9 Questions that Smart Tenants Should Ask Their Broker
Not all commercial brokers are equal. Almost all commercial brokers represent both landlords and tenants, which is called a “dual agent" under the law. That means the broker ostensibly has a duty to both parties, but from a practical standpoint, brokers can skew allegiance to the customer that is bigger and longer term—that is, the landlord.
Even without the issue of dual representation, commercial real estate is very much a "buyer beware" business, with pitfalls and landmines at every turn. It's important to find a broker that you trust to help you through the process of leasing a new space—someone that understands your needs, and is savvy in the market and product type you are considering. You also want to engage someone that works with companies like yours.
Questions to Ask a Broker
1. Does your firm list buildings for lease or purchase for landlords, or provide management services to landlords; or does your firm invest in commercial real estate or have funds that do so?
2. If the answer to any of the above is yes, how do you navigate the conflicts of interest in compensation and fiduciary responsibility, as well as confidentiality?
3. How many lease transactions where you personally represented the tenant (not the landlord as a dual agent) have you done in our size range in the last 12 months, and for what companies? (See if they can actually name them.) Realize that brokers work in silos within their companies, so don't assume the company's track record is a reflection of the broker's personal experience.
4. What services do you have to help us define space and leasing requirements in a new facility?
5. If you do provide services to help with space and leasing needs, can you show an example of that work product for a facility of our size?
6. Talk about the level of financial analysis you provide, who provides it, and what skills and educational qualifications that person has.
7. If you deliver more than just brokerage (for example, project/construction management), who from your firm delivers that service and what experience do they have? You want to be looking for actual resources, and not just referrals to third parties, which is what most brokers do.
8. Tell me about your partners and team: what bench strength do you have, what are their qualifications, and what they will do differently than what you will do?
9. Please provide three tenant references for me to reference check that have used you at least three times. (Most brokers do “one-off" representation of tenants, and don't have a long-term tenant orientation.)
About the Author: David Marino
David Marino is executive vice president and co-founder of Hughes Marino, a commercial real estate firm committed to only representing tenants in their lease and purchase transactions of commercial space. David has been exclusively representing tenants since 1991.
This article was updated on 12/13/2024