You need a new space, and you have more than one commercial real estate broker who wants to help you find it. One of them asks you to sign an exclusivity agreement. What should you do?
Though this reads like a trick question from the game “Clue,” it’s not. It’s a question many business owners ask themselves when faced with a similar situation. It’s appealing to have more than one person actively looking for your new office or retail space. That is, after all, what a broker does. Why not have a few of them doing this for you? And as an honest business owner, of course, you’d go with whoever found your perfect space first. That makes sense, right? But, is it in your best interest to be exclusive to one broker?
Let’s define our terms
Let’s start off by defining a commercial real estate broker. A commercial real estate broker is a State-licensed individual who represents a tenant or landlord in a leasing transaction. That can include anything from looking for the space to negotiating and executing the lease agreement. Brokers can also represent clients in purchase transactions, though this article will focus on leasing transactions. Brokers are paid through commissions, not from a traditional salary. In order for them to be paid for their work, the lease must be signed.
Now, let’s define an exclusive agreement with a broker. This is a written agreement you and the broker sign and date. It states that you are committed to working solely with the broker and will not use any other commercial real estate broker in your search for new space.
Exclusivity = Priority
Signing an exclusivity agreement with a broker means you are their priority. You’ve shown loyalty to the broker, and in turn, the broker is more likely to demonstrate a commitment to you. Because they know they will earn a commission when you sign your lease, the broker can dedicate more time to you.
Benefits of working exclusively with a broker:
More Selective with Clients
Brokers that seek exclusivity agreements are generally more selective of who they take on as a client. They want to ensure they are able to devote the necessary time and resources to each exclusive agreement they have.
More Time Dedicated
When a broker knows they will earn a commission from a lease, they are more likely to dedicate more time researching spaces that may be a good fit for you. They’ll also spend more time networking with landlords to find potential spaces that may not be on the market yet.
Invested in Your Business's Success
An exclusive broker will invest more effort and resources to make sure you are at a phase of business where seeking space is the next logical step and will lead to your success.
Negotiates the Best Deal for You
A broker who is exclusive to you will have more incentive to negotiate the best deal on behalf of your business. They want to make sure they are securing the best possible space, as their success and reputation depend on it.
More Communicative with You
When a broker is exclusive to you, they will be more communicative with you as they want to keep you updated on their progress. This way, you can be assured that your business is their top priority. You will spend less time waiting to hear back from them about any questions you have during the process.
Highly Curated Spaces
A broker that works exclusively with you will spend more time curating potential spaces that best meet your requirements. Each business will have its own unique needs for an office, warehouse, storefront, or another facility, and these will be accounted for with greater attention to detail.
You should not be surprised if this broker asks for your business and marketing plan as a way to ensure that they find the perfect space; they don’t want to waste time showing you inappropriate possibilities.
Save Time, Money, and Stress
When you work with an exclusive broker, you are likely to save time, money, and stress that comes with seeking out a new commercial home for your business. Instead, you can enjoy the peace of mind that your search is in skilled hands.
What About Non-Exclusive Brokers?
Not all brokers will ask for an exclusivity agreement. Instead, they work with multiple clients simultaneously to increase their chances of earning a commission.
Keeping this in mind, however, non-exclusive brokers will typically prioritize the clients that are easiest to find spaces for. Instead of a highly curated list of potential properties, you will likely receive a broader range of listings from them to consider.
These spaces may not meet your exact specifications and you may spend more time and effort finding your new space. With an exclusive broker, they dedicate their time completely to finding the best possible properties in your desired geographic area.
The 30-day trial
But what happens if you sign an exclusivity agreement and aren’t happy with the results? Some brokers offer a 30-day cancellation option to their exclusivity agreement. This gives you 30 days to see how your broker manages your project, and then cancel or continue based on your satisfaction. This gives you an ethical option to put another broker on the job if your first choice doesn’t work out, and motivates your broker to work hard to keep you as a client.
With an exclusive agreement and a knowledgeable broker leading the process, you’ll soon have the perfect space that aligns with the current and future needs of your business. You'll want to make sure you've chosen your broker wisely and that you know how to best utilize their services.
For office and retail commercial real estate insights, leasing and consulting, please contact us.