How Do Developers Benefit
From Commercial Real Estate Brokers?
Developers often think about commercial agents after they’re well along in their planning process. The brokerage conversation comes up once they start thinking about developing a leasing program and attracting anchor tenants.
While developing a leasing program and lining up tenants is a central part of a broker’s role, it’s still a gross oversimplification of how they create value.
Commercial Real Estate Brokers Are Not Salespeople
Brokers are Business Consultants, Advisors and Partners. Their specialty is creating value from real estate investments. Their purpose is to help you maximizing the potential of a development.
In simple terms, you can break down a broker’s role into three broad categories, Strategic Planning, Maximizing Revenue and Filling Vacancies.
Whether you’re planning a new building or a large mixed-use development, the time to speak with a commercial realtor is as early in your planning as possible. Why? Because that’s where they can contribute the most strategically to your planning and decision making.
Commercial brokers spend all day, every day tracking the market. They’re talking to building owners, tenants, and other developers all the time. They know the local market.
They know where the demand is, what people are struggling with and what your competitors are building. They have access to all kinds of industry, tenant, and statistical data for site selection and to help put your development into a regional context. When combined with your goals and data, they can help you develop more pragmatic and workable plans that address your marketing needs.
If you’re a first-time developer or new to the market, they can introduce you to a wide range of professionals and suppliers to help expedite your timeline.
The point of any development is to create something of value, that enables business and serves the community. It’s also about maximizing revenue and earnings potential for investors. Fortunately, these two objectives are two sides of the same coin. Successful developments are all about creating win/wins.
There’s always a tendency to look at developments from structural and economic points of view. Your broker helps bring the tenant’s, building owner’s, and surrounding community’s perspectives to the table.
Brokers assist with concept development, planning your tenant mix, positioning the development and more. When a development starts with these elements in mind, moving into the leasing program is much easier because much of the preparatory work is already done.
The most obvious value of a commercial real estate broker is helping you fill vacancies with desirable tenants. To do this, they develop a marketing plan and a leasing program.
Ideally, you want to start pulling this together at least two years out, to fit into the planning timelines of national firms like banks and big box retailers. Many franchises operate on a six-month timeline, and local businesses tend to operate in real-time with minimal lead times.
Modern leasing plans need to anticipate remote transactions and a steady progression from targeted direct selling to a broader marketing-driven approach.
More and more, renderings, animation, virtual tours, and internet marketing are becoming essential parts of the leasing program tool kit as well.
Brokers are Strategic Partners
As you can see there is a lot more to commercial real estate than operating a leasing program. Depending on your business and your specific development project, your broker can become a vital strategic partner in the success of your project.
How Do You Select a Broker?
There are several factors to consider, but these are the most important.
- How many properties are they working on? More is not always better. Your broker needs to have time to support you and to represent your development. If they’re spread too thin, you’re not going to get the attention or support you need.
- What is their specialty and how much experience do they have with your type of development? For a broker to advise you well, they need to understand your business requirements.
- Similarly, they need to know the market and have relevant industry connections to help you move through the process quickly, while avoiding costly problems.
- What is their fee structure? Since there are no standard commissions in commercial real estate, you need to understand their fee structure. It is important to find and negotiate a good fit.
- A modern approach is vital. While traditional direct sales leasing programs are still important, search engines, social media and virtual tours are becoming essential tools of the trade. You’ll want to work with a progressive brokerage who uses modern tools and techniques.
- Your broker’s business culture and internal compensation model is also important. A collaborative compensation model means their whole team can work together on your development. The alternative is for everyone to compete with each other. Internal competition can effectively nullify the advantages of working with a large brokerage.
There are certainly more factors to consider, but these are a good starting point to frame your search. We’d be happy to continue this discuss with you if you’d like to learn more or if you have a project in the works.
Jeff is the owner and Broker of JR Mercantile Real Estate Advisors Inc. with more than 20 plus years of commercial real estate advisory experience. With a focus of inner-city development and mixed-use development, Jeff participates early in the design phase to help ensure the commercial environment is not only readily leasable but workable for both Landlord and Tenant.
Jeff’s client base ranges from institutional landlords to local entrepreneurial developers and from high profile restaurateurs to national retailers.