Finding the right broker for your needs is one of the most important decisions as you prepare to buy, sell, lease, renew, or sublease any commercial real estate property. This relationship isn’t a one-size-fits-all approach, either. But once you’ve found the best fit and partnership, you set yourself up for a successful investment journey. Here are our recommended best practices to consider.
Types of CRE brokers
First, let’s define the term. A CRE broker collaborates with other real estate professionals to negotiate deals — and then facilitate transactions. A successful broker requires in-depth knowledge about their industry and exceptional interpersonal and relationship skills. Depending on your goals, you may work with a broker with one of the following specialties:
- Listing reps are CRE brokers working with (and for) landlords and have deep market knowledge. These brokers help develop leases, source tenants, and negotiate lease terms, often overseeing the entire leasing process. They may advise landlords on rental rates, tenant improvement allowances, or anything else designed to maximize ROI.
- Tenant reps work for tenants. They’re savvy negotiators who will negotiate the best terms for their clients — and often help them find appropriate properties. These brokers educate tenants on the lease’s financial, legal, and practical details and advise on covenants, rent, security deposits, termination clauses, and more. They also work with the broker representing the landlord to deliver a successful negotiation acceptable to both parties.
- Dual agents work with a CRE property’s buyer and seller. They must remain impartial throughout the negotiation process as they advise and guide both parties to ensure each understands the contract’s terms.
Don’t Opt for a DIY Approach
It might be tempting to take a DIY approach to your CRE endeavors, but because of the complexities involved, saving a few dollars upfront can lead to much more expensive headaches in the future. It makes good strategic sense to rely on CRE brokers for their guidance and expertise because they offer a wide range of services. The following list is just a sample of how they help — and is not exhaustive.
- Property searches: You probably don’t have access to the range of databases or industry contacts a broker uses to identify suitable commercial properties based on your specific criteria, like location, size, type, and budget.
- Market analyses: To make an informed decision about your real estate investment requires accurate data. Brokers provide in-depth market analysis and insights, including current market trends, property values, rental rates, vacancy rates, and demographic data.
- Property valuations: Using comparable sales analyses (comps), income approach, and cost approach, your broker will evaluate commercial property value to determine fair market prices — whether you’re selling or buying.
- Financial analyses: If you’re a numbers person, great! But adding a broker to your team to conduct financial research and evaluate potential returns and risks associated with a CRE investment makes sense. Brokers calculate cash flow projections, ROI, and net present value (NPV) to ensure you’re making a sound financial decision.
- Marketing and advertising: Ready to sell or rent? A broker will develop a comprehensive marketing and advertising strategy to promote your commercial property, from creating listings and arranging property tous to leveraging their network of industry professionals and potential buyers or tenants.
- Property presentations and showings: Brokers know how to highlight your property’s best assets. They’ll organize and conduct property presentations and showings to prospective buyers or tenants, highlighting the key features and addressing questions or concerns.
- Purchase and lease negotiations: You want an intermediary protecting your interest and working to achieve favorable outcomes. Brokers negotiate terms and conditions of purchase and lease agreements, including price, rent, duration, concessions, and more.
- Due diligence support: The amount of due diligence required on a commercial building is daunting. A broker will coordinate property inspections, review documentation and legal contracts, analyze property condition reports, and address issues uncovered.
- Transaction management: A CRE transaction has many moving parts — and dates. Brokers oversee the entire process, ensuring accurate, efficient, and timely completion of all paperwork and documentation. They coordinate with attorneys, lenders, title companies, and other parties to facilitate a smooth transaction.
- Feasibility studies: Considering a development project? A broker will conduct market research and feasibility studies to assess your project’s viability, analyzing market demand, competition, zoning regulations, and other factors to determine its potential profitability.
- Ongoing support: Even though the transaction’s complete, you may still have questions or future needs. Brokers often provide ongoing client support, assisting with lease renewals, property management referrals, market updates, and advice on future real estate investments.
Best Practices for Finding Your CRE Broker
Before you begin your search, clearly define your specific requirements and goals. Determine the type of property you want, its location, budget, and other relevant criteria. You’re all set, and you’ve crossed those Ts and dotted those Is? Great. Use this checklist to help you find the ideal broker for your project.
Research your broker options.
Conduct thorough research to identify potential brokers. Look for experienced professionals specializing in commercial real estate with a good track record. Search online, ask for recommendations from colleagues or industry contacts, and check local real estate associations or directories.
Evaluate their expertise.
Your broker should have extensive local market knowledge, including trends, property values, and investment opportunities. Consider their experience in dealing with properties similar to those you’re seeking.
Check their credentials and licensing.
Verify that the brokers you’re considering are properly licensed and accredited. Check if they are members of professional organizations such as the National Association of Realtors (NAR) or the Commercial Real Estate Development Association (NAIOP). These affiliations demonstrate their commitment to ethical standards and ongoing education.
Review their track record.
Examine their previous transactions and client testimonials. Request references and contact their past clients to gain insights into their experiences. Narrow your search by focusing on brokers who have successfully closed deals similar to — or aligned with — your requirements.
Interview multiple brokers.
Schedule in-person meetings or phone interviews with several brokers to gauge their professionalism, communication skills, and compatibility. Prepare a list of questions to ask, covering their market knowledge, negotiation strategies, marketing plans, and fee structures.
Assess their local market knowledge.
A broker’s understanding of the local market you’re targeting is crucial. They should know current market conditions, property values, zoning regulations and any relevant legal or economic factors. Ask them to share their insights into the market and how they stay updated on industry trends.
Evaluate their network and connections.
Successful CRE brokers have strong networks. Inquire about their connections with property owners, developers, investors, and other industry professionals. A broker with an extensive network can provide access to a broader range of properties and potential buyers or tenants.
Analyze their marketing strategies.
Online marketing — and an omnichannel approach — is crucial in today’s digital age. Learn about the broker’s online and social media presence and how they leverage different digital tools, including websites and listings on relevant platforms. A proactive marketing strategy will help attract potential buyers or tenants.
Set expectations about communication and responsiveness.
Effective communication is vital in a broker-client relationship. Discuss how the broker will update you on potential properties, negotiations, and developments. Because you don’t want to be left hanging when you need something, ask about their typical responsiveness and availability.
Review their fee structure and contracts.
Before entering into any agreement, ensure you understand the broker’s fee structure and associated costs. Review the terms and conditions of the brokerage agreement carefully — and ask questions about anything you’re unclear — to ensure it aligns with your expectations and needs.
Trust your instincts
Ultimately, trust your instincts when selecting a broker. Choose someone you feel comfortable working with, who understands your goals, and who demonstrates integrity and professionalism.
Are you a commercial real estate investor or looking for a specific property to meet your company’s needs? We invite you to talk to the professionals at CREA United: an organization of CRE professionals from 92 firms representing all disciplines within the CRE industry, from brokers to subcontractors, financial services to security systems, interior designers to architects, movers to IT, and more.