5 Questions to Ask Your Property Agent

As manufacturers and logistics companies climb out of the recession, many are looking for new sites, but with cost constraints being a bigger consideration than ever. For companies selecting a site for a new workshop or distribution facility in China, regardless of the location or purpose, one of the best ways to control costs and preserve value is to get professional advice. This week, Andrew Hatherley of global real estate consultancy CBRE explains how to determine if you are getting the information you need.

RightSite: What are the top five questions tenants should ask to determine if a real estate agency has the ability to handle their requirements?

Hatherley: To gauge an agency's ability, we recommend that clients ask the following questions before engaging a property consultant to work on their behalf:

1. Does the agency have a full range of associated property services should they be required? For example, can they provide research, project management, valuations, consultancy or other services?

2. Does the agency have operators who specialize in the tenant's target locations?

3. Does the agency have staff specialising in the type of property that the tenant requires, such as business parks, or logistics?

4. Which individual agents within the agency will be assigned to work specifically for the tenant?

5. What track record or experience do these agents have in helping clients to fulfill similar requirements?

RightSite: Most industrial property deals in China are done through property consultancies. However, some tenants still prefer working on their own. Under what circumstances, might it be more effective to pursue a deal without an agent?

Hatherley: Real estate costs (eg rent or capital investment) are among the largest expenses for most companies in China and the opportunity to utilize the experience and specialist knowledge of an experienced property consultancy to identify, benchmark and negotiate on your behalf can provide huge benefits, particularly since the landlord normally bears the cost. With this in mind it is difficult to see how it could be more effective to make decisions concerning such large expenses as a long term lease commitment, without the assistance of a specialised agency.

RightSite: For foreign investors, local knowledge and better communication are two benefits delivered by international property consultancies. Besides these advantages, what other reasons are there for choosing an international consultancy in China?

Hatherley: In the last 5 years, the demand for expert advice on property, and subsequently the business of providing this advice, has grown substantially across China. In our case at CBRE we now have 14 offices and 1450 staff in China. The growth of the property consultancy business in China reflects not only the development in the property sector as a whole, but also the increasing complexity of many of the transactions taking place and the need for working with experts experienced in such deals.

RightSite: Many international consultancies are based in large cities like Shanghai, Beijing, and Guangzhou. For manufacturers looking for properties outside these regions, how can they determine an agency's ability to source the best deals in 2nd and 3rd tier cities?

Hatherley: The best advice to manufacturers looking for property outside the major hubs is to work with the property companies that have invested in developing operations in these areas and have the experience necessary to establish a full and substantial China platform. In the best case scenario, the property consultancy should have full service offices in 2nd tier cities and significant direct representation in 3rd tier cities. To complement this, the consultancy should have more specialised staff available in their 1st tier city offices who can provide support and enhance the abilities of the team members in the local offices. Typically, only the largest and best developed of the international property consultancies can provide this degree of support, but given the challenges of working in China's emerging cities we recommend securing this level of advice to ensure that clients are getting what they pay for with their new sites.

RightSite: A top priority for most investors is ensuring the long-term stability of the site that they select. How can working with a property agency in the site-selection process help investors eliminate some of the risks involved in site selection?

Hatherley: One of the biggest contributions that a property consultant can make is helping to introduce and qualify eligible sites for investors. By introducing a competitive element to the site selection process, a qualified property consultancy, can help investors compare the benefits of various potential locations and ultimately help to identify the most suitable and cost effective option. Investors should look for skills in pan-China or localized site selection as a core competency when selecting a property consultancy as experience in this area will invariably clarify the process and thereby eliminate many of the risks for occupiers and investors.

Andrew Hatherley is Executive Director for Industrial and Logisitics Services at CBRE in Shanghai. CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world's largest commercial real estate services firm. To find out more about CBRE's operations in China visit www.cbre.com.cn or you may contact Andrew directly at andrew.hatherley(at)cbre.com.cn.