Bakery Lease - Trust Commercial Broker has my best interest vs their commission in mind?
**Question first:** do I trust that a commercial broker will fight to get me the "best deal" if: themore the deal goes for, the more commission they make?

**Side question if possible:** (after you read the below) I am in a booming \~300,000 population town that gets denser by the minute. What would be considered a reasonable lease rate? I know there is a lot of "it depends" - but I am looking for just a gut check. (I.e. avoid \_\_\_/sf) (I have done a lengthy business plan but it is highly conservative and didn't consider a new construction.)

**Background:** I am new to this - so am likely more nervous than average. I have been on the hunt for a commercial space for my bakery utilizing a commercial broker (has actually kinda sucked because they are an appraiser moreso, with no food-space/buildout experience, and I have had to do most of the hunting anyway).

I think I have landed a good prospect which is a new construciton. This helps me a lot as the owner takes on a hefty amount of the buildout costs/TIA (which I know is all factored into the lease and I end up paying for it). As you can imagine - keeping as much of my money for equipment, months of rent/labor, and cash flow is a high priority.

I have been telling my broker I would like a 5-year lease. In an early negotiation meeting, the owner of the property/building said it would be a 10-year lease. I was a little thrown for a loop. My commercial broker seemed immediately on board when I was hesitant, and kinda seemed on their side to sell it. I talked to her later about it, and she said: "this is great for me (the broker) because I get to make double the money!". She also joked "and I deserve that for putting up with you"! (I have been a very hands-on, analytic/anxious type and joke that I am "a lot".)

So I guess I feel nervous that she doesn't have my best interest and more her best interest in mind. Is this just how commercial real estate works? Now I kinda wonder if I should have ever used a broker - and why it was so highly recommeded by other bakery owners.
[{"id": "ff9jy77", "text": "10 years is a long time for a new business. I would insist on 5, or look at another property.\n\nThere is no way for anyone to tell you a good square footage number, its different for every market. \n\nIf you tell your broker you won't dona 10 and only a 5 they will/should work to get that done for you.", "replies": [{"id": "ff9qqo3", "text": "You think it is reasonable to ask for 5 with new construction (build out to suit my bakery)? That was their rationale for pushing 10.", "replies": [{"id": "ffa0udd", "text": "Maybe you can at least split the difference with them do a 7 or something. \n\nIs this a brand new business for you? If so I would try to find an existing space that could work, you would end up saving a bit of money I suspect. Unless you have already investigated this route.", "replies": [{"id": "ffchjhn", "text": "Yeah it is definitely valuable advise, but it seems that since the economy is relentlessly booming here - food spaces aren't really closing to lead to existing spaces. And, conversions of non-food spaces have shown a similar or larger amount of money investment, with owners NOT wanting to put the money in (unlike new construction).", "replies": [], "depth": 4}], "depth": 3}, {"id": "ffa4ivj", "text": "It just depends.  I dont like how your broker explained this.\n\nThere are certainly spaces that want a 10 year and its a binary thing.  They commonly actually do not deal with start up businesses and tia too.\n\nId you wanted one of those a good broker would explain that to you and ask you to decide if that was a deal breaker or not.  \"Well yay I get paid twice as much \" isnt great feedback to a client asking for advice on terms they dont prefer.\n\n--edit as far as why to use a broker its because they should be able to explain this type of thing, and let you know what is negotiable, where you have leverage, and where you dont.  If your broker isnt doing that then maybe you need a new broker", "replies": [{"id": "ffchtvn", "text": "Yeah - so in hindsight, they have been helpful with kinda the minutia of understanding the industy. THe who's who, the market rates, what seems high, seems low, seems like not a good neighborhood. Its been nice especially since I haven't lived here long.\n\nThat is the large advantage of this owner. He is local and is specifically wanting the development to be small local shops. I think its a smart move, because I think everyone is getting tired of chain - and quite a few people are willing to spend the money on better quality. \n\nSo you can see why it feels like quite the opportunity. The location is also really good, on the proper side of the street, and very walkable (important for regularity for a bakery).", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ff9k4qo", "text": "This is not how it normally works.  My commercial broker (granted, for purchases, not leases) is very much aligned to my goals and requirements.  He knows what I\u2019m looking for, doesn\u2019t show me anything that\u2019s too far outside the boundaries, and it works.", "replies": [{"id": "ffchxyp", "text": "That is great!", "replies": [], "depth": 2}], "depth": 1}, {"id": "ff9ua51", "text": "There are so many variables to consider here that it's impossible to give you great advice. The Landlord may be disinclined to go through the time and expense of a buildout for less than a 10-year lease. For a 5-year lease, they may want to amortize the TI costs over a shorter timeframe, which your broker feels makes the Rent/sf unsustainable for you over the short-term. Are you signing a personal guaranty? Have you been presented with a 5-year and 10-year proposal? Is the landlord local or a large corporate firm? How does this location compare to other options in your market? Is your particular space prominent within the new construction or are you a small tenant in a larger shopping center?", "replies": [{"id": "ffcichg", "text": "Yeah - it seems the 10-year \"makes sense\" (I mean I get it - if I had lots of bucks and was putting in a ton to custom outfit a space, I don't want them up and leaving in a few years. They are not just signing on to a food space, to a bakery, but also to the idea they want to give customers regularity I imagine.) \n\nI didn't think about shortening the amortization as a strategy to strenthen the lease term. I'll retool my business plan and see what would be best. For a bakery, available capital is so important, that spread out seems like an advantage (even though paying more for it in the long term).\n\nI'll see if I can be presented with a 5-year and 10-year proposal. Good idea.\n\nLandlord is local and really wanting to keep the shops local and small. Seems like quite the opportunity. He has deep pockets, so I think the risk feels less for him. \n\nI'd be a small tenant purposefully as I want to keep my lease low and not have unneccessary square footage.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ff9yy7g", "text": "If the Landlord insists on a 10 year lease see if they would be willing to give you a kickout after 5 years dependent on a set sales threshold.", "replies": [{"id": "ffcfx92", "text": "Can you elaborate on what you mean here, so I can bring it up to the broker? (ELI5)", "replies": [], "depth": 2}], "depth": 1}, {"id": "ffa1l0f", "text": "Your broker should be working for you, not convincing you to agree to what the landlord said. That being said, as previously mentioned, on a new construction the landlord would prefer longer term (especially with a buildout). If you are not comfortable with 10 years (i.e brand new business) you should look for existing space.", "replies": [{"id": "ffchx3g", "text": "OK - thank you. It seems like 10 years \\*might\\* be negotiable from what I am reading from you all and what I heard from them. I'll see what I can get.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ffa2b8e", "text": "Whats the parking situation?\nIs it on an important street/avenue?\nWhat is the anchor store if any?\nWhat are the other tenants?\nHow much will it cost to outfit your new place?", "replies": [{"id": "ffa2p5k", "text": "This! And try and avoid any personal guarantees, or at least minimize them at all possible. Negotiate every line of the lease if you have to, but understand the landlord may not agree to any changes.\n\nYou want to limit your personal liability for the lease and limit you being potentially on the hook for 10 years of lease payments if your bakery goes BK in year 3.", "replies": [{"id": "ffa42qx", "text": "Super important! Landlords will always look for the way to maximize their revenue streams, you need to fight for your bottom line and strategize to protect your future well-being if everything goes south.", "replies": [{"id": "ffa4yty", "text": "Yes, all about shifting risk. The developer/owner will try and shift all risk to the tenant and the tenant should be trying to shift as much risk as possible to the landlord", "replies": [{"id": "ffcga6w", "text": "OK thank you all for the elaboration. They don't yet have an anchor store, it is the early stage of the construction (I would be phase 1 with a few other stores). \n\nGood to know about avoiding personal guarantees. I am meeting with my accountant today as the owner does want to see financial statements and I want to get advice on what to provide. My broker says it is best to be \"willing\" here, so that you don't scare them. Is it okay to share personal financial statements as well - as they speak more highly of me than business. Or - does that breach the corporate veil and let them know of my personal assets they could go after? (But, perhaps this is necessary since my business is only 1-2 years old with small revenue)", "replies": [{"id": "ffctt8t", "text": "That is pretty common for them to ask for personal guarantees, especially if you have a new business that is not very profitable. \n\nPiercing the corporate veil is more of a legal term and wouldn\u2019t apply if you sign a persona guarantee. However that veil is important for liability purposes. Hopefully you have an LLC setup for your business and are doing the steps to keep your veil intact, like: holding annual meetings and taking minutes, keeping completely separate bank accounts with zero personal transactions in your business account( no coffees or fuel stops for your personal vehicle through your business account, for example). \n\nMost importantly, IANAL!!", "replies": [{"id": "ffh8euj", "text": "I yam! I have been very very careful with this.", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ffa41kr", "text": "&gt;I talked to her later about it, and she said: \"this is great for me (the broker) because I get to make double the money!\". She also joked \"and I deserve that for putting up with you\"!\n\nThe type of person who jokes about this isn't exactly my cup of tea, and the question you're asking (are they truly representing me or their wallet) is a fundamental question within the tenant/buyer rep space.\n\nObviously every piece of information that has been asked for is important to the question - visibility, location, what is the size of the space? If your business plan didn't consider new construction, I would strongly consider re-writing it or modifying it to consider the possibility, to see if it's financially feasible.\n\n10 years is forever for a new business to sign for, but 10 years is a pretty typical ask for new construction these days (especially restaurant/food space) because the builder's costs are not low.\n\nLastly, and most importantly, if you haven't read \"The E-Myth Revisited\" by Michael Gerber, drop everything and do it right now. Come back when you've finished the book. I'm only half-joking.", "replies": [{"id": "ffcgnu1", "text": "OK - so you are not the first to tell me to read the E-Myth, so I am going to get my butt in gear and read it. I didn't quite like the joke either, but I ended up being frank and talking to her about it. After reading all these responses - I had the courage to press that negotiating for a shorter lease should be considered since I am a young business. I communicated that it is a bummer she would make less, but it is important to at least try.\n\nGood to know the details on the 10 years.\n\nSo - she ended up being very reasonable in the end and very reassuring. (Perhaps she had to be since being confronted). She said she absolutely didn't want me to worry about that, because she really wants what is the best for me. So...hopefully that is true.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ffaakgs", "text": "I was losing my mind because I remember typing a response to this, but it wasn't showing up. Here's what I said in the original post,\n\n1. This is the gamble with any broker as there are a lot of bad ones and many are just interested in getting the biggest fee they can. I'd be more concerned that brokerage doesn't really appear to be their primary job. Retail Tenant Reps shouldn't be hard to find. Did you sign a representation agreement?\n2. Personally, I don't like a 10-yr initial term for a start-up. That's an incredible amount of potential liability should things go south. I much prefer shorter terms with options to extend.\n3. Impossible to give you a blanket rate. Ask your broker for market comps.\n4. Length of lease could have to do with your volume of required TI. If you're asking for a lot, then that's going to impact rate and term. It's all numbers on a spreadsheet. Decide whether you want to give up term for the LL funding your improvements or pay for some yourself and shorten the term.", "replies": [{"id": "ffavs4l", "text": "Find a new broker!  Saving a client money should be a priority!  A good commercial broker should feel like an extension of your team.  If you try moving forward alone or with a broker that has no CRE experience, you may be fine, but you may not.  There can be a lot of risk when dealing with CRE.\nThe more the Landlord needs to put into the space, the more it\u2019s going to cost you.  They want to ensure their payout and probably build in an amount of \u201cinterest\u201d.  The Tenant ends up paying for the cost one way or another.  But, through conversation and negotiations you might be able to reduce the financial burden in some way.  Remember that Landlords want their Tenants to be successful!  \nA good Broker can do market comps for you and really should know the basics without reviewing data.  \nRemember, position your business in the best place for your business to survive.  I have had many clients want to place their business in the wrong areas.  If you don\u2019t need high traffic, don\u2019t pay for high traffic.\nI wish you tons of luck!", "replies": [{"id": "ffchebf", "text": "All very valuable information - thank you (and for the good luck!). \n\nI did discuss the \"joke\" with the broker. She ended up (kinda felt sincere?) insisting she wants what is best for me. Hope that is that case.\n\nThe landlords did seem to really want my business to be successful. They are local which is nice. I also realize its business and sales. Here's a-hoping.", "replies": [], "depth": 3}], "depth": 2}, {"id": "ffch0cv", "text": "OK - thank you for bearing with the frustration of your posts not showing. Been there.\n\n1. I am kinda hoping she is a good one. I am 70% confident she it. But - I kinda think we are all human, all driven by our own means, and live in a capitalistic economy. So I imagine with all - I'm going to get a bit of their motivation to land a deal. I did not sign a representation agreement.\n2. OK - another vote for no 10 year. Going to push hard for 5.\n3. That's what I was thinking.\n4. This is what I was thinking as well - and will calculate it out to see if I can handle putting in TIA myself to avoid a lengthy 10 year term.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ffes6bl", "text": "I'd require a clause that prevents competing businesses from being tenants. Has this been discussed? \n\nAnd I do not like the broker's \"jokes\" either. It makes her seem very untrustworthy.", "replies": [{"id": "ffh8fxm", "text": "Good point. I agree.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ffh8lvp", "text": "In case any of you are still chimed in - I am at the point of providing a personal financial statement with the owner. He willingly signed a financial non-disclosure. My broker strongly urges to include bank/ira statements as well. Is this customary?", "replies": [], "depth": 1}]