Starting a business and getting it off the ground presents a monumental task. The number of problems to solve is endless and rarely does the workday provide enough hours to tackle every issue. Perhaps the most daunting task when beginning a business is deciding where to set up your physical locations. Retail leases can be as long as ten years, so finding the right location for your product is pivotal. The ins and outs of what makes a property viable are extremely complicated, and only more so in a city like New York. The lifecycle of business in The City is vicious, and there’s so much information to digest when deciding where to locate yourself. In instances like these, it’s usually best to spend the extra money on a commercial real estate investor that can broker a deal for you.
When determining what broker works best for you, there are a couple of basic guidelines and pitfalls to be aware of. First and foremost, make sure you have a commercial real estate broker who wants to represent buyers (you) not the sellers (the property). Commercial real estate brokers differ from residential real estate brokers in that they are completely business-focused. Residential real estate will focus on concepts like “fit” and “comfort” which generally are irrelevant to commercial leases.
The importance of having a broker who is a buyer can not be overstated. Brokers who are buyers generally spend their time trying to lease properties for clients. Brokers who sell generally attempt to sell property. There is an inherent conflict in interest if you are in discussions with someone who does both. If you do find someone who is saying they do both, tread carefully. Frankly, it is difficult to trust whether or not they are selling a property because it’s in your best interest or theirs.
Generally, brokers get paid when a percentage of the deal when it closes, which is what you want. You want your broker to fight as hard as possible on all negotiable costs, so predicating their salary off a successful percentage of the lease guarantees a broker will work their hardest to get you their best deal. Almost as important; don’t get trapped by thinking bigger is better with brokerage firms. Oftentimes a big firm might have flashy incentives or tools, but you’re anonymous within their system. When you work with smaller boutique firms, you have a better chance of developing an actual relationship with your broker and your broker will have a better chance of understanding what you want. This is pivotal in New York. Just getting noticed is hard enough as a small business, making sure you’ve selected a location that meets your needs and places you in a geographic space to succeed is pivotal.
Finally when determining who you hire as a broker, do heavy research. Find a few names, you never just want to commit to the first person you encounter. Find standard questions and ask them to all the brokers you interview, then compare the answers to each other. Check for any online social media presence like a blog on their website or a linkedin account. Online presence can really help you with both researching your broker and determining how legitimate you think they sound. If you can find a history of previous transactions for this person and how those businesses have done in their location then you have really placed yourself in a position to understand which broker might fit best for your business needs.