If you're looking for new office space in Indianapolis, you probably have a checklist list in your head (or maybe even on paper) to make sure the lease gets done right. You want to pay as little rent as possible while getting the most bang, and of course, you want to avoid rookie mistakes or hidden clauses in your lease that can cost you later.
Do you really think you can afford to not have a commercial broker who specializes in leasing office space on your side?
It's hard enough to find the right office space for your business, and this often takes up the bulk of your time in the beginning phases of the search. But what about the commercial real estate agent who you've chosen to represent you and your business as an expert in leasing office space? Have you been as thorough in your research about your broker as you have with other considerations?
You need to protect your business from making uninformed decisions and simple, but costly oversights. That means you'll need to ask the person you hire to represent you some important questions to make sure you choose a broker that is focused on you and your business' best interest.
1. Are you free of any conflicts of interest if we work together?
The brokerage firm that handles the listing for a landlord has a legal obligation to get the best deal for the landlord –not the tenant. If the agent you're vetting represents the landlord, or if the firm the agent works for represents the landlord, you have unfortunately entered into a relationship with a commercial real estate broker that has a clear conflict of interest. Don't worry, you don't have to accept this. But it's important to ask right away so you can make other arrangements.
2. Are you primarily a tenant advocate (tenant representative) or a listing agent?
Understanding the role brokers most often fill in the commercial real estate world is vital. If the agent you're working is NOT a tenant representative means they will not be well-versed in how to advocate for your best interests and may have a greater interest in helping the landlords they have ongoing relationships. A true tenant rep. will work like a partnership during the engagement and act as an advisor every step of the office leasing process, including after the lease is completed.
Recommended reading: 5 Characteristics of a Tenant Representative
3. Do you have time to work on this project?
It's a lot of work to find the right properties that meet your criteria, working with the listing agents, dealing with landlords, negotiating the lease, and managing your office lease after you're in the new space and throughout the lease term. Most business owners and managers have enough on their plate as it is and cannot afford to add the time consuming tasks associated with being the point-person on an office lease transaction, which can take months to do properly.
4. What other projects are you currently working?
This plays into the previous question. Asking what other projects they currently have in thier pipeline can help you to get a better feel for how much time they will have to focus on your project. Additionally, you can find out pretty quickly the sort of projects they most often work to learn if your office lease project is within the realm of their expertise or not.
5. What is your experience in finding properties like mine?
The whole reason you're vetting an agent is because you're considering moving into a new office space -- so we don't need to convince you how important it is to have the exact right fit. You'll need to know if your agent is able to work their network, if they have right relationships that will benefit your business, and have the experience neccessary to negotiate leases that will suit your business goals. Take your list of "must haves, should haves, and nice-to-haves" to your agent and ask if they've been able to negotiate terms that can satisfy these requirements while working on other projects.
6. How many tenant representation transactions have you handled in the past 3 years?
This discussed in #1 & #2 above, if thebroker is free of conflicts of interest and experienced in advocating for the needs of their client (you), they will have a recent history of similar projects. Ask for case studies that demonstrate their abilities as a tenant advisor...and definitely ask for references. Which leads us to...
7. Can you supply references?
Case studies are great, but references are better. There is no substitute for being able to speak with a live person to get feedback on their experience from working with your potential agent. Pay attention to if this request makes your agent feel defensive or guarded in any way. They should freely offer references where they exclusively represented a tenant and were free of conflicts of interest. At no point during an office lease project, should the business owner or manager wonder if their best interest is being served...it should be obvious!
8. Are you knowledgeable about market conditions?
A good commercial real estate broker will have a pulse on the local economy, changes in the market conditions, and a sharp eye on projections. Your agent needs to be able to advise you on opportunities and warn against any potential pitfalls they see on the horizon. Once again, this is where experience...especially recent experience with similar office lease transactions, in the broker's abililty to best serve their client.
9. How do you handle conflicts of interest, such as when you show me space that you or your company represents on behalf of a landlord?
If your agent does have a conflict of interest in that they represent both the landlord and you, the tenant, you need to get a very clear understanding of how they deal with this issue. Keep in mind that an agency relationship means that the leasing company is the legal representative of the landlord and has a fiduciary duty to represent the landlord's best interest in any lease negotiations. One must ask, how will the broker get the best deal for their client (the landlord) and you simultaneously?
10. How often have you been in dual agency where you're representing a tenant and the landlord in the same transaction?
Since CARMEN Commercial Real Estate is the only exclusive tenant advisory firm in Indiana, so as a general rule, you're going to encounter brokers and brokerage firms that lists properties for landlords and works with tenants to fill those properties. How often is this the case for those firms? Are they willing to share with you the tenant references in those cases where they were in dual-agency.... representing both tenant and landlord?
11. What is your negotiating philosophy?
How do they recommend that you approach the negotiation table? A competent commercial real estate agent who is committed to representing the tenant's best interests will advise you on what you need to prepare on your end to help them be the most effective. They also should be willing to share their philosophy on negotiating with landlords, so you can know what to expect, when to be prepared to walk away, and when to up the stakes.
5 Biggest Mistakes Tenants Make During Lease Negotiations
12. Do you work with an Exclusive Representation agreement?
Let's say you are working with your agent and you've signed an exclusive representation agreement. It's been a few months and they're not doing you any favors. Or maybe the conflicts of interest seems to be rearing their ugly head and you're ready to move on. Tenants don't want to be stuck with a crummy agent. Find out if they require this agreement.
13. What happens if I’m not happy working with you?
If you signed a strict Exclusive Representation agreement, it's not as easy as moving on. Have that frank conversation about how to sever the relationship if the relationship is not longer benefitting you and your business. The bottom line is that you need the freedom to not be stuck with inferior representation.
14. How do you get paid? What commission do you expect to receive?Many tenants worry that engaging the services of a tenant representative will result in them having to pay more in rent so that the landlord can pay the tenant's broker. There is almost always a real estate fee already built into the rental rate landlord's charge for their space, regardless if you (the tenant) are represented by a broker or not. That means the landlord does not tack on a fee on top of the lease rate. You will not save anything by not having dedicated representation -- and frankly, it will ultimately cost you.
A final word...
The bottom line is that just about every Indianapolis commercial real estate agent or their respective firms is representing landlords while also working with tenants like you. This is a massive conflict of interest because there is simply no way they can advocate for your needs while simultaneously being legally obligated to represent the best interests of their *real* client: the landlord/owner.
The only way to protect yourself is to take advantage of the ability to get personal assistance from a top local commercial broker who is knowledgeable and experienced in commercial office tenant representation.
Working with an expert with local knowledge and expertise on your side to assist you in leasing office space will help you find the right space, get the best deal possible, and ensure you avoid costly mistakes.