For many businesses, the option of subletting a portion of their office space sounds desirable. From the money received, from the rent of the other business, it can help offset the cost of their own lease. However, the decision to sublease office space is not always as desirable as it may seem. In some instances, it is an excellent option, whereas, with others, it should not be done. Let’s discuss when you should consider subletting your office space and when you shouldn’t.
When Subletting Your Office Space is a Good Idea
There are many great reasons to think about letting your office space. After all, you can save a significant amount of money when you let another business into your space. Below, you will see some of these great reasons to welcome another business into your office space.
Have you recently downsized your business? Or, perhaps you have allowed some employees to work from home. No matter the situation, downsizing your on-site workforce can create a great deal of room. So, if you have enough room in your office space for another business to move in, consider subletting your office space. Even if you only have five to ten desks open, it may be the perfect size for a small start-up. Anything you make from their rent can help minimize the costs of your own space, which is very helpful.
When You Have a Large Amount of Extra Space
Many businesses decide to move into a larger office space that they can grow into. This is an excellent idea as it can save a great deal of money by avoiding moving the entire office later on. However, this can lead to office space that is not used. This can either waste money on rent, or you can sublease the space to another business. If you decide to sublease your extra office space, be sure to design the space to separate the two businesses. This means you should seclude the extra office space for the business that will be subletting your office space. Perhaps building a wall or setting up a temporary barricade can seclude the two businesses well.
When You Are Moving to Another Location
Some businesses grow out of their space before their lease is up. While this is a sign of a successful business, it can still cause a problem with getting out of your lease. An excellent option for moving into a large space early is by subletting your office space. Lease the entire space to another business while your business moves into a larger location. Although this does not get you out of paying for your office space, it should cover what you owe your landlord for the time being.
When Subletting Your Office Space is Not a Good Idea
Despite sounding like a great money saver or a way out of a small space, not every business should sublease their office space. There are some instances where it is not a good idea to do this. At the end of the day, if you are ever unsure about subletting your office space, it is a good idea to contact your lawyer. Have them look over your lease and the laws in your city to make sure you are following the laws and your contract.
If Your Lease Prohibits Subletting
Some landlords prohibit subleasing in their tenants’ leases. This is usually because they want to approve who is allowed in their building. While this is completely understandable, it can prevent you from leaving your office space. It can also cause you to waste money on empty office space. However, following the contract you have with your landlord is the most important thing. This way, you don’t have to face legal consequences or fees.
Your Business is Growing Quickly
As mentioned above, many businesses move into larger spaces with plans on growing into it. However, just because your space is too big now, it doesn’t mean you won’t grow into it within a few months. Take a look at the rate in which your business is growing to be sure you have enough time to sublease your office space. If you predict your business will grow into the space within a year, we recommend not subletting the space. This is because most businesses will look to sublease a space for six to twelve months. In this instance, it is best to hold off and embrace your growing business.
Your Business Handles Private Information
Perhaps you have plenty of space to welcome another business into your office. But, if your business handles private information such as bank account numbers, health information, or legal matters, it may be a privacy concern to have a business sublease form you. The privacy of your employees and your customers should be a top concern. So, be sure your business will have the necessary privacy if you sublease your office space.
We hope this is helpful, if you’re considering the idea of subletting. And if you’re ever looking for a new office location, or trying to find a tenant to fill your currently open office space, let us know! That’s something we can certainly help with!
Leads are one of the most important things for the success of a commercial broker. When your leads convert into clients or property sales, you will make more revenue for yourself. So, it is vital commercial brokers take steps to increase their lead generation. In this blog post, we are going to cover just a few ways to get more leads as a commercial broker.
Invest in a Quality Website
A website is one of the biggest lead sources for a commercial broker. When a website is high-quality, loads quickly, and looks professional, it can generate a majority of a broker’s leads. Although it can be costly to hire a website developer to put your website together, it will be well worth it. On your website, you can put information about your experience, your current listings, and even testimonials from your previous clients. Then, when prospects land on your website, they will be much more likely to generate a lead. Additionally, what you spend on putting your website together and the yearly cost for a domain is tax-deductible as a business expense. So, be sure to invest in this helpful marketing tool to get more leads.
Be Active on Social Media
Another helpful lead generation tool is social media. There has been an increasing trend amongst commercial real estate brokers using social media to promote their listings. Almost half of the world’s population has social media, which means it’s imperative for brokers to use it as a marketing tool. Social media presents a great opportunity to connect with people who are not already your clients and be on the top of their minds if they ever need your services as a broker. You can use hashtags, tag your location, and comment on others’ posts to increase your audience.
Facebook tends to have the highest return on investment out of all social media platforms. However, many commercial brokers prefer to use Instagram, as it is a photo-focused platform. With that being said, Instagram is a great platform to use to show off drone footage of a commercial building. You can also or go live to show an exclusive walk-through of your listing. Additionally, social media is completely free if you are not paying to boost your posts. So, this is a budget-friendly way to generate more leads for yourself.
Network at Local Events to Get More Leads
A classic way to generate leads is to attend local events. If there are any business-related events in your area, consider going to network. Introducing yourself and letting people know what you do can help you get new clients. Business owners or investors are typically a commercial broker’s target audience. So, when attending a networking event, you have access to a room full of potential clients. However, at these events, you don’t want to be too pushy. If someone expresses interest in using your services to buy or sell a property, then hand them your business card or give them your information. This is to ensure you appear as professional as possible, rather than appear as though you are only there to generate sales.
Ask Your Previous Clients for Reviews and Referrals
The recommendations from your previous clients can be very helpful for your business. If you have not done so already, sign up for some free business listing websites with review functions. Then, ask your clients to leave you feedback once your sale is over. After this, you can post their reviews to your social media pages or on your website. This will give you great credibility and will encourage people to consider using your services.
Consider Joining a Nationally Known Franchise
Another tactic to increase your leads as an independent broker is to join a widely known brokerage franchise. Being a broker under a large name, such as SVN, can boost your credibility greatly. Additionally, it can help you to get more leads as someone searches for a local franchise. Many franchises also have a marketing budget, in which they help their brokers get more leads. This is a route that many independent brokers decide to take when they are having challenges generating leads. However, if you enjoy working independently, this is not a necessary tip.
If you are in the Salt Lake City, Utah area and are looking to join a local brokerage franchise, feel free to look into SVN | Alta Commercial. We are accepting resumes from licensed brokers to see if they would be a fit in our office. Our team looks forward to hearing from you!
A common question people ask in the commercial real estate industry is “How do brokers get paid?” Although the payment to a broker is involved with every commercial real estate transaction, it seems many people lack clarity on the subject. Truth be told, the process of getting paid as a broker can get a bit complicated. The fact that commission rates can vary also contributes to the confusion around how brokers get paid. Whether you’re interested in becoming a broker one day or you’re thinking you might want to work with one, this blog post will explain how brokers get paid for their work.
How do CRE Brokers Get Paid?
What many people do understand is that commercial real estate brokers get paid based off commission. The commission is typically paid by the seller of the property, but the buyers of the property may also owe the broker a payment as well. Who pays the commission depends on who the broker is representing in the transaction. When representing both parties, both the seller and buyer will pay the broker a commission fee. If there are two brokers involved with the deal, they will split the commission between each other. However, the amount in which the broker is paid varies due to anti-trust laws.
Due to anti-trust laws, it is illegal to set a commission rate across a market or industry. This means the commercial broker and their client need to negotiate a commission rate before agreeing to work together. Negotiating a price for a commission can be great for both the client and the broker, as the costs of different properties vary greatly. Additionally, some properties are easier to find than others, which changes how difficult the broker’s job is. According to our partners at SVN | Southgate Realty, most commercial brokers get paid between four percent and eight percent of the sale price from the property. However, this may increase or decrease based on the complexity of the deal. So, be sure to consider how hard the broker will need to work when negotiating their commission rate.
How Does Commission Work?
In commercial real estate, a property can be sold or leased. The amount a commercial real estate broker earns is based on the price of the property. So, if the broker and the seller agree on a seven percent commission rate and the property purchased was $1,000,000, the broker would earn $70,000. However, if another broker was involved to represent the buyer of the property, the $70,000 would be split between the two.
For commercial real estate, because leases are typically paid on a monthly basis, there is a different way to calculate the commission of a broker. With leases, the broker is paid based on the length of the lease agreement and the monthly rate. For example, if a property is leased for three years at $15 per square foot, and it is 2,000 square feet, the lease value would be $90,000. We find this from 3 years x ($15 x 2,000 SF). If the seller and broker agreed on a seven percent commission rate, the broker would make $6,300.
Who Pays the Broker?
The person who usually pays the broker(s) involved with commercial real estate transactions is the property owner or landlord. Almost always, the seller or landlord will pay both brokers who are representing clients in the commercial real estate transaction. This is because the landlord wants to get the property off their hands and needs the help of the broker to do so. If you are looking to purchase a property, do not skip out on using a broker because you think you will get a better deal. Brokers are very resourceful, and you typically won’t spend any money on their services when you are buying the property.
Looking for a Commercial Real Estate Broker in Salt Lake City?
We hope this blog post cleared up any confusion you had about how brokers get paid. If you are looking to buy or sell a commercial property in Salt Lake City and need assistance from a broker, please feel free to contact us. Our highly skilled and experienced advisors will help you get an excellent deal and can answer any questions you may have. We always strive to make the transaction process as easy as possible for our clients. So, please feel free to reach out so you can work with one of our advisors today!
Last year the top investors in Utah’s commercial real estate market were from California.
Given the economy and amount of capital in California it shouldn’t come as a surprise that investment dollars spill over into Utah. What is surprising is the profound number of Californian investors – double that of the next closest state, which happens to be Utah. California represents 37% of the top 100 investors while Utah comes in second at 18%. The remaining 48 states don’t really show up in any significance, with the exception of Washington – 8%.
By comparing the cap rates, which measures the rate of return on investments in Utah to that of the largest three markets in California, it is easy to see why investors place their money here. It is only part of the story however. After all, there are markets with better cap rates. But, investing in Utah over California is a sound practice. In 2017, the average cap rate in Los Angeles and San Francisco was 4.6%, in San Diego it was 5.3%. For the same time period, the average cap rate in Utah was 7.3%. That is a difference of over 200 basis points.
Investors feel safe making an investment in the top three California markets, which is easy to understand. An enormous economy and an equally large population mean that apartment buildings, office towers, retail centers and industrial warehouses will rarely be vacant. But, the same is true in Salt Lake City, where low vacancies tend to rival those of California.
Salt Lake City survived the Great Recession in good form, in some metrics better than California. Vacancy rates climbed to just below 7%. That rate is on par with Los Angeles and lower than San Francisco at 9% and San Diego at just over 10%. Meaning, Salt Lake City fared better than two of the three big California markets at retaining tenants. The only metric where the three California markets beat Salt Lake City was in the way that rents rebounded. The Salt Lake City commercial real estate market took longer to bounce back to pre-recession values. It wasn’t until 2016 that rents in Utah reached the levels where they were in 2008. Whereas, rents in Los Angeles and San Diego rebounded in 2014 and in San Francisco rents never lost momentum, but were able to climb to new heights within two years of the recession.
All of the fundamental metrics are good reasons for investment in Utah.
However, the biggest factor which attracts investment in commercial real estate is the increasingly familiar news of international corporations moving to the state. As companies like Adobe, Amazon, Overstock.com and Goldman Sachs locate here, the big money in real estate follows. And, it makes perfect sense. For an investor looking to purchase a building where a large corporation is a tenant, the return is much higher in Utah than California, yet the chances that the corporate tenant vacates the space, is equal. Thus with the same amount of risk, an investment might yield up to 200 basis points more in Salt Lake City than it would in San Francisco.