ARTICLE:
Do I Really Need To Hire A Broker?
This is a question I often hear: “Do I *really* need to hire a broker to help me find my next NYC office space?”
It’s the year 2020 and I’ve been doing this for 20 years now, and I can tell you that the short and honest answer is that you absolutely do not *need* a broker to help you. You certainly can go about finding space opportunities yourself, whether it’s asking friends, searching online, or calling signs off office buildings. Note though, I would have a similar answer if you also asked whether you *need* an accountant to do your taxes or if you *need* a barber to cut your own hair, or other types of professional services.
So yes, those brokers whose only value add is their access to the MLS (which essentially is access to CoStar), are likely to be disrupted.
I believe a more appropriate question should be: “Why would I *want* to hire a broker to help me with my office space search?”
Here are a few ways in which an experienced office leasing broker should add value:
1) Saving TIME: There are approximately 3,830 commercial buildings in Manhattan alone. How will you whittle it down to just the top 3-5 space options, unique to your specific situation, to present to your senior management? If your broker is an expert in the local market, he should be able to reach far more landlords and leasing agents to qualify and vet space opportunities and in much FASTER time than you can. Plus, each building has its own unique features and landlords who operate differently from one another- making it difficult to compare apples without a broker with years of history and personal experience by your side advising you.
2) Saving MONEY: Your broker should be an expert in the neighborhood and type of space you’re hunting for. If so, he’d not only save you lots of time, but money as well. Besides for the high cost of wasted salary time on unnecessary site tours calls and meetings, the broker should save your company money once the perfect space is identified. Since he’d have the latest lease comps and relevant data, he’d be able to ensure you’re getting the best lease termsheet possible and not leaving anything on the table (and since most NYC office leases contain anywhere from 20-100 pages, there is a lot that can be left on the table when a company doesn’t negotiate with the right representation.) Just a few of the items in the lease which have real financial implications include: condition of delivery, tenant improvement allowances, free rent, base rent escalations, additional rent items, operating expense passthroughs, electricity and utility charges, and security deposits.
3) Avoiding FRUSTRATION: It could be extremely frustrating (and costly) when you spend a lot of time working on the deals that don’t materialize, especially if the deal breaking issues could’ve been avoided had a knowledgeable broker been involved. Besides for the emotional drain of not getting the space you invested your hopes and time on, oftentimes the deal dies only after legal and architectural costs are incurred as well, plus losing out on the other viable space opportunities which may now be leased already.
4) Landlord Lowdown: Office tenants typically do close to zero diligence on the potential landlord or management company before signing a lease. A pretty lobby doesn’t mean the landlord isn’t a slumlord who can make your next office unbearable for your staff or clients once you sign that lease. A good broker will give you a history on the various landlords and management firms you are considering so you know what to expect.
5) Honest and true REPRESENTATION: When a landlord sees that you’ve retained a reputable broker for your space search, they will take your offer more seriously and give it more consideration. As for lease renewals, having a broker represent you shows that there is a real probability of you actually moving, which is what gives you leverage on the renewal terms (as deep down, landlords know the true and high costs of re-leasing a space, so despite what the way they start the negotiations landlords really want you to stay.)
6) OPPORTUNITY/ NEEDLE IN THE HAYSTACK: If your requirement is super specific, the right broker should immensely. For example, if you need: 10k rsf with AND want to stay on a single floor (not dividing the team over multiple floors) AND need a particular layout, AND you need a certain amount of light, AND by a certain date, but you only want to be walkable to either union square or Madison square park, and on top of all that – your board won’t allow anything more than a 2-3 yr lease terms - where would you even start?
A knowledgeable broker should know about move in ready sublets that could fit the bill, as well as which landlords are now agreeing to shorter lease terms or giving tenants flexibility to allow for growth. Additionally, if the broker is personally very active in that market, he may have access to listings not yet officially on the market yet and show you that “needle in the haystack.”
In short, most companies relocate or work on lease renewals only once every couple of years. Landlords, however, deal with that stuff daily. Your broker should give you leverage, guidance, and market expertise to even the playing field.