Please Rotate Your Device
We tend to hire people we like and we know. Naturally if we know them, like them, and they are like us, we trust them.
Does that mean you would use your next door neighbor for your open heart surgery? Likely not. Even your family doctor is grossly under-qualified for that.
So why would you ever hire a residential agent to handle your commercial real estate lease?
The answer is simple.
We like to keep everything in our mind to be simple and organized. As a commercial agent I cannot tell you the number of times I tell people I am in commercial real estate and they start talking about housing prices and mortgage rates. They normally know more than I do!
As a commercial agent I have the exact same license as a residential agent. We take all the same exams in my jurisdiction. That is because there are so many more residential agents and many commercial agents also do residential?so we are all lumped in together from an education standpoint, with more of an emphasis on the residential end of things.
How comfortable am I with doing my own residential deals? After 16 years of corporate leasing experience I still do not do my own residential deals (three). I do all the searching (I have full access to my local real estate board) and touring by myself. I then bring in the residential expert to handle the paperwork and negotiation and we split the commission. So although I have the education, I do not have the experience. And the experience is the real education.
Here are the reasons why a residential real estate agent should not handle your commercial lease:
Residential agents have it easy compared to their commercial counterparts.
Real estate boards in just about every town and city are so well organized and established that there is really just one website to visit to find all the available houses. Just about every house will be listed on the local real estate board?s website. What?s more is that the agent can typically set up a profile for your requirement and voila...they receive email updates when a new house is listed with your parameters.
Commercial agents typically deal with more than one central source. The commercial market is simply a little too fragmented vs the residential market.
There are too many one-off landlords that only publish available space on their website, or by email, or by a sign on the building.
Third party information providers may or may not pick up those availabilities or may not have the information until a month or two after it hits the market. Much less efficient. What?s worse is that when spaces are leased there is an even slower process to remove those availabilities, leaving brokers to deal with stale information on old listings.
The moral to the story here is that a residential agent used to a cookie cutter search process in residential may not have access to expensive, 3rd party databases for commercial space and even if they have that access, they typically will not understand the weaknesses of those databases. They will not have the list of other landlords that are still behind the times and want to receive the phone call for a list of their availabilities.
While you want your broker to represent your best interests, there still needs to be a good working relationship with landlords.
Your broker should be tough but fair and liked by landlords. When your broker calls a landlord with your requirement the best space often surfaces as a result of that conversation, instead of what is currently available for lease.
A perfect example is a case in which there was a space that was too large for a client but I called to see if the space was divisible. With providing a bit of information on how attractive my client would be as a tenant and that this was a live requirement, the leasing agent made a few calls to existing tenants. It turned out one of the tenants with one year left on their lease wanted to downsize. We divided that space in half, the landlord was able to renew the downsizing tenant for another 5 years and we completed a 5 year deal on the balance.
A residential agent would not have made that call.
As soon as a landlord sees a residential agent coming, he is going to think two things.
1 - this agent must know the business owner personally
2 - there is now way this agent knows what he is doing
Not only do residential agents not have access to databases as mentioned previously, but finding space is only half of the battle.
Once you find the space you now have to lease it. In order to do that, you have to be able to tell your client that you have arrived at the right net rental rate.
Even if the residential agent somehow gained access to the right resources to find all the right spaces in the market, how do they know where the deal should "land"? What if all the asking net rental rates are $25 but everyone is doing deals at $19?
Further, what about all the other clauses in a commercial lease? A 5-page offer to purchase for a house is nothing like a 50-page commercial lease, so how can a residential agent truly deliver an expert commercial lease review or the best lease abstract? Rent is just the tip of the iceberg. In order to gain that knowledge, an agent needs to be in the culture of commercial leasing, not mostly residential sales + the odd commercial leasing assignment.