Why does my company need a tenant representative?
Landlords and their representatives negotiate leases on a daily basis, while the typical business tenant does so once every three to five years, if ever. Given those odds, who do you think will come out ahead at the bargaining table?
Engaging a tenant representative ensures that your company’s interests are protected and that you find the best location at the best terms. A tenant representative will not only level the playing field, he or she can even create competition among landlords to win your business.
What about cost: how are tenant representatives compensated?
Your tenant representative’s commission is typically paid by the landlord. Just as the seller pays the realtor commission in residential real estate, the landlord pays the commission in commercial real estate.
If you work exclusively with your landlord’s representative, that individual earns the entire commission. However, if you engage a tenant representative to look out for your interests, he or she will split the commission with the landlord’s representative when the lease is signed.
How does tenant representation work?
Working with a commercial real estate broker as your representative means that your best interests are driving every step, from the facility search to lease negotiation. It also means you and your staff can focus on running and growing the business while your tenant representative handles the relocation research and legwork.
How does my tenant representative discover the best properties?
Your tenant representative will scour the market to turn up any and all properties that meet your requirements, regardless of which brokerage firm has the property listed. In contrast, the landlord’s representative is obligated to promote their clients’ buildings.
Your tenant representative will also know about unadvertised opportunities and creative alternatives that would not occur to someone unfamiliar with the market.
How can my company be sure we’re not overpaying for office space?
Working with a tenant representative is the best way to make sure you’re getting the most competitive lease terms available in your market. For example, part of a tenant representative’s strategy will be to create a bidding war between two or more landlords by sending out a well-crafted Request for Proposal (RFP) to each one. Even if you’re really only interested in one property, your representative will choose one or two similar properties to negotiate against, thus encouraging landlords to compete for your tenancy.
Can a tenant representative help with renewals as well as new leases?
Absolutely. Tenant representatives frequently negotiate renewals on their clients’ behalf. In addition to analyzing the renewal terms, your representative will also show you what else is available on the market to ensure that you’re still getting the best available terms.
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.
Are You Represented in Your Office Space Lease?
In any business transaction there is an advantage to having as much relevant information as possible. In a real estate transaction, this is often difficult because of potential conflicts of interest.
It used to be simple. A commercial real estate broker represented the individual or firm with whom he or she had a listing agreement. If a broker with several office building listings is also representing a tenant in their search for office space, it is very difficult for the broker to be unbiased toward his or her own listings. The broker is representing the building owner and has a fiduciary responsibility to that owner. Thus, in this scenario, the potential tenant is left unrepresented, oftentimes, unknowingly.
Legally, the broker must disclose this relationship to both parties by entering into a role of dual agent. As a dual agent, the broker cannot disclose any information, which would put either party at an advantage in the negotiation process. In such cases, neither party, the tenant nor the landlord, are getting the value of the broker’s expertise.
In order to avoid any potential conflicts of interest or mixed loyalties, some brokers act only as tenant agents. The tenant’s best interests are always kept at the forefront, because the broker is not also representing landlords, which could prejudice their loyalty toward their client.