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You have made the decision that you do not want to tackle your commercial lease renewal or relocation project on your own - you have decided on hiring a commercial real estate agent. Great - now you just have to figure out who your commercial real estate agent should be.
Here are the top 7 considerations to evaluate.
A lease renewal or relocation is much like a construction project - it usually goes longer than you originally anticipate. For your own sanity sake, hire someone who is likeable. You will enjoy the process a little more and the likeability factor of your agent will most likely bode well for you in the negotiation with the landlord so long as your nice agent knows when they have to be firm.
Although you are hiring a real estate brokerage and sign your representation letter with them, you are working with a person. The trust is not with the agency, but with the agent.
Certainly you will want to have trust with any kind of supplier, but real estate is a very big ticket item and there are many elements that come into effect "behind the scenes".
For example, what if you are 95% done on a renewal and the perfect relocation option surfaces. Do you trust that your agent will present the option to you when they are so close to their commission?
When hiring a commercial real estate agent it can be hard to determine who to trust when everyone is putting their best foot forward during the interview process.
So pay attention to who seems most genuine during the follow up stage - before you pick an agent. See who seems the most sincerely concerned with helping you out, not themselves out.
Success in commercial real estate does not mean that an agent is actually good at all parts of the process.
In fact most agents who do very well in the industry have had success based on their people skills and ability to land clients, not because they are brilliant negotiators or have outstanding attention to detail.
Ask questions like
How have you saved clients money other than in the rent?
What are the top clauses to negotiate in a lease other than the rent?
Can you show me your letter of intent template?
Do you think I will have to agree to a personal guarantee on my next lease?
When agents are bidding on your business most are willing to complete a complimentary lease abstract to showcase their attention to detail.
What about the brokerage that the agent works for? What databases do they subscribe to? Do they have other services in house that can be pulled into your project?
This part of hiring a commercial real estate agent is very easy - so long as you know of the right questions to ask.
The most obvious conflict in commercial real estate is when you hire an agent who represents a number of landlords in the immediate area.
That agent is now trying to serve your needs when they have already promised those landlords that they will fill vacancies and achieve the highest rental rates possible. You should ask yourself about the severity of this conflict and how much it matters to you.
The less obvious conflicts should still be addressed with your prospective agent.
Is he bidding on future landlord work? Does he consistently prospect for landlord work or solely work on behalf of tenants? Do they have other clients in your size range right now that may also be interested in the spaces that you may be interested in? How would the agent deal with that? Are there any buildings that pay a higher commission than other buildings? Would they disclose to you and reject the bonus commission?
While this is an obvious one, the common metrics of how old an agent is or years in the business can both be misleading.
Commercial real estate is a popular second career (given the potential upside, low barrier to entry and flexibility of hours) so there are plenty of middle aged rookies. Normally once you see a few grey hairs, you stop questioning their level of experience.
Although someone may bring a seasoned level of business experience you still want someone who is not new to the steps involved in finding and evaluating space and a commercial lease review.
Even if someone has been in the business for a long time, the question is how active have they been during their tenure?
Commercial real estate is also a popular part time business. There are plenty of agents who have been in the business for years and have the same experience level as a young super star who has accumulated more deal experience in a very short time period. Be sure to ask how many projects an agent has been involved in throughout their career and year over year.
The two most common ways to specialize in commercial real estate is by location and industry vertical.
Location specialization is far more important. This specialty allows an agent to really know what is going on in their market: how low rental rates are being negotiated down, who the landlords are and their negotiating styles, lease expiries coming due and the characteristics of the available spaces in the area.
Do not confuse likeability with loyalty. There are plenty of commercial realtors who make their living being personable but always put themselves ahead of their clients.
Speak with references and ask about the broker's level of engagement after the deals were done, and the commission was paid. The good guys are still supportive. The bad guys move on to the next deal.