If you’re not an insider, the CRE business can be difficult to understand. I certainly don’t understand the inner workings of every industry and often need guidance from respected professionals. In this post, I hope to bust some popular CRE myths so you’re more confident when hiring a professional for your next deal.
Myth: Tenants pay their brokers’ commissions.
Truth: Landlords pay the brokers their commissions.
I know it seems backwards, but brokers—regardless of where their fiduciary responsibility lies—are creating value for the Landlord by securing their tenants in a new or existing lease. Therefore, they are paid for creating that value.
Myth: Even though the Landlord pays the commission, the tenant still pays for it through their rent.
Truth: Theoretically, the tenant does pay for the commission via the rent.
Every owner factors a commission into their standard rental rate. Whether you use a broker or not, you’re going to pay for it. Worse yet, your Landlord is paying a commission to their broker or in-house leasing agent, which also comes from your rent. So you’ve basically paid the Landlord’s advisor to negotiate against you.
Myth: Brokers just want to relocate my office.
Truth: Brokers want to do whatever is best for the well-being of your organization.
Brokers are paid to do what is best for your company. If that means relocating, then yes, we want to relocate your office. If that means representing you on a renewal, then that is what we will do. To reiterate: We are paid by your Landlord under both scenarios. We have a wealth of knowledge and different ways to help your business. Take the time to learn about the services we provide, and you might be pleasantly surprised.
Myth: Big companies don’t use brokerage services, so I shouldn’t, either.
Truth: Most Fortune 100 & 500 companies hire brokers to represent them exclusively throughout the world.
Large organizations from all industries, including technology, banking, and pharmaceutical, all use real estate brokers to advise them on their space requirements. It’s no coincidence that these companies have become household names. To get there, they’ve aligned themselves with many different advisors, including real estate brokers. I’m not suggesting that your business will be the next Facebook if you hire a broker, but it’s certainly a good place to start.
Hopefully this exercise in myth busting has made you feel more confident and educated about how the CRE business works. Brokers have a lot to offer. Don’t pass up a great opportunity to create a strong, long-lasting partnership with a trusted advisor who will help guide you through the ups and downs of your business.
Based in Princeton, N.J., Vinny specializes in tenant and landlord representation for Colliers International, working directly with his clients in the acquisition and disposition of office space. For more commercial real estate insight and trends, follow Vinny on Twitter.