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Using a Tenant Representative

 

 

Your primary business is running your company. How often do you lease office space? Hopefully, you don’t have to do so more than every 3 to 5 years or so; the same with lease renewals. The bottom line is that you rent office space only a few times in your business life.  Landlords on the other hand rent space over and over again. In most cases, they even hire a listing agent to help market the property and advise them. Do they have an unfair advantage? You bet they do. How do you balance this unfair advantage? Engage the services of your own commercial broker; a qualified office tenant representative. These are commercial brokers who specialize in representing tenants, not landlords.

Many tenants have a fear that by engaging the services of a tenant representative they will end up having to pay more in rent so that the landlord can pay the tenant representative. I am sure you have heard the sales pitch from an agent that engaging a tenant representative doesn’t cost you anything.  The response I hear to this is “the landlord tacks on the fee on top of the lease rate.” Not true.

 When it comes to negotiating for office space, 
there is no question that a good tenant rep will not only save you money, but will also make sure you don’t make any critical mistakes.

In most cases there is already a real estate fee built into the asking price. This is paid whether or not you have representation.  Typically, what happens is that the fee, usually 4% to 6% of the gross lease amount, is split between the tenant representative (leasing agent) and the listing agent. There really is no additional fee tacked onto the lease rate and you won’t save anything by not having representation.  The commercial broker listing agent, who represents the Landlord - no matter what they tell you - will get the whole thing.

What about lease renewals? Should you also engage the services of a tenant rep? Absolutely!  How a tenant representative gets paid on a renewal is negotiable. Should they be paid a full fee on a renewal negotiation? The answer depends on how much work is involved. If is just a matter of going out and doing a market survey then negotiating the deal, they probably don’t deserved a full fee. Most tenant reps will work as consultants either hourly or for a predetermined flat fee. On the other hand, if you want to consider other alternative locations, request proposals and do some preliminary negotiations on other properties, it is justified. It is a comparable amount of work that would have to be completed if you were moving. Or at least a half of a fee is justified, the leasing side of a commission.
 

 

 

 


How will a tenant rep save you money?

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The leasing process is generally complex. After labor costs, your investment in office space may be your most expensive line item and decisions you make will have an impact on your company’s profitability. The tenant representative is your guide through the process.

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Market knowledge is a key ingredient in which a qualified tenant representative can make a big difference. Having a grasp on asking rates versus deal rates and incentives available is important to make sure you get the best terms available.

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A qualified tenant representative understands the numbers and is able translate data into implications for your business – advice on growth strategy within a particular building or market, for example. Tenant representatives are also able to perform financial analysis to help you select the most cost effective location.

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Expert negotiation skills are critical for a favorable outcome. Representation gives you subtle leverage during negotiations, informing the landlord that you are professionally represented and undoubtedly advised of alternative sites and comparable lease rates. As an added benefit, a tenant representative may know the temperament of a particular landlord and/or landlord’s representative, and recognize how far to push the negotiations without jeopardizing the transaction. This is a definite advantage when it comes to lease renewals, too.

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Familiarity with the documents is a must. Tenant representative have a working knowledge of the documents necessary to conduct the transaction. These documents include requests for proposal, letters of intent, lease agreements and workletters and vary from market to market. A tenant representative knows how to customize the documents to meet your needs.
 

A few important questions to ask and receive acceptable answers when you look for a tenant representative:

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 Are you free of any conflicts of interest if we work together?

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 Are you a primarily tenant advocate or a listing agent?

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 Do you have time to work on this project?

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 What other projects are you currently working?

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 What is your experience in finding properties like mine?

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 How many tenant representation transactions have you handled in the past 3 years?

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 What is your negotiating philosophy?

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 Are you knowledgeable about market conditions?

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 How do you handle conflicts of interest, such as when you show me space that you or your company represents on behalf of a landlord? 

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 How would you describe your reputation in the business community?

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 Can you supply references?

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 Do you work with an Exclusive Representation agreement?

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 What happens if I’m not happy working with you?

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 How do you get paid? What commission you expect to receive?



 

How do you know if you’ve chosen the wrong Tenant Representative?

Here are 10 ways you in which you know you need to go back to the drawing board.

  1. While the size of the spaces you’re shown seem OK, none are laid out remotely close to what you need.
  2.  When you ask if the suite can be remodeled, you’re told, “Sure, no problem.”
  3. Your broker sends you a 50 page computer print-out of every building in a 20 mile radius and asks you to point out which ones you'd like to see BEFORE meeting you or discussing your business.
  4. The broker is so familiar with the buildings you are seeing that the landlords actually let the broker put his name or his company’s name on a sign in front of their buildings.
  5. The broker’s cell phone burns up from calling ahead to landlords from his car with you in it to check on availabilities- assuming it’s not one of those “friendly” landlords.
  6. Three hours into the tour, the broker doesn't know the name of your company or what you do.
  7. You tour so many properties you end up having breakfast, lunch, and dinner with your broker.
  8. The sign on the side of the broker’s car reads “Tours-R-Us.”
  9. You can stand to not hear any more stories of how many BIG deals the broker did.
  10. At the end of the tour the broker assures you you'll get your first choice building and hands you a reminder card to call him in five years.

 

Take advantage of the ability to get personal assistance in your market from a top local commercial broker who is  knowledgeable and experienced in commercial  office tenant representation.

A local expert with local knowledge and expertise on your side to assist you in leasing office space will ensure you find the right space, get the best deal possible and guarantee you avoid costly mistakes.


 

If you want to make sure the deal gets done right, pay as little rent as possible and avoid costly mistakes, can you afford not to have a commercial broker who specializes in office space on your side?
 

 

 



See Also:Tenant Representation Process | Costs of Leasing Office Space | The Leasing Process and Timing | Questions to ask Tenant Representative | Tips for Tenants | Commonly Asked Questions | Hints for Lowering your Rent Expenses | Exclusive Representation Agreement
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