This post was originally published on JLL Spaces.
Real estate is one of the largest expenditures an organization incurs, thus warranting a formal, strategic process to making sound decisions. As you approach your current commercial lease renewal, give your organization the best chance at negotiating a favorable agreement and selecting a property that best meets your needs.
To accomplish this, consider using a corporate real estate broker to assist you in the research and negotiation process. Why?
1. Brokers have expertise in the market.
Not only is keeping tabs on the local real estate market difficult for tenants, but doing so may distract you from your business at hand. Tenant representation brokers—those who help you as the commercial property tenant in your lease negotiation process—however, are immersed in the industry, trends and market fluctuations, and have knowledge of openings and opportunities of which you may be unaware.
Think about the professional services your company already outsources—such as accounting or legal counsel—that are not included in the specialized skills of your organization. This is done to increase efficiencies and decrease expenses incurred.
The same should go for real estate, which typically ranks as the second or third largest expense on operational balance sheets.
2. Brokers have access to better information.
Similar to the previous point, brokers are tapped into a network that provides them with real-time market knowledge. Even if someone in your company is familiar with transactions, unless their job is 100% real-estate focused, they are not likely aware of the best options at any given time.
For example, professional, commercial real estate brokers here at JLL have access to:
- Proprietary research developed and interpreted by a staff of 350 local, national and global professional researchers
- Market comparables of recently completed deals
- Proposals from landlords and transactions not completed
A broker’s access to in-depth data and research, coupled with experience in applying this intelligence across a wide range of client sizes and industries, can be used as leverage in your negotiations—even if you are not considering an actual relocation.
3. Working with a broker enables you to be proactive, rather than reactive.
Because tenant rep brokers are watching the market on a daily basis, they are able to provide you with continuous updates on market trends and opportunities. Developing a relationship with a broker will help you stay informed about new opportunities as they arise, and often provides the leverage your organization needs to structure the best possible lease package.
4. Brokers save you time.
Consider the time it would take you to research the market, narrow down options and negotiate with your landlord, as well as the many other activities involved in an effective lease renewal. Using a broker eliminates the amount of time taken away from your work, and helps you focus on the assessment of your organization’s real estate needs.
5. Brokers save you money.
Brokerage firms exist because they save clients time, money and risk. Using expert advice enables you to secure a lease agreement that benefits your organization and its business goals.
Think brokerage service fees are too expensive? Often, these fees are paid by your landlord, with the cost budgeted into your rental agreement. Should you choose to use the broker’s services, you are simply accessing a market fee that will be paid as part of your rental transaction.
Sometimes, landlords will dissuade tenants from using a broker by offering to pay them the amount of the service fee. Even if your landlord is willing to pay this amount over to you, consider how much could be lost in the negotiating process if a broker is not used. According to our research, a broker can save you an average of five times the cost of their fee.
6. Brokerage firms support organizations with needs in multiple markets.
If your company runs operations in multiple locations, a strong brokerage firm can serve your needs from a central location. Rather than seeking a partner in each market, find a national or global firm that works with multi-city tenants. The firm can provide you with a global account manager who serves as the main point of contact, connecting you with brokers and information in each market to find the best opportunities available.
This also helps your organization have a more clear understanding of its entire real estate portfolio and costs, which can get messy if local decisions are all left to individual markets.
7. Not using a broker benefits your landlord.
Giving your landlord the impression you’re not using a broker can harm you in the negotiation process. If he or she believes you are comfortable in your current space, he/she will assume you are satisfied and willing to accept their increases. And, he or she may be less inclined to bargain with you for items like more flexible agreement terms, rent, new amenities, or updates to your office infrastructure or technology. Why else would they pay you not to use one? (See #5)
8. Brokers have expertise in handling specialized needs.
Broad-based brokerage firms offer the additional benefit of providing full-service real estate services to clients. This may include knowledge and experience in special real estate segments, such as build-to-suit facilities or environmentally friendly properties.
If your company requires a specialized lease or property arrangement, partnering with a large firm may also reduce unneeded expenses incurred from inaccuracies or oversights in project management—as well as take this burden off your team.
The Bottom Line
Even if your company has the ability and resources to assess your property needs, research the market and negotiate a better lease agreement, you should still weigh out the benefits of opting for professional services to support one of your largest expenses.
Are you aware of the expenses associated with negotiating your lease agreement? Did you realize all that your company stood to gain through increased efficiencies and a more favorable agreement through utilizing a brokerage service? We welcome your thoughts and feedback in the comment section below.
For more information on the benefits a broker can provide in your commercial lease negotiations, download our white paper, Top 10 Reasons to Use a Broker. This paper includes more detailed insight and specifics to keep in mind, based on JLL’s global knowledge base. We hope it serves as a helpful reference resource as you more forward with your lease planning.
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