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CRE 101 

4 Things to Look for When Hiring a Commercial Broker

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Starting the business was the hard part. Now you are looking for a space but how do you find the right commercial building? You need a good commercial real estate brokerage but each brokerage and broker is different. How do you choose the one that’s right for you? Here are 4 things to look for:

#1: A broker that specializes in the type of commercial property that you need.

One of the first things you’ll come up against when you start looking for commercial property is zoning. You may think that your office building could fit perfectly in a vacant restaurant or retail shop but is it zoned for that? Businesses that will use a building for industrial use have to find property that is zoned for industrial use just like any other type of commercial business.

Particularly if you have a unique business, for example a circus or a building that needs especially high ceilings or something, you’ll need help finding the right type of commercial property. Ask the brokerage what their agents specialize in and if any specialize in your particular business. Knowledge of the market in that industry is crucial for getting you into the right deal.

#2: A broker that represents you.

Most commercial lessees have bought or leased a piece of property before, sometimes without the aid of an agent – but rarely. In a commercial real estate transaction, it’s very difficult to do without the expertise of a skilled and experienced broker.

Both parties typically have their own agent: the landlord uses a leasing agent who lists the property for sale or rent and the tenant goes with a tenant broker who negotiates the lease with the leasing agent on behalf of the tenant. But it gets a little more complicated.

Your landlord’s agent will receive at least a 3% commission on the deal and sometimes 6%. The tenant broker gets a chunk of the commission that the landlord pays. Therefore, you know going in that the leasing agent is obligated to negotiate the best deal for the landlord.

The tenant broker however, usually has no more of a stake in it than a share of the commission – acting more as a referee. And lessees can avoid paying a commission altogether since they are not obligated to use a tenant broker.

However, a tenant broker’s help is invaluable in a negotiation because of their access to comp details, expertise about the market, experience negotiating deals, not to mention securing financing, which makes hiring a broker and paying the commission worth it.

#3: A Broker that’s upfront about their fees.

Even though you do not have to pay the commission as the tenant, your broker may and often charge additional fees for their services. Some work by the hour. Some by flat commission, others have flat fees for a list of services. Make sure that the brokerage that you go with is upfront about what they plan to charge you.

#4: A broker that offers the type of exclusivity arrangement that you prefer.

Negotiating the terms of a commercial lease can take months and in some cases, years. Hiring a commercial brokerage means you’ll want assurances that they’ll stick with you through potentially long negotiations. Ask if the brokerage offers exclusive arrangements where you can retain your broker’s services for up to a year.

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