When Do I Need a Commercial Real Estate Broker? A Q&A
SK Commercial Realty’s Vice President John Poulos was recently on High Velocity Radio to talk about the benefits of using a Commercial Real Estate Broker from an office tenant-side perspective in the Atlanta office market. You can catch up on the full interview here, or read on below for our recap Q&A.
Why use a Commercial Real Estate Broker? I’ve done my own deals in the past, or I closed on my home purchase without an agent, why do I need a broker for my CRE deal? What value do professionals like you really add?
- Market knowledge. While it’s possible to self-educate on the state of the market (and we encourage it!), it’s unrealistic to expect you’ll have the time and resources to find all the information that can get you the best deal as a layperson. CRE Brokers are here to be your resource.
- The creation of leverage. Atlanta’s market has become a “landlord’s market,” with more demand than supply. Now more than ever, it helps to have an industry advocate. Landlords will often negotiate on more market competitive terms when they know that their tenant is working with a Real Estate professional. ?
- Ability to negotiate terms, including build-out dollars, personal guarantees, free rent, escalation, etc. Tenant Reps have processes in place that landlords are familiar with to manage costs, and they have the industry contacts to negotiate better deals.
- Liaison between tenant & landlord. You want the best deal you can get, but it’s in no one’s interest to sour landlord relations right off the bat. When negotiations go through a Real Estate professional, the tenant / landlord relationship is better preserved.
- Time. How much is your time worth? Would you handle your own lawsuit?
- Process management. Commercial real estate brokers handle all parts of the process, including locating all opportunities that meet parameters, space planning, monitoring construction budget, making furniture & cabling vendor recommendations–and more!
- No fee to pay. Our service is paid by the landlord- Our work is also done on a speculative basis meaning, we only get paid if and when a transaction is consummated. At that time, our payment comes directly from the landlord.
I’m currently in an office or I’m considering moving into an office. How do I know what my options are? Can I get everything I need from a service like LoopNet?
Yes, you can technically get everything you need from LoopNet–however, when you go the DIY route you’re very likely to miss options, get an above-market deal, and waste a great deal of time that would be saved going through a broker.
What does the process look like? How long should I expect this to take?
To start, we learn about what you are looking for–everything from location, to basic layout, budget, growth, business objectives, etc. We then survey the market, schedule appointments, tour various buildings / spaces, test-fit floor plans, request proposals, perform financial analysis, negotiate proposal terms (including build-out dollars, request Lease Agreement, negotiate lease language, value engineer construction budget). The entire process takes an average of 3-6 months, sometimes longer depending on particulars.
Suppose I want to renew my current lease and stay where I am. Why would I get a CRE broker involved in that?
A CRE broker gives you leverage with your landlord. You’ll be better able to negotiate terms and ultimately get a better deal, without harming the landlord / tenant relationship, because all negotiations go through the broker.
What does the Atlanta office market look like now, after the recession and expectations moving into Q1, 2017?
Most Atlanta submarkets right now are “Landlord-friendly.” Rates are 20-30% higher than 24 months ago, and tenant improvement dollars and concessions are down. Buildings have sold at record-high prices, meaning rates will remain high. Very little new supply is hitting the market right now, and the addition of large office tenants like State Farm over the past year has made available office space even more scarce.
Are there areas of Atlanta submarkets where you expect to see rates rise/fall? Where are the DEALS in the CRE Office Leasing Market?
Downtown and Peachtree Corners are looking like good tenant markets. Downtown has been vacant, but now there does seem to be a value here as Midtown develops.
Right now, with the office market so competitive, the best deals are going to be found by following new developments. We’re seeing a trend in pre-leasing in developments that aren’t yet completed, something the Atlanta market hasn’t typically been known for–the 3 Alliance Center in Buckhead, for example, is 60% pre-leased to tenants before it’s opened. It’s going to take a good market eye and knowledge of up-and-coming development to really spot the deals on the tenant-side in 2017 Atlanta.