You’ve often heard “don’t pay broker fees” as a gimmick that companies advertise to make you think you’ll get a better deal by working with them directly. Well, there’s a reason why they don’t want you to use a broker, and often times it is to take advantage of you. You should have an experienced broker for office space, retail space, and any sort of commercial real estate transaction. It’s especially important if you are looking to buy or sell real estate. Here’s why
1. An experienced broker will know more about the market than you do
Some people think they can gauge the real estate market just by going out and looking at four or five similar types of vacant spaces and get a good idea what the particular market is doing. That’s only partly true, because there’s a bigger picture.
Appraisers are taught to estimate the value of a property by comparing similar properties. For buying, they compare recent sales, and for leasing they compare the terms and rates of what’s currently vacant and for lease. In both of these cases, the information being used is not holistic and inclusive of all the possible information out there.
For instance, what the trends of the moment are, and what very recent activities have taken place. If you were vacillating about whether to rent creative industrial work space at the moment or within six months less than a year ago; were aware that three major sewing manufacturing properties in Downtown were going to be converted into residential; that all their sewing tenants would be kicked out; and that those tenants would absorb most if not all the vacant industrial space for rent, you would have been wise to lock in a longer lease at a lower rate that time, than waiting another six months.
If you weren’t aware that these buildings were being converted, you would have used the current vacancy information to appraise the value of industrial space for lease without knowing that a lot less industrial space would be available in six months and that the rates would be going up or at least staying the same. In fact, you might have even have been pessimistic about the future rates of industrial space and signed only a one year lease. So as you can see, this is only one example of how using a comparative market analysis based on the current and past inventory, could cause you to make a poor real estate investment decision; one that an experienced broker would be far less likely to make.
Basically, knowing the value of something includes knowing the most. Since an experienced broker will be aware of more factors and more current information and trends (because such information is only gathered over a long period of time), it is best to be using that broker for your real estate needs.
2. Brokers have needed experience in complex transaction situations
Self explanatory. Brokers know the process of leasing and buying, what is normal, what you should look out for, how to prevent bad things from happening, and so on.
3. Brokers will likely find you space you cannot find on your own
It would seem that with technology the way it is today that so much information is available online at the finger tips of buyers and sellers that a broker would be unnecessary. Not true, here’s why: most of the time, brokers know of or are capable of knowing a lot more real estate opportunities than what is online. More than that, what they know that isn’t online, is often times a better deal.
They have expensive memberships to data-bases that you don’t have at your disposal. Also, many times, really good spaces in really good locations (which is especially true for retail space) never go online at all. Brokers have relationships with a network of owners and often times these owners tell brokers about it. In fact, an owner might give a broker the listing and that broker might not even want to put it online. This is called a pocket listing. A broker first exhausts his personal network of clients (buyers and renters) before he lists it online. Why? Because brokers can make more money that way: in fact, he or she would typically make twice as much money by not putting it online, because he or she won’t have to share the commission with the tenant or buyer’s broker. That should be a powerful reason for you to invest yourself in the services of a broker.
In other words, often times, what is put online is the stuff left over that brokers weren’t able to lease or sell on their own. Why weren’t they able to lease or sell them? In other words, what is wrong with the space now that it’s put online? That’s a powerfully good question.
You can see now that the prime commercial real estate spaces typically aren’t put online, and when they go online and they’re a good deal the get bought or rented quickly. And you might not be aware that the space is a good deal and vacillate on it for a while, and it gets rented or bought out from under you. That is a bad experience you wouldn’t want to have, and you can prevent it by working with brokers.
4. Brokers can be an important figure in your networking strategy for your business
If your business benefits from networking with other business owners, the person that finds business owners a space to operate their business is a good person for you to know. He or she can give you referrals for your business, or possibly refer you to a trusted associates that can benefit you.
5. Brokers can prevent you from making mistakes
See 1, 2, 3, 4, 6, and 7.
6. Typically, brokers can negotiate more creatively
Possible concessions are not always obvious, in the mind of the lessee/buyer or the lessor/seller. A broker is there to facilitate the transaction between these groups in a way that will satisfy both parties. Each party to a transaction is invested in a deal in a different way, and therefore they do not always see potential mutual benefits. Who would be a better person to help you find common ground, than a person who does it every day for a living?
7. Brokers are invested in your happiness and success
As a renter, brokers want your business to succeed because it makes them look bad to the owner if you fail. When you are not able to pay your rent or fulfill your lease obligations the owner or manager of the building associates that negatively with the broker who brought you to the building. What does that mean? If you fail it harms the relationship between the broker and the owner. So, literally, the broker’s business is hurt if you do not succeed.
As a renter or a buyer, commercial real estate brokers want your business to succeed as well; not only that, they want you to have, at the very minimum, a reasonable deal. They know that you will tell everyone you know about your experience and what kind of deal you got. In other words, if they give you a bad deal they know you are going to talk badly about them to everyone you know. A professional real estate consultant is there to make a reputation for himself, long term. He or she has a lot to lose by your business failing or you not being happy with your deal.
CONCLUSION: You should have a commercial real estate broker. It is like having an insurance policy. It’s not required but it’s smart.
As always, if you need help renting office space or retail space in Downtown Los Angeles give us a call (213) 304-4727!