Finding the right commercial real estate broker is an integral part of the process when securing a new business location. The most common way is through relationships, which can create sub par results. Look out for these five traits when selecting a broker:
Objectivity and Creativity
Experience can create bias. It’s not common that “ideal” is available everywhere you would like it to be. Brokers need to be able to think creatively, think objectively, and be perseverant when ideal sites are unavailable. Being transparent through the process is also important in order to succeed in finding the right location.
Say the tenant wants 3000 sf of retail space. The broker should expand the search and look for 2000-4500 sf in retail space or potential redevelopment sites. This way, if the the perfect location isn’t available there are still other feasible options.
Fiduciary Responsibility
Brokers have a responsibility to act fairly to both the tenant and the building owner. Long term, this is the best way to create business on both sides. However, listing agents have a clear responsibility to get the best deal for the building owner as they have an existing relationship and the building owners are a primary source of deal flow. This means that when push comes to shove in the negotiations, the listing broker will err on the side of the owner.
There is a common misconception that hiring a broker costs money, but the fees are paid exclusively by the building owners. Therefore, it makes sense to hire a broker to help with site selection instead of relying solely on listing agents.
Market and Client Familiarity
It’s important to find a broker that has an understanding of both the local market and the client. This doesn’t mean the broker has to live in the local market. On the contrary, living there can create subconscious bias. In Dallas, for example, the client will have a general idea of several trade areas they wish to pursue. It’s not necessary to have a detailed understanding of the greater Dallas metropolitan area. A good broker can fly in and drive the trade areas in a day or two in order to get market familiarity. In fact, some brokers who are local rely on online searches which often misses new and poorly categorized listings.
Client familiarity refers to the brokers understanding of the client and their industry. Today, word of mouth is the number one way to find brokers. This can lead to hiring inexperienced family members or friends in order to help them out. Although generous, more often than not this type of deal making costs the clients dearly long term. A broker should have at sufficient experience in that specific industry before engaging.
A Focus on Long Term Relationship
Unfortunately there is an inverse correlation between the broker and the tenant. The more the tenant pays, the higher the commission. A broker who values a long term relationship won’t try to squeeze every penny. Rather, they will be focused on getting the best deal for the tenant so they can do many more deals with them.
Another good sign is the broker’s willingness to walk way. This shows true objectiveness. Chances are good that through creativity and over time, something will open up that suites the needs of the tenant.
Negotiation and Experience
Some brokers have been in the business a long time but still don’t produce results. The annual average production is an important metric to consider alongside the years of experience. Most experienced brokers will know a certain type of real estate extremely well while having almost no experience in other sectors. Look for a broker that can admit when they are outside of their field.
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