Ripples were felt across the serviced office broker community following remarks made by Justin Harley of Yardi, a majority shareholder in provider WeWork, at the Flexible Space Association conference in May. Speaking about the role of serviced office brokers, Harley, as reported by Estates Gazette, likened the broker market to “the Wild West,” recounting a conversation in which someone had remarked “they don’t do a lot?”.
He went on to suggest that the industry should consider “disintermediating the brokers”, arguing that occupiers dealing with providers directly would “help everyone”.
But cutting out the broker, is that really the best move for the tenant?
In this blog we explore the distinct advantages of retaining a broker for the occupier, from optimising a serviced office search through to strengthening a position in fee negotiations with a provider.
THE SEARCH
Assessing Quality
A broker will work with you to understand your requirements and make sure you find your ideal space. Their ability to do this stems from their understanding of the different facets of the serviced office experience and market. On the space quality side, brokers know the details including the building, whether it holds any sustainability accreditations, past and future development works, and other tenant activity. However, perhaps more crucially the broker will have a unique understanding of the quality of the service offered by the provider compared to others in the market, something that is difficult to get a sense of if you are dealing with a provider directly.
Pinpointing Options
A broker will be able to quickly get a sense of your requirements and translate them into options, not least of all when it comes to location priorities, whether those be accessibility to local transport links or the proximity of local amenities. The benefit of going through this with a broker is not just that they are able to show you options from across the market, but the broker will also have visibility of off-market/pre-let options that cannot be found online. As such, instead of merely being presented with those options from a single provider’s portfolio that resemble your requirements, through liaising with a broker you gain access to a much wider breadth of options based entirely on your brief.
Handling Communications
While engaging a broker opens doors to opportunities, it also saves you considerable time by taking on tasks that would otherwise fall to you if dealing directly with providers. Acting as a single point of contact, a broker manages communications, confirms availability, and schedules viewings, giving you the freedom to explore a wide range of options without the burden of coordinating with multiple parties.
THE NEGOTIATION
Spotting the Savings
Prior to the beginning of the negotiation process, a broker will work with you to establish whether your desk requirements need reviewing. Establishing how many days a week your staff are in the office to gauge the extent of your daily occupancy is important. It may be the case that despite having 100 staff members only half this number are in the office at any one time, and as such, only 50 desks are needed. This would enable you to make significant cost-savings even before the broker begins to negotiate the rate quoted for the final desk number.
Brokers will also come armed with other options for cost-savings that can be unlocked through negotiation. Many of these may not be obvious if you are negotiating directly with a provider yourself, for example brokers may be able to negotiate the provision of extra access passes or meeting room credits, creating some additional savings during occupancy.
The Power of Representation
When it comes to the negotiation itself, the very fact of going into negotiations with a broker will serve to tip the balance more in your favour. Providers will be aware of how many transactions the broker is completing and the weight of their experience and understanding of the market, giving you more power to push for a better deal.
The mere fact that you are using a broker can also serve to create competition, as the provider you are negotiating with will recognise that you will likely have seen multiple options from other providers, creating greater impetus for them to close the deal as quickly as possible and potentially making them more willing to make concessions.
Insider Knowledge
Brokers have a unique awareness of the workings of both the provider and the space, experience that they can leverage to your benefit in negotiations. First and foremost, a broker will be aware of how the provider in question prefers to structure their deals, something that can vary, and so will have an awareness of which elements the provider will stand firm on and which for where there is more leeway for further negotiation.
The broker will also have knowledge of the current occupancy of the building and the extent to which providers need to get new occupiers in, for example if a significant occupier has just vacated the space a provider may be more willing to negotiate to fill the space quickly.
Finally, a broker will also understand how the provider puts together their contracts and so will be able to spot any clauses that could cause issues further down the line if they were to go unnoticed, for example auto-renewal clauses or scheduled annual uplifts.
SHOULD YOU REALLY DISINTERMEDIATE THE BROKER?
When considering the inference that Harley has made that brokers are being paid for not doing a lot, occupiers should take this with a pinch of salt.
While there are undoubtedly brokers in the market that add little value in negotiation, occupiers should be aware that these operators constitute only a very small portion of the market and are not reflective of the service as a whole. In fact, as we have outlined, those brokers that are active not only shoulder a considerable degree of the responsibility in finding you a space but will also negotiate for you on a variety of hidden pain points to get you the best deal possible.
It is also worth keeping in mind that broker fees are paid for by the serviced office providers; should this arrangement change, as per the call from Harley of Yardi, it is difficult to envisage that providers will reflect this and reduce their desk rates and office costs appropriately.
From a tenant perspective, tapping into the knowledge and expertise of brokers is currently not an additional cost, but missing out on this would impact cost-saving opportunities which would have a more profound influence on outgoings in the long-term.
Ultimately, retaining a broker instead of dealing directly with a provider increases the likelihood of finding a serviced space that works for you while saving on both cost and time.
If you are looking to secure space in a serviced office, Devono’s own team of serviced office brokers would be more than happy to help. For a discussion about the services we can provide, please contact our Head of Flex, Andy James at acj@devono.com.
