Should a Company Hire an Exclusive Broker?
The answer is 100% yes!
Let me caveat that to say, that you should only engage an experienced broker with a proven track record of working on similar transactions as to yours.
A real estate transaction is complex and as an occupier there is a lot to understand and a lot you most likely don’t know. Therefore, having an experienced advocate who is going to spend the proper time educating you to the market, providing financial analysis, providing deal comps and explain all the pitfalls of a lease is invaluable. Also, once engaged the broker is going to stay with the process even after the deal is closed knowing that this is true client relationship, and they are not someone who just got lucky throwing a listing at you.
➡️ For insights into navigating lease complexities, read Deal Economics in a NYC Lease: What You Need to Know.
The most important thing is that your broker’s interests are aligned with yours, acts as a true consultant, and is agnostic as to which space you select because it does not affect their compensation. Brokers are only compensated when a deal is successfully completed, and the broker’s fee is paid by the Landlord. If you make proposals on multiple spaces with multiple brokers, and each broker is only going to get paid if their deal closes, then the brokers have no incentive to represent your interests. Their only incentive is for their deal to close. They have no fiduciary to your company, and if they don’t tell you that this owner has a less than stellar relationship, that is the position that you put them and yourself in. If you are not loyal to your service provider, then they are not going to be loyal to you.
➡️ For more on why loyalty matters in real estate partnerships, check out Why Length of Lease Matters.
The biggest objection I hear is that not all brokers have access to the same listings and spaces and that you will miss out on opportunities by working with only one broker. Let me address it.
All reputable commercial real estate companies use a listing service called Costar. If your broker does not have access to Costar, then they do not have the full resources to represent your interests. Also, most real estate companies whose primary focus is residential real estate do not have Costar either. I would strongly advise against using a residential broker for a commercial requirement. You are better served with a specialist. 90%-95% of all available space is listed on Costar. As a user you will not have access to all the listings that the brokers do. The 5-10% of space that is not listed, is not secret; it’s just that the Landlord has elected to not post it yet for a myriad of reasons but will tell any broker who calls them or has relationship with them about it. If a broker has an exclusive, they will spend the proper time making all the calls and ultimately will uncover every opportunity.
➡️ For insights into finding hidden opportunities in NYC’s competitive market, explore How Long Does It Take to Find a New Office Space in New York City?.
The other objection is that you will lose leverage in a negotiation working with one broker as they will not try as hard knowing they will get paid no matter what. In fact, it is the exact opposite. The Landlords typically have their own broker who represents their interests and is responsible for recommending the deal. The Landlord’s agent is relying on the tenant broker for information such as if I fight for your deal is it going to go our way. If the agent knows that the tenant is working with multiple brokers and that their counterpart has limited information, I can guarantee that there is no way the landlord’s agent will stick their neck out and push for the best deal. Why would they fight with their client for a lower rent or more free rent only to not deliver the deal and wind up with egg on their face? Not worth it! This is a business of trust and relationships and if the tenant is working with multiple brokers no one will trust them or take them seriously.
➡️ For strategies on leveraging landlord relationships during negotiations, explore Blend and Extend.
Having an exclusive broker will save you time as they will weed through all the space options, make you smarter as they will educate you on the market and the process, and will get you a better deal as they can successfully leverage one landlord against another.
📧 Paul.Walker@cbre.com
📞 212-984-7117