Relationships. The commercial real estate process is definitely relationship related, not only in the selection of a brokerage partner, but also throughout a broker’s services and the approach to the market.
More often than not, the specific market details and the up-to-the-minute knowledge are where the assignments are earned. Beyond the basic business or personal relationship, one literally could consider dozens of very capable firms that may or may not differentiate themselves, or their individual professionals, from one another.
How and where can one identify and investigate commercial real estate firms who have the talent, experience and capability to handle the very important and sensitive concern of one’s commercial space needs?
There are several ways to investigate the industry, from word of mouth to formal capability presentations by individual firms; and from the World Wide Web to the local real estate board association, known as the Commercial Brokers Association of the Greater Boston Real Estate Board. Many, many listings will be presented in any of the above cases. Further distinction can be determined by contacting organizations such as the National Association of Realtors, Massachusetts Association of Realtors, Society of Office and Industrial Realtors, Counselors of Real Estate and the Certified Commercial Investment Member Institute. Each member of organizations like these must maintain high levels of experience, continuing education, ethical practice and the like.
Hub Talent
According to nationally-recognized REIT managers and long-standing institutional Boston owners, as well as other national players, one can be sure that among the Greater Boston commercial real estate practitioners there are perhaps some of the most educated and brightest commercial brokerage talent in the country. I must admit, I am proud to be a part of our local industry.
Whether it is a difficult decision on choosing your broker, or a relatively easy one like selecting your brother — yes, an attempt to be funny — choosing a team is the first and foremost action item in the search for commercial space.
We do highly recommend engagement of a commercial broker; in doing so, one will experience a more organized and methodological approach to the market search and to the typical leasing process and procedures that differ greatly from the residential search, and even among the various commercial product types, such as retail, industrial, flex, manufacturing and office space.
Once having identified, interviewed and selected a commercial real estate brokerage professional(s), one must be introduced to a process from which the most suitable available commercial space is selected. There are minor variations on the approach to the market and the timing to enter the market due to the lease expiration date, expansion needs or otherwise. But a few objectives should surface: goal setting and modeling, if you will. Some of the more common goals are economics, operational functionality, contract flexibility and a streamlined process.
It is appropriate to engage a brokerage professional and even more appropriate to know the process before, during and after locating commercial space. The very basic guidelines for the process to identify and negotiate for commercial space are outlined below:
• Define and establish space needs. Create the model for perfect occupancy. The criteria include: location, size, layout, budget and image consideration among other things. The model will establish benchmarks for comparison of alternatives for lease renewal, restructure or the like. With the assistance of a space planner, and with your direction, a brokerage professional will highlight noteworthy selection criteria that will be incorporated into the future selection of available prospective properties.
• Survey market availabilities. The brokerage professional will prepare a detailed report of market alternatives. Each of the considered alternatives should be discussed, and only eliminated after determining its lack of desirability, taking into consideration the aforementioned criteria, including location, pricing, timing of availability, etc.
• Perform property inspections. It may take more than one tour in today’s market, but keep it simple. Try not to inspect more than eight to 10 properties in any one tour. It can be difficult to differentiate them after three hours of inspecting properties. Be sure after each tour to review the pros and cons to assist in creating an outline or matrix for discussing the alternatives at a later date. The property inspections are organized and meeting times arranged through your commercial broker.
• Select the most suitable alternatives. Working closely with your selection committee or team, create a matrix or outline to present and evaluate each property. Then compare the matrix with the model established in the first phase of the process. Evaluation can be made with technical aspects including floor load, power, HVAC, area and property amenities, window size and brightness of natural light, column spacing, etc. Your brokerage professional will assist in all aspects of the evaluation.
• Prepare a request for proposal. Often overlooked, the RFP is a means by which the tenant can assert modest control in identifying to the landlord the most important business terms and the format in which to present its proposal to lease. It addresses and identifies major financial issues, operational issues and other hidden costs found in many leases. This is created by a representative and forwarded to the landlord’s agent.
• Analyze and evaluate proposals. Individual proposal summaries of financial, tangible and intangible criteria should be modeled against the benchmarks set in previously mentioned phases. Present value modeling and equivalent level rent comparison is helpful in providing an “apples to apples” true comparison building by building. There are many ways to run financial models; most brokerage firms have the capability to present this comparative analysis.
• Conduct negotiations. A brokerage professional will orchestrate a competition for the tenancy and strive to consummate a favorably economic and flexible contract that meets the needs and goals of the tenant. No broker should ever make any commitments or agreements without the express permission and approval of their customer. A Letter of Intent or Memorandum of Agreed Terms should be created, presented and executed by both parties to assure business terms are fully understood.
• Execute the contract and occupancy. A brokerage relationship should continue to provide worthy and timely information and service well-beyond execution. By answering day-to-day, simple operational questions or providing general market information during occupancy a commercial broker can be a valuable addition and resource to any company’s senior management team.
By employing the services of a commercial real estate professional, one aligns with a knowledgeable, licensed advocate that provides very important services at critical stages within a company’s evolution. We are all aware that occupancy costs can be the second highest cost on many company’s balance sheet, second usually to personnel-related costs, such as salaries, medical and financial benefits, etc. Space decisions are of utmost importance. Brokerage selection, financial implications, operational productivity and so on, are only a few of the concerns related to commercial space needs. I can assure the readers that the brokerage community well understands the concerns and the direct importance of the well-being of a company; the local commercial brokerage industry is prepared to serve those needs with vigor.
