How do I hire, and pay to, a buyer's agent for commercial lease negotiations?
July 24, 2009 1:16 PM Subscribe
Should I hire, and how do I pay to, a buyer's agent for commercial lease negotiations? Note: I found property myself but the negotiations don't go the way I expected...
This is my first experience in the commercial real estate market. After an extended market research I found this property (industrial, not retail) and approached the selling agent myself (don't tell me it was a mistake - I've realized it myself by now). The negotiations are going pretty hard: the broker initially (in our first phone conversation) quoted me pretty good lease rate, but when it came to the actual Offer to Lease, the rate suddenly became "subject to change based on the amount of landlord's work required".
Of course they use their "standard" Offer to Lease form that is heavily skewed to the landlord's advantage. Most of the amendments I propose are being declined or watered down on the grounds that "this is just a preliminary offer - lets keep it simple -- we'll incorporate your proposals in the final lease document". And this is just the drafting stage, even before the offer is shown to the landlord!
I could of course keep pushing my way in negotiations and insist on the initial quoted rate and including all my amendments, but I am afraid I don't know where to stop: what is acceptable/common industry practice, and what is just broker' tricks playing the newbie. At the end, if I am unwilling to compromise I may end up loosing this location - which I wouldn't like to see go as it is on the top of my shortlist.
So I am seriously thinking about retaining a buyer's agent to help me in the negotiations. As far as I know, the usual industry practice is the buyer's agent makes initial contact with the listing agent and then they split commission 50/50. But how do I do it at this stage, in the middle of negotiations? Should I pay the buyer's agent myself? What should be the fee structure? Fixed amount? Success fee (based on what - percentage of savings negotiated, percentage of lease amount, etc)?
Please tell me what you think or know, share if you had similar experience. Any constructive feedback will be very much appreciated!
This is my first experience in the commercial real estate market. After an extended market research I found this property (industrial, not retail) and approached the selling agent myself (don't tell me it was a mistake - I've realized it myself by now). The negotiations are going pretty hard: the broker initially (in our first phone conversation) quoted me pretty good lease rate, but when it came to the actual Offer to Lease, the rate suddenly became "subject to change based on the amount of landlord's work required".
Of course they use their "standard" Offer to Lease form that is heavily skewed to the landlord's advantage. Most of the amendments I propose are being declined or watered down on the grounds that "this is just a preliminary offer - lets keep it simple -- we'll incorporate your proposals in the final lease document". And this is just the drafting stage, even before the offer is shown to the landlord!
I could of course keep pushing my way in negotiations and insist on the initial quoted rate and including all my amendments, but I am afraid I don't know where to stop: what is acceptable/common industry practice, and what is just broker' tricks playing the newbie. At the end, if I am unwilling to compromise I may end up loosing this location - which I wouldn't like to see go as it is on the top of my shortlist.
So I am seriously thinking about retaining a buyer's agent to help me in the negotiations. As far as I know, the usual industry practice is the buyer's agent makes initial contact with the listing agent and then they split commission 50/50. But how do I do it at this stage, in the middle of negotiations? Should I pay the buyer's agent myself? What should be the fee structure? Fixed amount? Success fee (based on what - percentage of savings negotiated, percentage of lease amount, etc)?
Please tell me what you think or know, share if you had similar experience. Any constructive feedback will be very much appreciated!
You should be able to bring in a buyer's agent at any time, and the cost to do so shouldn't be your concern at all. As you state, the buyer's agent is paid through the commission on the sale. It's your right to bring in that advocate--your advocate--at any time.
Think of it like this--would the seller rather have you walk because your uncomfortable or concerned, or would they rather complete the sale because your comfortable and represented. In four mortgages, I've always used (and been thankful for) an agent.
Good luck!
posted by richardhay at 6:00 PM on July 24, 2009
Think of it like this--would the seller rather have you walk because your uncomfortable or concerned, or would they rather complete the sale because your comfortable and represented. In four mortgages, I've always used (and been thankful for) an agent.
Good luck!
posted by richardhay at 6:00 PM on July 24, 2009
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So, you want a commercial leasing advisor, or a commercial property agent, to work with you. You find such a person by independently contacting commercial real estate firms, and asking if they offer fee-for-service consulting, or would be willing to come into an ongoing lease negotiation as your advisor. You may also find local attorneys who specialize in commercial real estate advising, on a fee for service basis. If you find such a person, they should be familiar with various lease options common in your area, including the various forms of net leasing.
It sounds like you were initially quoted a bare lease for the space, and that you have been trying to get the lessor to include various leasehold improvements at that price. Introducing a new negotiator in the process will only benefit you, if there is room in the price you were originally quoted to accomodate your desires. A competent advisor should be able to quickly evaluate your current offer, and tell you whether it is comparable and reasonable for the space you are being offered. If not, they may be able to guide you to a better offer, suggest a better lease structure (like some form of net leasing), or put you into other space.
posted by paulsc at 2:12 PM on July 24, 2009