Why Represent-Yourself Commercial Real Estate is a Losing Proposition

By Amy Zewe of Alseata, Inc. and Dana Weinberg of Mid-Atlantic Commercial Realty

Abraham Lincoln Had It Right – “He who represents himself has a fool for a client.” While this may have been said in the context of attorneys and the law, commercial real estate transactions are legal events using a very similar set of skills and wisdom.

Loopnet is the popular public-access database to commercial real estate properties available for lease or purchase. A snapshot of properties is available for free, but even the pay-for portion may leave you in a position of not knowing what you don’t know. The Loopnet database is not only incomplete in terms of inventory, it is also does not include precise analytics so one can negotiation from a position of strength, knowledge and real-market conditions and comps.

CoStar is the Commercial Real estate professional subscription-based database that purchased Loopnet in 2011 (to eliminate competition). The two commercial real estate databases are still very different and totally separate platforms. Information from the Loopnet does not link to CoStar and vice versa. For example, if you have a 3,000 square foot office condo for sale, you have to enter the information in both CoStar and Loopnet. If you are looking for space on Loopnet, chances are leasing agents only used CoStar for posting the property.

If you are using the free-access to Loopnet and are looking for space to lease or a property to buy, then you will only see a small percentage of all the listings available, and nearly none of the history. If you want to review the full data on a listing in Loopnet, you have to pay the monthly fees. Many commercial real estate brokers, especially those working the boutique firms and the regional, national companies and international companies, only list their properties for lease or sale on CoStar. In addition to only seeing a small percentage of the listings on Loopnet, many listings from the aforementioned brokerage companies are not even listed on Loopnet. Why? Because CoStar is the standard for these types of brokerage companies.

Nine Reasons Why You Should Engage a Broker for your lease renewal or finding new space:

  1. Landlords will take advantage of a “defenseless” tenant.
  2. Landlords who offer to a lower rate in exchange for not hiring a broker are engaging in a myth Working without a tenant rep broker does not produce any savings or safe-guards to a tenant in your lease terms or overall obligations.
  3. Landlords budget a lease commission for every lease transaction (renewal or new), so the tenant receives no value by not having a broker.
  4. Landlords want the best deal for themselves, even if you have been getting along well with your landlord and feel you “trust” him or her and are ready to renew a lease.
  5. Tenants overestimate their negotiating skills against a leasing broker who is armed with market information.
  6. The landlord will yield a higher investment return at your expense if you do not have a broker representing you.
  7. The landlord’s broker is paid a higher commission if you do not have a broker–while working to get the landlord the best deal.
  8. Without a broker representing you, you will negotiate for yourself less free rent, less money to renovate your space and you will pay an above-market rental rate.*
  9. You would not engage in a complex tax return without a CPA or go to court without an attorney. Tenant Brokers are your fiduciary advocate with the industry expertise to win you the best deal—with no fees to you.

*An example of a business owner securing his or her own space: This tenant wants to lease 4,000 square feet with a 5-year lease term. The “market” economics for the building is a $25 per sq/ft rental rate, four months of free rent and a $20 per sq/ft tenant improvement allowance. The tenant, who does not have any knowledge of the market (and perhaps saw on Loopnet a list price of $29 sq/ft) is not represented by a broker and negotiates a $27 per sq/ft rental rate, two months of free rent and a $15 per sq/ft tenant improvements allowance.

How poorly did this negotiation go?

The tenant has left almost $96,000 of economic value on the table for the landlord. This tenant is going to pay a rent premium of $8,000 per year or $40,000 over the five-year term and lose out on $25,833 in free rent and $25,000 in tenant improvement dollars.

If the landlord listed the property for $29 per sq/ft and offered 2 mos free rent and $15 sq/ft for improvements, the tenant thinks he or she got a great deal by getting the landlord to concede….but the tenant was not armed with the market data, and is understandably busy running his or her own business, to dig deep and leverage information, with finesse, to achieve real savings.

For premier representation on your next lease renewal or need for commercial space (lease or buy), please contact Amy Zewe, serving Maryland, DC and Virginia. Amy@alseata.com 571-235-3019


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