The selection and hiring of a market broker to represent a client as a fiduciary is one of the most significant responsibilities of a corporate real estate account manager. A market broker is typically an expert in a given geographic market or vertical, such as cold storage or truck terminals, while the corporate real estate account manager oversees the overall real estate services to the client.
Without the proper process in place, the odds of selecting the wrong market broker greatly increase along with the chances of frustration for the client, the market broker, and the account manager. There are a host of variables to consider in any market broker selection process. Without a defined process in place, many account managers simply do not have the time or resources to appropriately conduct a market broker search from scratch.
That’s why it is important for the account manager and the client to have an agreed upon plan and process for selecting a local brokerage team. Such a plan would ideally be simple, adjustable guidelines for selecting and working with market brokers. Some of the plan elements usually would include:
- Criteria for market broker selection
- Brokerage standards of conduct
- Responsibilities of the client, account manager, and market broker
- How requirements are presented to the market broker
- Expected compensation structure including fee sharing
Most clients want the best broker for their requirement in a given market. For the account manager, fulfilling this requirement means considering market brokers affiliated with their firm and those who are not affiliated with their firm.
Practically speaking, most account managers affiliated with large national brokerage firms will limit their search for market brokers to those within their company. Exceptions to this include areas where their company has limited coverage, such as tertiary markets, and when the client directs the account manager to use a certain local market broker.
Whether the account manager considers market brokers outside if their firm is ultimately not as important as making sure the selected market broker meets the client’s agreed upon criteria. If such standards are not met, the account manager should be responsible.
Brokerage standards of conduct and market broker responsibilities should be clear and concise. They should be communicated in writing shortly after initial contact and certainly before engaging the market broker. A brief summary of expectations, such as reporting, confidentiality or dual agency concerns, along with a matrix showing the responsibilities of all relevant parties is usually sufficient.
Client requirements should also be communicated clearly and in writing to the market brokers prior to engagement. It does not make any sense to hire a market broker for an assignment until the account manager can accurately describe what the client needs. This communication is sometimes assisted by visual aids such as prototype site plans, maps, and photos of current properties similar to the required facility. Once a market broker understands the requirements, the account manager should allow them the opportunity of declining to be considered for the assignment.
Lastly, the account manager should communicate the anticipated brokerage fee sharing along with the standards of conduct and client requirements in writing. This includes the nature of any exclusivity, fee sharing with a client, and other matters related to their compensation. It is vital that the market broker and account manager have agreement on compensation concerns prior to the hiring of the market broker for the assignment.
The above does not include every consideration for selecting a market broker in every situation. Therefore, it is critical that the account manager and client have a general plan in place to review and modify prior to starting the search for a market brokerage partner. By doing so, they will greatly increase the likelihood of hiring a qualified, motivated, and invested market brokerage partner to work on their behalf.