With commercial real estate being such a large investment, it’s crucial to have an experienced and knowledgeable broker on your side. But not all brokers are created equal.
Purchasing or leasing commercial real estate (CRE) can be a complex process with high stakes. Having the right broker representation is key to finding the perfect property, negotiating favorable terms, and ensuring a smooth transaction.
But with so many brokers to choose from, how do you select the right one? This article will explore the top characteristics that property owners should look for when hiring a commercial real estate broker to ensure they find the ideal partner.
Why Hire a CRE Broker?
Hiring a qualified commercial real estate broker provides immense value in buying or selling CRE. They have specialized expertise and insider industry knowledge you likely lack as an individual investor or property owner.
For buyers, brokers extensively research local inventory and market conditions to target suitable properties before they’re publicly listed. Their relationships with landlords and experience in negotiating complex leases save you time and money. Overall, a broker’s skills and connections reduce the hassle of finding the right property and closing a deal.
In addition, a CRE broker could be a valuable partner to secure the required financing for buyers. These professionals have typically secured partnerships with top commercial real estate lenders who assist their clients in the process of obtaining funding to invest in commercial real estate properties.
Meanwhile, for sellers, a broker will tap on its network of contacts to identify potential buyers, provide advice when bids start to come in, make assessments of the different arrangements being offered, and ultimately handle the paperwork needed to complete the transaction.
Typical Commission Rates
Commercial real estate brokers typically charge commission fees between 3% to 6% of the total lease value, often split between the tenant’s and landlord’s brokers. While rates vary, the industry’s standard hovers around 5-6% for office space and 4-5% for industrial space.
Meanwhile, the commission for an investment sale is commonly 5-8%. For business owners and investors, paying a commission is well worth it for the experience and results an expert broker provides.
However, companies like Gparency are working to disrupt the traditional commission-focused model adopted for centuries by commercial real estate brokers by introducing a new membership-based approach that can save hundreds of thousands of dollars to buyers and sellers of commercial estate properties.
Whether the property owner chooses to work with a broker that charges a commission or a membership, relying on the assistance of these professionals to make a deal will typically make the process of making a deal a hassle-free experience.
Top Characteristics to Look for in a CRE Broker
Here are the top 5 characteristics you should look for when hiring a commercial real estate (CRE) broker or agent:
A positive track record and proven experience
Look for a broker extensively experienced in your specific asset class – whether that’s office, retail, industrial, multifamily, or special-use properties. They should intricately understand metrics like cap rates, appreciation, zoning laws, and market nuances in your local area. Verifiable experience consistently delivering results is key.
Word of mouth and direct referrals are usually the best way to make a list of possible candidates to work with. Property owners can talk to fellow investors and landlords in the area to find out who they worked with to make their deals and ultimately set up interviews to get to know the candidates better.
Strong relationships
An established broker will have invaluable connections with landlords, investors, lenders, attorneys, and vendors to find off-market deals and assemble the best team for your needs. These relationships can make or break negotiations and expand available opportunities.
Proactive on your behalf
You need an energetic broker who initiates outreach to identify potential properties or buyers who may be interested in what you are selling. They should also provide regular market updates along with a summary of what their strategy and approach will be to find the right buyers or properties for you.
Even if a property is a hard sell due to either the state of the market, its characteristics, or the price you are asking for, you should feel that your broker’s interests are aligned with yours and that your business is considered a priority.
Transparent and analytical
Insist on transparent data analysis, not just opinions. Your broker should assess objective valuation metrics like price per square foot, cap rates, and net operating income to quantify opportunities and risk. You need the full picture, not hype.
Data-driven insights and recommendations set a broker apart from the group as this is the kind of advice that may maximize the value of your deal. If you are buying, this kind of knowledge can result in better outcomes when negotiating. Meanwhile, if you are selling, the data can tell you exactly what to expect from the market and reduce the time it takes to find a suitable buyer.
Local market expertise
There’s no substitute for in-the-trenches knowledge of an area’s zoning, infrastructure, economy, commercial inventory, and investor profiles. Local expertise opens more possibilities and informs wise decisions. Don’t underestimate its importance.
Bottom Line
When preparing to buy, sell, or lease commercial property, choosing the right CRE broker will have a sizable impact on how successful and hassle-free the deal is. Prioritizing field expertise, connections, proactive customer service, transparent analysis, and in-depth local market knowledge will lead you to a stellar representative. With the right broker as an ally, your commercial real estate endeavors will be far more fruitful.
