Why tenant representation is crucial to getting the best lease possible
Driving around town, anywhere you find vacant office, industrial or retail space you’ll also find a sign emblazoned with the company and contact information for one real estate broker or another. These brokers represent building owners, but there’s another type of commercial real estate broker – one that provides tenant representation.
A tenant representative caters to the businesses looking for a place to set up shop. It’s a specialization many tenants appreciate when approaching a lease negotiation. Landlords and their representatives usually bring one distinct advantage to the table: They negotiate leases on a daily basis, while the typical tenant only enters into a lease once every three to five years. Because tenants negotiate leases so infrequently, they’re not as practiced with the strategies that lead to the best outcomes for their needs.
A commercial real estate broker experienced in tenant representation can level that playing field for you with their focused history in negotiating for tenants. Not only that, these representatives know how to comfortably guide you through the whole process of finding and securing a new space or new lease – a prospect that can seem daunting to the average tenant.
The key to successful tenant representation is knowledge. Your broker should know your business goals and thoroughly understand the ins and outs of the local commercial real estate market.
A tenant representative will:
- Assist you in developing a strategic real estate plan that is consistent with your larger business vision.
- Help you determine your particular office space needs, including the type and size of your space.
- Analyze the market and identify potential properties that meet your specific criteria.
- Provide a comparative property and financial analysis to narrow the list of alternatives.
- Work with the landlord to maximize the tenant improvement allowance available to design or reconfigure the space.
- Negotiate as much flexibility in lease terms as possible.
To find a good tenant representative, interview several brokers and ask the following questions:
- Do you specialize in a particular property type?
- How long have you been working in commercial real estate?
- Have you worked with other companies like ours?
- Do you have more experience in certain parts of town?
- How do you find available space?
- Can you provide references for recent lease transactions?
Also ask about their education and credentials. Hiring a broker with the CCIM (Certified Commercial Investment Member) designation will ensure you are getting an experienced tenant representation professional with a proven track record.
Many tenants don’t realize that a tenant representative can also represent clients when it comes to lease renewals. Having tenant representation on your side of the negotiating table will help ensure that your renewal terms are in line with the market and that you are receiving competitive concessions that many renewing tenants don’t realize are available.
In larger markets, the majority of tenants utilize the service of a tenant representative in their initial search for commercial space and a significant number also use them to negotiate lease renewals.
So next time you find yourself looking for either new space or a lease renewal on your current space, consider having tenant representation on your side. Engaging a tenant specialist ensures that your company’s interests are protected and that you find the right location at competitive terms.
How to attain the ideal office for your business
Determine Your Needs
- How much space do you require?
- What type of building fits your business?
- What is your preferred geographic location?
- Establish your rental expense budget.
Identify Potential Properties
- A thorough market survey of available properties meeting your requirements will be provided.
- List is narrowed by excluding any properties that are undesirable.
- A property tour of the remaining facilities will be scheduled.
Take a Property Tour
- Guided-tour of the prospective properties.
- Two or three properties that would best fit your needs are identified.
- Re-tour specific properties, if necessary, to gather additional information.
Preliminary Space Planning
- A space planner or architect will help determine the most efficient use of space at your two or three top building alternatives.
- The general type and amount of changes required will be established for construction cost estimate purposes.
The Request for Proposal (RFP)
- RFP’s will be prepared and distributed to the landlords of your top two or three building choices.
Select a Building or Space
- RFP analysis based on the RFP responses will be provided.
- Based on the RFP analysis and the preliminary space plans, determine which space would be the best alternative for your business.
- A Letter of Intent will be sent to the landlord of your selected property outlining the terms you intend the lease to be based on.
- First draft of lease will be requested from landlord.
- Lease review by your commercial real estate broker, decision-maker(s) from your company and your real estate attorney.
- Renegotiate and/or accept lease terms.
- Build-out of space begins.
- Construction progress is monitored throughout the build-out period.
- Final walk-through is performed.
- Certificate of Occupancy is delivered.
- Network/telecommunications equipment set up and testing.
- Move in furnishings and equipment.
Tips for office leasing success
Moving a business to its next level of success can sometimes mean literally moving—to a bigger or better office space, opening up opportunities for growing your customer base or boosting your business’s curb appeal.
The bad news is that finding the best location, the right space, and the best office leasing terms takes a lot of time and resources. Compounding the pressure is that fact that leases last for years, so any decisions reached and terms made will have long-term consequences.
The good news: the right tenant representative can do the lion’s share of the office leasing work for you—at no cost to the tenant. And a skilled tenant representative can typically negotiate a much more competitive lease than someone who isn’t well versed in commercial real estate.
Many businesses don’t realize they don’t have to go it alone, but most national firms rely on tenant representatives to find and negotiate on their behalf for office space. And while some companies have in-house real estate departments, more and more are choosing to outsource the job to local professionals who are experts in their particular markets. Why? Because it saves time and money.
The Play by Play
Just as the seller pays agent commissions in residential real estate, it’s the landlord who foots the bill in commercial real estate. If a tenant has a representative, the landlord’s agent and the tenant’s agent split the commission. If the tenant chooses not to be represented, the landlord’s agent handles both sides of the equation and earns the full commission. Tenants with their own agents have a big advantage when it comes time to negotiate lease terms.
Enlisting a pro can also pay off in fewer headaches and less down time. An experienced tenant representative can manage the entire process, freeing you and your staff to focus on operations instead of diverting critical resources trying to get up to speed on the complexities of commercial real estate. Your representative can assist with expanding or reducing your current space, lease renewals, office relocation, subleasing your space, and even buying or selling office space.
The office-leasing game is complex and time consuming. A commercial real estate broker can ease the burden by providing a number of services, such as:
- Creating a detailed office leasing needs analysis to determine the size and configuration of your ideal space.
- Supplying a complete list of available properties in your market that meet your needs. Keep in mind that a savvy real estate professional is likely to know of unadvertised properties and creative opportunities that others may not be aware of.
- Presenting a comprehensive financial analysis of how the economics of each location stack up.
- Providing objective, expert guidance to help narrow down the alternatives to a short list of 3-4 best picks.
- Preparing detailed Requests for Proposals (RFPs) and delivering them to the landlords of each property on the short list.
- Collecting and analyzing the proposal responses.
- Negotiating office lease terms and possible concessions with the landlord of the chosen space.
Choosing Your Pro
Look for a commercial real estate broker who asks a lot of questions—and actually listens to the answers—about what your business needs and preferences are before he or she starts suggesting properties. In addition, make sure your tenant representative:
- Specializes in the right kind of space. For example, a law firm looking for office space would not be well served by a broker who mainly does retail storefronts.
- Does many transactions in your market and has experience with a variety of landlords and tenants. A locally-focused, experienced broker will provide the insider knowledge and expertise to ensure you’re being represented well.
- Provides unbiased information and doesn’t try to steer you toward a particular landlord or property.
Most businesses will have to deal with either relocating or renegotiating their existing office lease on a regular basis, but it’s hard to be in top form when you only practice every 3-5 years. And it’s not easy to work out a win-win result when the other team—the landlord and landlord’s agent—plays this game for a living. Professional tenant representation levels the field, makes it easier on everyone, and best of all, it costs the tenant nothing. How’s that for a slam dunk?
The value of having an experienced tenant representative acting on your behalf
The cost of leasing office space is one of a business’s biggest expenses, in most cases second only to payroll. Getting the best value for that huge expenditure is critical.
Also, office location, the amount of space, and the way that space is designed all heavily influence customer confidence, productivity, and employee satisfaction, so the office space selection process deserves time and attention. It’s critical to manage the move itself so the process goes smoothly with minimal disruption for customers and staff.
Most importantly, though, leases last for years, so any decisions reached and terms made are decisions and terms the business will have to live with long-term. Most businesses will have to deal with either relocating or renegotiating their existing office lease on a regular basis, but it’s hard to stay proficient at something you only do every 3-5 years. A practical reference such as Move Your Office combined with an ongoing relationship with the right commercial real estate professional can make all the difference in maximizing your productivity and minimizing down time.
An experienced tenant representative acting on your behalf can simplify the process of leasing office space while saving you time and money.
Most business owners or manager address space needs a few times in their careers. Increasingly, businesses of all sizes have found that it is a useful practice to employ the services of a Tenant Representative who has the market knowledge, insight and the experience to minimize risk and maximize opportunity for your company.
Virtually every office building is represented by a building manager and/or a broker who has a fiduciary responsibility to make the most profitable transaction possible for the building owner. It is important for you to do what Landlord’s do: Enter into any office leasing negotiation armed with your own representative, someone who is looking out for your best interests.
A tenant representative will:
- Work within your overall corporate strategy to help you develop a real estate plan that supports your business vision and goals.
- Help you determine your particular office space needs, including the type of space, the square footage, and the most efficient layout and design.
- Analyze the market and identify potential properties that meet your specific criteria and provide a detailed comparative analysis of each one.
- Utilizing our market knowledge and experience, negotiate the most competitive lease terms available.
- Streamline your relocation process by helping you create timelines, schedule tasks, and manage vendor relationships so that nothing falls through the cracks.
- Deliver the highest level of professionalism, responsiveness, integrity, and quality of service on every assignment.