Author: officespace

With the explosive growth of small businesses in the U.S., more entrepreneurs are finding themselves negotiating and closing leases without the help of a broker. While at times it makes sense to do this, using a broker in the right scenario can greatly assist in securing the best possible lease for you and your company.

Before deciding whether you need extra help, it’s important to understand what motivates brokers and how they can benefit you during a lease transaction.

Getting their attention. Knowing how brokers get paid is important to understanding their motivations — and why sometimes, they don’t return your calls. Most brokers get paid a percentage of your total lease value, which is typically between 3 and 5 percent. However, this often isn’t the full amount your broker will receive, as they usually have to share a percentage of their commission with their brokerage companies.

Getting to a signed lease can be a lot of work. This can involve conference calls or face-to-face meetings, searching for spaces that satisfy your requirements, setting up and attending property tours and actual lease negotiations themselves.

A broker will have to do these steps for a company regardless of if they’re looking for 10,000 square feet of space or 500 square feet of space, but the difference in size means that the amount the broker receives will be significantly different.

This is why you might want to — or have to — represent yourself in a lease transaction for a smaller space. If your space requirements are bigger or more complicated, then there are instances where using a broker may be in your best interest. To better understand the potential costs of working with a broker, check out our FAQ.

Knowing the landlord landscape. It’s tempting for experienced entrepreneurs to think that they can deal with the landlord directly and save money by not using a broker, expecting that the landlord will pass savings on to them. While there may be times when this is true, there are just as many situations where it isn’t necessarily the case.

While you might do a lease transaction every three to five years, brokers do many deals every month. The end result is that brokers are likely to know more about the landlords operating in the local area than you do. They know the property owning landscape well: who is flexible, who is motivated and who will go the extra mile to accommodate a tenant.

For example, let’s say you are a growing company with the stability to sign a long-term lease if desired, but want to retain a short-term lease for greater growth flexibility. In situations such as this, an experienced broker can guide you to spaces with landlords who are not only flexible, but can accommodate you in alternative buildings while under your current lease.

Let’s say you run out of space two years into a five-year lease, you may have the option to transfer your lease terms and move to a larger space in their portfolio. Additionally, as opposed to having to take a large space that is intended to be grown into, a broker may be able to negotiate rights of first refusal on adjacent spaces one or two years into your lease term, saving you from paying that rent from the onset.

Striking a creative deal. A broker may also be able to work out a plan that works best for your company’s financial needs by getting creative with how your rent escalation is constructed. If you are working on a product launch that runs on an 18-month cycle, a broker may work with you to escalate your rent accordingly instead of a traditional 12-month rent increase cycle.

If you are facing a scenario where you may have run out of space completely, they may even be able to negotiate a lease buyout with the landlord so that you can move into their new space without paying double rent.

There are no hard and fast rules on when to work with a broker. Before putting in a lot of work shaving a few percentage points off your lease by saving the landlord from a commission, ask yourself if you’re paying for something that you shouldn’t have to or if there’s any flexibility that is worth more to your company than the rent savings.

These factors could amount to much more savings than the commission saved and passed to you.

This article was written by Susie Algard and  originally featured on Entrepreneur.com. See original source here: http://www.entrepreneur.com/article/235529

This week we have the pleasure of sharing another Q&A for our Broker Banter series, featuring Denver Broker Jason Bollhoefner.  Similar to our previous conversation with Portland broker Kristi Ricker, we connected with Jason to get more insight into some key things that tenants should know before touring potential sites, selecting a space, and negotiating a lease.

OfficeSpace: What are some things that tenants typically overlook when looking for new space that they should be paying attention to?

Jason:  Commercial leasing is a complex process, fraught with significant potential risks and liabilities, and should only be handled by a representative that has both the necessary experience and your best interests in place.  I have found tenants tend to overlook the importance of their creditworthiness and the time required to bring a commercial lease transaction to close.  Leasing commercial space is very comparable to getting a loan from a bank.  Tenants should be prepared to share financial statements and to appropriately collateralize the lease transaction.

Commercial real estate transactions, even for a seemingly “simple” deal, may take a considerable amount of time to successfully complete.  Having adequate time to identify, tour, design, price, negotiate terms on, construct or improve, and move into suitable commercial space helps to shift negotiating leverage to the tenant’s benefit.  Start the process 4-8 months before you need to occupy your new space.

OfficeSpace: What are the best practices to selecting the best space?

Jason: The best space is the space which meets unique criteria that vary by industry, property type, the nature of the user’s business and their business plan, and location.  I ensure a successful process by taking the time to understand the intricacies of my clients and their businesses up-front so the real estate supports these needs and requirements.

OfficeSpace: What are the best practices in negotiating my lease?

Jason: The best practices in negotiating a lease are summarized into 4 critical path items as follows:

1. Start your needs analysis and discussion well before the need is estimated to commence.
2. Engage an expert commercial real estate broker with proven experience and leverage their knowledge; we are here to help you starting with the needs analysis and continuing from occupancy throughout your lease term.
3. Always have a solid back-up option at hand, especially in an improving real estate market. Being prepared to walk away is a very powerful aspect of successful negotiation.
4. Engage a real estate attorney to provide counsel and revise the lease document.

OfficeSpace: What are the hidden costs in a lease?

Jason: Your real estate broker should be well versed and provide assistance in mitigating latent/hidden costs within the lease agreement.  The primary area of hidden costs arise from Operating Expenses or Common Area Maintenance (CAM) charges and maintenance obligations.  Other potential pitfalls include Tenant Restoration requirements, Tenant Alteration processes, landlord administrative markups, and property management fees. My experience  negotiating thousands of lease agreements is invaluable to my clients in these areas.

OfficeSpace: What’s the best way to compare offers?

Jason: The best way to compare offers is on a Net Present Value (NPV) basis and $/RSF basis with a matrix for a side by side comparison.  This analysis should also take into account intangibles such as building image, proximity to employees and clients, ease of ingress/egress, and the true cost of occupancy including any tenant contributions to build-out and relocation costs.

Jason Bollhoefner joined Corum Real Estate Group as a Leasing Agent in January 2001 and was promoted to Senior Leasing Agent in 2007 and to his current position as Assistant Vice President in 2008.

Find office, retail or industrial space by visiting: /Denver-CO