Why Hire a Commercial Broker

Posted on | May 1, 2009 | No Comments

Guest Post by Matt Jackson, Vice President, Halakar Real Estate.

Introduction by Matthew A. Griffith:

Everyone is watching the real estate market these days, because of the strong links between the state of our economy and real estate.  What is important to remember, however, are two things:

1.  All real estate is local, and

2.  Residential and commercial real estate are very, very different markets.

I meet with experts on a regular basis to learn what they know.  So, I recently sat down with Matt Jackson, Vice President, Halakar Real Estate, to talk about the state of real estate here in Central Indiana.  Matt had some very interesting observations about commercial real estate being a barometer for how small business is coping with the recession.

After we met, I asked Matt to share more of his thoughts and observations for my blog.  Here is a guest post by Matt.  Please enjoy:

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Why Hire a Commercial Real Estate Broker

Matt Jackson, Vice President, Halakar Real Estate

Matt Jackson, VP, Halakar Real Estate

One Indiana Square
Suite 2500
Indianapolis, IN 46204
Office: 317-964-0000 Ext. 228
Mobile: 317-340-3969       
Fax:    317-964-1144
MJackson@Halakar.com

A real estate transaction tends to be one of a business owners least favorite items to deal with.  There are three reasons why:

1) Time.  A business owner or their office manager does not have the time to deal with office/industrial leasing matters because they are too busy guiding their ship.
2) Lack of Market Knowledge.  Most tenants of leased space are not in the commercial real estate business therefore they are unaware of market trends.   If a owner is proposed a 3% rent increase is this “acceptable” per market standards?  Business owners are too busy worry about their company to worry about what they should be paying per square foot in rent.
3) Cost.  We all have heard time is money and typically the owner of a business’ time is extremely valuable, therefore any time that is spent on dealing with lease negotiations is time that is spent away from building ones business.

The solution for this problem is to find a commercial real estate broker that you TRUST.

Commercial real estate is not rocket science but there are certain matters of negotiation that do change on a week to week if not day to day basis.

There are some common misperceptions of negativity in hiring a commercial real estate broker that some tenants have.

Tenant: “My attorney is going to help me with my lease negotiation”.

Response: Should your attorney be involved with your leasing process? ABSOLUTELY.  In any instance that a tenant is leasing space they should have their attorney review their lease.  A lease is always written to benefit the writer (aka-the landlord).

Tenant:  “I don’t want to pay a fee to you for representing me” or “I don’t want to have to pay more for having a broker represent me”.

Response:  First and foremost commercial real estate brokers typically do not charge a fee for their services as the tenant’s representative is typically paid by the landlord… thus leading to… Tenants have a belief that if a landlord is paying a fee to their representative it will be reflected in their rental rate.  A broker’s job is to reduce their client’s overhead, not amortize their fee in a lease.  If a broker does a good job for their tenant the tenant will see a REDUCTION in their rent – not an increase.

Tenant:  “I don’t want to anger my landlord because we have a good relationship”

Response:  No one is in the business of ruining relationships and it stays true in commercial real estate.  A broker is simply the “trusted advisor” that a tenant hires to make sure they are making wise business decisions.  A landlord will not look at this negatively as 9 out of 10 times the landlord has a broker – so shouldn’t you as a tenant do the same?

90% of the job of a commercial real estate broker is EDUCATION.  At no point will you be as well versed in the market or negations of real estate as your broker but you will feel much better about WHY you are making the decisions you are.
Much like a doctor warns you of the hazards of eating fatty foods or not sleeping enough your broker should educate you on the benefits and negatives of all deal points.

Some Quick Pointers:

• As tenant are you paying “CAM charges” or “CAM pass-throughs.”  If you answered yes it might be worth discussing with your broker.  These charges are “pass-throughs” that the landlord charges above the base year, while common practice there are ways as a tenant to reduce your exposure.
• Are you a tenant who’s lease is up for renewal in 2009-2010?  Right now the going amount of free rent for a office tenant committing to a 5+ year lease is 2-6 months.  Properties and Owners differ on this lease incentive.
• Again, if you are a tenant up for renewal most landlords are willing to commit new tenant improvement (TI) dollars to keep you.  If you don’t ask, you won’t receive.

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