Tenant Representation: What it is and how to use it.
or, How to lease commercial office space.
When a business person needs to lease space, whether office, retail, or industrial, they too often start by
- 1) driving around town and calling the telephone numbers on “For Lease” signs they see on buildings, or
- 2) Googling “space for lease”. In both instances, that business person will almost always end up talking to the landlord’s broker.
The landlord broker’s job is to lease the empty space in the building advertised at the highest possible return to the landlord.
So, on the landlord or ownership side of the leasing process, the business person faces not just the building’s owner, but also a professional, licensed real estate broker and company who usually leases many different buildings and who monitors the market on a daily basis-- not just through the internet, but through telephone calls, market research and personal relationships. On the tenant side of the leasing process, the business person has whatever person he or she has assigned to the task and whatever information they can glean from the internet. The tenant must become an instant expert at leasing—something that is not a part of the tenant’s core business, and concerning a decision the tenant faces only once every time their lease term ends. In the case of a start-up business, it may be the first time the decision makers have ever faced commercial real estate business decisions.
Facing such an information deficit, most CEO’s and decision makers for companies large and small now hire their own real estate professional. That professional is called a “tenant representative”, or in the case of sales, a “buyer’s agent”. The tenant representative most often, but not always, is paid by the landlord but is recognized up front as the agent of the tenant.
Effective use of tenant representation.
The first element is obvious: hire a tenant representative that has market knowledge of the type of space and the relevant market and sub-markets of interest to your company or organization. You should also expect your tenant representative to learn about your business, customers, and employees as all three are important factors on what space is best for your business.
Technical and legal knowledge are also important factors. The tenant representative often interfaces with an architect on design and basic requirements needed in the space, and with attorneys on the legal terms that can often make or break a good deal for the tenant.
The tenant representative should create a market for your tenancy. This is imperative even when a tenant may end up targeting only one space or building—perhaps that building meets all of the company’s requirements in terms of location, size, price, and image. IT DOES NOT MATTER. The tenant representative will develop alternatives that the tenant representative can use to leverage the targeted building. We like to have at least three viable contending buildings for the client’s tenancy which we then use to maximize concessions from the landlord—lower rent, free rent, increased build out contributions, and lower escalations.
In today’s competitive environment, use of tenant representation will save the decision maker of any company or organization both time and money if used effectively.
We can also help reduce your ? commercial lease rates - see our blog about this
When a business person needs to lease space,
whether office, retail, or industrial, they too often start by 1)
driving around town and calling the telephone numbers on “For
Lease” signs they see on buildings, or 2) Googling “space
for lease”. In both instances, that business person will
almost always end up talking to the landlord’s broker. The
landlord broker’s job is to lease the empty space in the building
advertised at the highest possible return to the landlord.
