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Commercial Real Estate Ten Most Asked Questions

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This guide is primarily for medium-to-small tenants. These tenants are defined as a company with 25 employees or less, and are in need of an office space of less than 5,000 square feet. While some of these questions may seem simple, the answers are not always obvious.

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1. How does the commercial real estate (CRE) industry work?

Most owners of commercial real estate hire real estate agents to lease their property on their behalf. The real estate agentпїЅs responsibility is to represent the owner in leasing the property; not to represent the tenant.

2. How are CRE professionals paid for their services?

CRE agents receive a commission upon the signing of the lease between the owner and a tenant. The amount of the commission of most often calculated as a percentage of the lease value, which usually ranges between four and six percent. For instance, if a tenant signs a 3-year lease for a 2,000-square-foot building at $18.00 per square foot, a 4% commission to the real estate agent would amount to $4,320.00 (3 years x 2,000 sq. ft. x $18.00 x 4%). The owner of the leased building pays the agentпїЅs commission; typically one-half on the signing of the lease and the remaining one-half when the tenant begins occupying the building.

3. What is the difference between a leasing agent and a tenant representative?

The leasing agent has the listing of the property and represents the interest of the owner of the building. A tenant representative (rep) represents the interest of the tenant in the lease. Some agents work exclusively on listing while others take on tenant representation only. Other agents will work with both.

4. Why should I use a broker (agent) if I have an attorney?

A knowledgeable broker, who is a vital part of your team of professionals, uses comprehensive marketing expertise and valuable resources to ensure maximum results in every lease transaction. Using an experienced brokerage firm will complement the rest of the team allowing others to do what they do best in their profession.

5. Do I need a broker to help me find space?

No. Any one can search for office space if they have the time to spend away from their business. A broker however, does so much more that just find office space. A broker uses expertise in the leasing process. A broker starts with a good understanding of your business and gives you advice as to the best space suited for your business. A broker then uses inside resources to locate the best space available that offers a good deal. A broker seeks out the best terms and rental rates. A broker stands beside you from the time the search begins until the lease is signed.

6. IпїЅm thinking about moving my office or leasing a new office. Where do I start?

The first thing is to decide if moving into a new space is the right choice. Ask the following questions:

  • Do we want to find space on our own or hire a tenant representative to assist us?
  • Is it a good time to move?
  • How important is location?
  • How much space do we need?
  • How much can we afford?
  • On what date do we need to move into a new space?
  • How will the new space benefit the company and its future?
  • What does it cost to move?
  • What else is involved in moving (furniture, phones, computers, copy/fax/postage machines, internet access, etc.)?
  • Can we afford to lose business or employees during the transaction?

7. Whom does a broker work for?

Brokers generally work in two capacities: as a listing agent or as a tenant representative. Some, if not most, do both. This means that they have property listings and they also work as a tenant representative. If you work directly with the property listing agent, keep in mind that the listing agent is representing the property owner. If you hire a tenant representative, you should consider hiring an exclusive tenant representative that has no property listings. This will ensure you that the tenant representative is working solely for you.

8. What is a representation letter or exclusive agreement and should I sign one?

A tenant representative will present you with a representation letter to sign for your own protection. The letter protects you by stating that you are working with only one tenant representative. It also protects the tenant representative by ensuring that they will get paid if a lease is signed. If a tenant representative does not have a signed letter from you, they will most likely only perform a simple property search. If you want to get the most out of the brokerage community, we recommend that you sign an exclusive agreement instead of working with several agents on a nonexclusive basis.

9. Is finding a space without hiring a broker a good idea?

Generally speaking, the answer is no. You, as a tenant, enter into a lease every so often. A broker, however, deals with leasing negotiations daily. Think of it this way: Would you go into an IRS office without having your CPA as a representative? Again, the answer is no.

10. Now that IпїЅve hired a tenant representative, what should I expect from them?

You should expect your tenant representative to think only of your interest and to give you advice. The tenant representative helps you determine how much space you need, what is your most important selection criteria, and then find and negotiate the space that best fits your needs. When it comes to the negotiation, make sure your tenant representative knows what is important to you.

We hope you found this information helpful. If you have any questions, please give us a call.

cres real estate connie rankin
Connie Rankin, LEED AP
CRES + Associates
Office: 713-468-3833

 

 

 

 

 

 

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Mother Nature Can Help With Carbon Reduction

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cres real estate carbon reduction 1Last year my family and I traveled to San Juan, Puerto Rico. During our visit to the El Yunque Forest, we had the rare opportunity to celebrate National Public Lands Day. This offered us a close-up view of the forest wildlife and some valuable lessons in forest conservation. To top it off, there was no entrance fee to see this beautiful national wonder that no amount of money could buy.

That Lands Day holiday, we learned the El Yunque National Forest was actually one of the smallest forests in the US National Forest System. This forest has 28,000 acres with 240 native trees, of which 88 are rare and 23 are found only in this forest, according to the US Forest Service. The most interesting fact we learned was that hurricanes actually regenerate the forest. Damage caused by the great impact of wind and rain begins the 60-year regeneration cycle. During these years, re-growth increases forest productivity as it rejuvenates itself. To me, this suggests Mother Nature will take care of herself if we can just leave her alone. [1]

As a Leadership in Energy and Environmental Design Accredited Professional (LEED AP), I have great respect for our environment and understand that our stewardship of the forest today will affect future generations. Since the forest covers approximately 30% of the earth’s mass, we must view it not only from a microscopic perspective, but globally as well. The forest is a community of diverse organisms and supports such living things as bacteria and fungi, enormous trees, birds, shrubs, ants, beetles, fish, mammals, and even human life. [2] (more…)

What Is Your Company Image?

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cres real estate company imageA company image is the accumulation of the opinions, impressions, beliefs, and visions people experience about you, your products and services, your employees, and your company as a whole. Office spaces create either a positive or negative impact on your company image, depending on the type of services you provided. For example, if you design computer software, repair shoes, or have an import/export business, you most likely get very little foot traffic — then the right space for you may be in a more convenient low-cost location.

However, if you have high visitor traffic, the right space for you may be a nicer facility that will play a bigger role in creating a more positive company image from the moment someone approaches the front of the building. (more…)

The Cost To Own or To Rent

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Whether Tenant or Property Owner, you want to make an informed decision

There is a complex proposal on the table being reviewed by the Financial Accounting Standard Board to change the lease rules by the Statement of Financial Accounting Standard 13, known as FAS13.

For those of you not familiar with FASB, they are responsible for establishing and improving standards of financial accounting and reporting for nongovernmental entities. Consistent with that mission, the FASB maintains the FASB Accounting Standards CodificationTM (Accounting Standards Codification) which represents the source of authoritative standards of accounting and reporting, other than those issued by the SEC, recognized by the FASB to be applied by nongovernmental entities. (more…)

How to Increase Federal Contracting Opportunities!

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Your business address may be more than a mere location; it could also be a valuable certification. A company located in a qualified census tract may qualify for the HUBZone Program.

The HUBZone Program is regulated by the U.S. Small Business Administration (SBA) and was enacted into law as part of the Small Business Re-authorization Act of 1997. This program is separate from and unaffiliated with the HUB certification administered by the state of Texas.

The HUBZone Program provides greater federal contracting opportunities for qualified small businesses located in distressed areas, for the purposes of encouraging employment growth and economic development. (more…)