educated decisions. The deeper the broker's knowledge of a specific geographic area, the more value the broker will provide.

2. How do you earn your fee?

Residential and commercial real estate brokerages are very different. However, one similarity is how agents are paid. When purchasing a home, a buyer should hire a buyer's agent who will represent the buyer throughout the home-buying process. The buyer's agent is paid a commission by the seller of the home regardless of the brokerage affiliation. A commercial real estate broker engaged by a buyer (or tenant) is paid a commission by the seller (or landlord). A landlord, typically represented by an agent, signs an agreement that obligates that landlord to pay brokerage fees to the tenant's agent. Thus, the commercial real estate broker's commission is already built into the pro-forma rent, and paid regardless of the brokerage affiliation of the landlord's broker.

3. How do you handle conflicts?

The two most common types of perceived conflicts that may arise during a real estate transaction are (1) when a broker representing a tenant works for the same company as the broker representing the landlord and (2) when a broker represents two tenants who are competing for the same property.

(1) When a broker representing a tenant works for the same firm as the broker representing the landlord, it is referred to as “Dual Agency.” Ask your broker for their references from any past situations that involved Dual Agency. Dual Agency should be disclosed to all parties involved in the transaction. Dual Agency will not prevent or prohibit your broker from advocating on your behalf throughout the entire process.

(2) When a broker represents two or more tenants that are competing for the same property, this may present a conflict. Ask your broker how many tenants they are currently representing with space requirements similar to yours. The broker may tout themselves as a “Tenant Rep only” broker, but they are still subject to potential conflict situations.

4. Do you have a good reputation and a successful track record?

Experience, knowledge, honesty and integrity are the most valuable qualities to look for in a good broker. Ask the broker for specific references or case studies from his or her previous transactions. The more experience the broker has in a specific market, the better off you'll be.

5. Does your brokerage firm offer additional services and assistance throughout the entire process?

Finding the right space for your business is only one part of a multi-step process. Ask your broker if their firm can assist you with workplace strategy, construction (tenant improvements), IT infrastructure, furniture selection, economic development/incentive programs, and other services.

Since there is no additional fee to engage the services of a Tenant Representative, it makes sense to use one. A good Tenant Representative will save you time and money. Your time should be focused on running your business and your money should be spent wisely. Don't waste it unnecessarily.

About the Author: mattseward

Matt Seward is currently the Managing Director at Cushman & Wakefield in Baltimore, MD. He focuses on helping companies with their office and lab space needs and representating tenants and buyers in the Baltimore metropolitan area. His clients range from startups to Fortune 500 companies.

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