Pros/cons of Loopnet for marketing a commercial space to lease?

Question

Hi all,

We have a commercial space available in a large building we're breaking ground on in the next month. Construction will take about a year. We're considering listing the space on Loopnet (a costly upgrade from Costar which is free, for those that are familiar) for 3 months to attempt to lease it up ourselves before we list with a commercial broker.

Any feedback on this? How effective is Loopnet vs. a broker? In the past we've successfully leased up commercial spaces ourselves and mostly beaten the per foot number brokers were telling us the spaces should lease for. We have an excellent lawyer to assist us with writing up our leases and negotiating. Other than the networking a good commercial broker can do to get a space leased up, are we missing out on anything else they could provide? We're in the Brewerytown section of Philadelphia and to be honest, we know our market better than most brokers. It's not a huge commercial section so there aren't a lot of comps and the spaces provided to date have been rehabs and not as much overall square footage. We feel we can get a better number than what we're hearing from brokers. I look forward to your thoughts on Loopnet.

For your viewing pleasure (or displeasure, if you're not a fan), there's a rendering of the building below. The stats are:

-5 stories totaling 20,000 square feet above ground, plus a full basement which is partial commercial space and partial tenant storage/utilities

-First floor commercial space is around 2300 square feet with an additional 1500 in the basement, 12' ceilings in the first floor

-14 residential units above, most have private balconies or decks, elevator, bike storage, mail room. Mostly made up of 2 beds/2baths

-Elevator serviced building with a large common roof deck

Joel Owens · Answer

Troy national tenants are different than mom and pops. Mom and pops many tend to deal with the owners directly and can make a decision quicker with putting in an LOI and executing the lease phase.

Regional to national tenants that are scaling tend to have SELECT TENANT brokers they work through. They like the brokers to do the grunt work of scrubbing sites and then if it looks possible then calling them to discuss. Then committee might have to go out and tour the site. There is a longer process with regional to national tenants. Sometimes they will talk directly to the owners but other times if you just contact their real estate department directly they will give you information to their tenant broker to follow up.

National companies get submitted a lot what they deem to be subpar sites. They do not want to talk to these owners. They want the tenant rep broker to save them time to only present them high quality sites that meet their criteria. This is different from a landlord tenant rep broker that works on your behalf. You have to be careful either way as the tenant brokers try to find middle ground for the tenants and landlords to strike a deal. A client had one possible space coming open at 42 a foot in their retail center. The tenant was complaining they were doing bad and asked for a rent reduction. We asked to see financials and there were crickets. They are still there paying the rent.

A tenant broker tried to say space was worth 29 a foot when there were tons of comps to support high 30's into low 40's. Their comp they were using was 3 highway exits down and the retail center was not road frontage and was behind other buildings and turned to the side. It also did not have anchor behind it that drew millions of visitors per year in traffic. So you have to watch out for the tenant brokers and take what they say with a grain of salt.

Damon DiPlacido · Answer

Troy,

I don't see it as a loopnet vs. broker question. Brokers also use loopnet, but the truth is, most loopnet inquiries don't lead to a deal and often chew up time. Landlord's decisions to go with a broker or to handle the leasing in-house is often a function of how much time you have to allocate towards leasing it yourself. If you can lease it quickly, you know the market, you know how to get to restaurant decision makers locally, then it may make sense to do it yourself; however, if the leasing function cuts into your time for your primary job, then probably makes sense to outsource it.

Chris K. · Answer

@Troy S.

I would say it depends on your level of connections to businesses and expertise in dealing with different businesses (e.g. logistical/legal/practical issues leasing the space to a restaurant versus convenience store). Brokers can be very helpful in those situations due to the fact that they've seen a lot of similar situations. They can help both the tenant and the owner make smart decisions.

For example, I've done commercial lease work where the underlying business was something "odd." In such cases, having a broker experienced with such businesses ended up being helpful and cost-effective. For example, I could've spent hours researching what the exact legal (and practical) requirements are for vets treating horses. But having a broker made that easier since the broker literally did hundreds of those deals.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

Omar Khan · Answer

Connections are everything. Most national brokerages have an extensive network - nationwide and international - that the average develop/investor can not compare with.

Also, marketing (super important for when you want to lease this again) and advise on tenant selection. You might not need it but it's like insurance - you wish you had it, when you needed it.

Omar Khan · Answer

@Troy S. I would go with a broker to save myself the time, effort and headache. What's stopping you from doing it yourself if you're able to lease up with better PSF rates than a broker?

Aaron Ringel · Answer

People like me will see it. I like to check loopnet for going lease rates to run projections in the absence of better data. That should tell you something.

Troy Sheets · Answer

This is great info, thanks! It does affirm my suspicion that we could possibly eliminate a few potentials on the regional/national level. The likelihood of us landing one of those is very slim. We’re not a very high traffic area and we’re still lagging on the density side. We’ve come a long way but we’re not quite there yet. Possibly a chain drugstore like a CVS but that’d be about it. Most likely candidate would be a second location restaurant or a new concept from an already successful restaurateur.

Thanks again for this very valuable insight!

Troy Sheets · Answer

There’s not a lot of time, effort and headache that goes into listing and leasing a single commercial space, at least not that I’ve seen. Our spaces have leased up quickly and easily via word-of-mouth/social media/networking to date, but they’ve also been smaller, less expensive, rehabbed spaces and very comparable to everything else on our few block long stretch of commercial storefronts. Don’t get me wrong, I wouldn’t try leasing up a whole strip mall, but our little space doesn’t really move the needle for most brokers to get excited about anyway.

That said, this space is much more expensive new construction and larger than anything we’ve dealt with and pretty much anything else on the strip doesn’t compare. We could potentially get a national franchise restaurant or a notable restaurateur looking for a second or third location as a tenant in this space. My concern is, am I missing out on the connections that a good broker may have that I don’t and, are there any other benefits I’m missing?

Troy Sheets · Answer

Pinging @David Ross and @Jeremy T. to follow along.

Pros/cons of Loopnet for marketing a commercial space to lease?

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