Prospective clients often ask me “Why should we use the services of a broker to find office space, when we can just use any of the websites available to the general public”? I tell them it’s a little like removing your own appendix based on directions you found on the internet. You might accomplish your initial goal, but there are lasting and potentially disastrous side-effects.
Finding space at a rental rate that fits a budget are the most basic and clearly evident aspects of the process. However, due to a broker’s in-depth knowledge of the market, he or she can almost always negotiate a better rate than an uninformed tenant. There’s public knowledge and then there’s real market knowledge – available only to a seasoned professional with sources of information not available on the internet. Brokers typically exchange the terms of deals they have recently negotiated. Also, not every available space is going to show up in an internet search. There may be sublease options or space that is coming available that only an experienced broker would know. That inside dope, as it were, is not available to the public on any internet site.
Furthermore, a professional will have knowledge and expertise to negotiate the specific terms of various deal points such as operating expense escalations and holdover provisions as well as renewal, expansion and termination options. Without those you could be like the guy who removed his own appendix, but didn’t read ahead to find out how to “close”. Infection eventually sets in and your self-negotiated deal becomes potentially deadly to the health of your business. Escalations go through the roof or you can’t expand when you need to and you can’t get out of your lease because nobody thought to negotiate a termination option. You then realize your only hope is a prayer chain.
Many potential clients want to know what the cost is to use a broker.
I tell them, “Nothing. The landlord pays the commission for any lease transaction”.
“But doesn’t the additional commission increase my rental rate”?
“No, not even close”.
In Oklahoma City the use of a tenant broker typically adds two percentage points to the total commission paid (6% vs. 4%). If the negotiated rate is $20/SF, that additional 2% is $0.40/SF. I assure you, the market knowledge a broker brings to the table is going to result in rental savings of at least that amount in economics alone - to say nothing of the intangible value of a well negotiated lease which provides the tenant protection from potentially tangible pitfalls.
A tenant should never negotiate directly with a landlord. The landlord is in the business every day, the tenant every 5th year. The landlord is a professional and the tenant is an amateur. You have got to level the playing field. Do not take a knife to a gunfight. You’ll lose.
