How do I find office space? Should I use a broker or do it myself?
MySquareFeet can provide you with a list of available space and direct links to the leasing contact. But using an experienced commercial broker is frequently the fastest and easiest way to find office space, especially if you have never done it before because:
- They know the inventory,
- They usually know the owners,
- They know approximately where deals can be made and
- They can usually help you with the lease negotiations.
Unfortunately, small tenants (under 3,000 square feet) don't generate fees large enough to catch the interest of the most experienced commercial real estate brokers. That's where MySquareFeet can help. We have the tips you need to make you more comfortable with the process if you decide to go it alone. If you decide to work with a broker, the guide on MySquareFeet will help you work with your broker more efficiently. An experienced broker will be enthusiastic about working with an informed and decisive client.
How do brokers get paid for office leasing?
Generally, the owner of the property pays a commission to all brokers who are involved in a specific transaction. In most markets, the commission is based on a percentage of the rent, calculated over the term of the lease. For instance:
Let's say you need:
- 1,500 SF (square feet) of office space.
- The rent is $20 PSF (per square foot)
- You sign a three-year lease
- And the market commission rate is 5%
- Then the broker would be paid a commission of $4500
(1,500 SF X $20 per year X 3 years X 5% = $4500)
Question
"Wow, that's a lot of money! Didn't you say the broker did not get paid that much for a small lease transaction?"
Answer
It seems like a lot, but the broker does not usually get the entire fee. Half of the fee usually goes to the "house" (the company the broker works for), and Uncle Sam and business expenses reduce the fee by as much as another 40%. The broker is now looking at about $1350. Sometimes, there are two brokers for one transaction, one listing the space and one representing the tenant, so the commission could be split again reducing the fee to $675. That's not a lot of money for the amount of work it takes to find suitable space for a small tenant. That is why it makes a lot of sense to start searching for space yourself and do a lot of the leg-work in advance of engaging a broker to represent you. After you have researched the market and know exactly what you want, and what you can afford, you are in a better position to select a broker to help you. If a broker believes he/she is working with an informed decisive buyer who is ready to commit to space, then they will generally take you on. An informed tenant will be easier to work with and more decisive. BUT if the broker thinks that they are working with a beginner, who has no idea what they are looking for, then the most experienced brokers may not want to work very hard for you. Stay organized and focused, so you will increase your chances of working with an experience commercial real estate broker or dealing effectively with a property owner directly. Generally, an experienced commercial real estate broker can save you time and money! So, it is worth doing a little homework to interest them in assisting you.
How do I select a broker and how can they work with me?
There are many ways to find the right broker to help you in your search for space:
- If you have a friend who is a commercial real estate broker, ask him/her to refer you to someone who covers the market where you are interested in finding space.
- If you are out looking for space and see one name repetitively on signs offering property in the area you select, he/she may be a good candidate. Call them and have a chat.
- Check out certifications that make brokers specialists in the commercial real estate area, such as CCIM or SIOR designations. Go to the web sites and get the names of certified professional in your area.
- Use the Broker Finder referral service link on MySquareFeet, which can help you find qualified commercial brokers in your market.
- Above all, make sure you work with a broker that is experienced in commercial real estate. Ask for references and CHECK THEM! Tenants who have had a good experience with a broker are usually more than willing to give him/her a glowing reference.
- Interview the broker you are considering before you go out looking at space with them. Make sure the chemistry is right. Tell the broker how much space you need, what you are willing to pay, how long a lease you want to commit to, what kind of property image you want to have and any special requirements your business may have, such as high-speed internet access or a lot of parking. This will allow the broker to focus on a few selections that are suitable. Ask for a survey before you go out looking at space. This way you can eliminate properties before you waste your or the broker's time looking at buildings or locations that have no interest to you.
- Be loyal. If you find a broker willing to work hard for you, make sure you credit them as your representative. Sign a representation agreement, if necessary. If you engage a broker, don't look at space without them, even if he/she did not offer it to you. It usually does not cost you anything more to use the broker since the broker fee is built into the rent. So if you find a qualified broker that is working hard for you, stand behind them. On the other hand, do not tie yourself to a broker who is not doing the job you need them to do, does not have a commercial real estate background or does not have quality checkable references. Many sure any representation agreement you enter into with a broker has a right to cancel if things are just not going the way you want them to.
What do I do if I can't find a suitable broker willing to work with me?
It takes a bit more work on your part, but you can find the perfect space for your business on your own. By browsing on MySquareFeet, you already have more information than the average tenant does. If you read all the articles, you will gain a wealth of information. In many cases you will encounter a broker on the other side of the transaction representing the owner. Even though he/she is the owner's representative, the broker is not your enemy and will generally help you out (at least a little bit) to get a deal done. Just remember, his/her allegiance or fiduciary responsibility is to the landlord, so make sure you are careful. Follow the tips in the MySquareFeet articles, have the right legal representation for your lease document and you are on the right track.
