How do Brokers work?

Most commercial real estate leases are facilitated by brokers and it can be unclear how best to work with a broker. 

This section is designed to help you navigate that process.

TYPES OF BROKERS

There are typically two types of commercial real estate brokers involved:

  1. Listing agent – Brokers who represent landlords.  This means that a listing agent always has a duty to act in the best interest of the landlord.

  2. Tenant broker – Brokers who represent tenants.  Tenant brokers, on the other hand, represent the tenant interests and owe their fiduciary duties and duty of confidentiality to their tenant client, not the landlord. 

HOW DO BROKERS GET PAID?

Listing agents earn a commission that is paid by the landlord.  It varies by brokerage firm.

Tenant brokers are typically paid by the landlord, via the listing agent (a 50/50 split is common). 

The tenant broker’s payment is worked out between the landlord and the listing agent. Your broker will confirm how they are being paid.

It is rare in our market that a tenant has to pay commission.  Always ask plenty of questions at the beginning so you are both on the same page.

 

WHAT DO BROKERS DO FOR YOU?

A tenant broker is your resource and expert in the market.

They will:

  • Search for properties

  • Prepare the Letter Of Intent

  • Review and negotiate the lease

  • Handle lease execution

  • Manage the lease timelines

  • Integrate your lender needs

 

As a broker, it’s their job to introduce you to the professionals you need to review the space and help bring the project to life. 

WHAT YOUR BROKER NEEDS TO KNOW...

  • Funding: How will you finance your project? Where are you in the process?

  • Location: Ideal Locations; Locations to avoid

  • Your timeline

  • Square footage needs, minimum and maximum

  • Budget for rent

  • Budget for up-fitting the space to your needs

  • Parking requirements

  • Accessibility needed to major intersections, roads or Interstates? Walkable?

  • How many customers and staff will be in the space at its busiest times?

  • How many bathrooms?

  • How many drains?

  • How much space needs to be heated and cooled?

  • Visibility and signage

HOW TO WORK WITHOUT A BROKER

Signing an agreement with a tenant broker isn’t mandatory. While a tenant broker is helpful, there’s always a small chance that you’ll end up having to pay a commission.

If you’d also like to look for commercial real estate properties yourself, you can find commercial real estate listings on such websites as Commercial Real Estate Listing Service or LoopNet

The only benefit of not using a broker is that there’s no chance of paying a commission. Otherwise, it’s probably best to use a tenant broker.

However, if you choose to look for yourself, you’ll have to conduct the following without the help of an experienced broker:

  • Finding new listings

  • Find off market opportunities

  • Set up walk-throughs

  • Submit an LOI

  • Negotiate and execute the lease

 

"I don't want to limit myself to one broker"

We commonly are approached by tenants who are working with multiple brokers or who have previously seen properties with other brokers. Due to NC Licensing Law your NC broker cannot “poach” a client nor work with someone who has signed an exclusive agreement with another broker.

On a practical note, tenants who use multiple brokers tend to have much less success in finding space as the brokerage community can perceive them to be aligned with others. 

A good broker is loyal to their client and will go out of their way to find a space for their client before thinking of non-clients.

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