The value of tenant reps
Tenant representatives play an important role in the business leasing process. First, it’s important to note that the business leasing process generally includes a project team bringing all required resources to the table for the benefit of the business seeking space. Generally, project teams include other related professionals, such as lawyers, CPAs, commercial lenders, architects, insurance agencies and others. The tenant rep is usually the “quarterback” for the team.The concept of a buyer broker has taken hold in the residential real estate world, but tenant/buyer reps are not as prevalent in commercial transactions.When I ask how business owners are going about the process of finding space, they often respond that they are doing it themselves. They say they are calling on all of the signs or Internet listings they come across, and don’t want to tie themselves down to one broker.I can understand that view, and there are many competent business owners who can get through this process on their own, especially if they are looking for relatively small space. But I do tell them that there are many reasons for using an exclusive tenant rep.First, the tenant rep is an advocate for the business owner, with all of the fiduciary obligations that a landlord rep has to the property owner, including confidentiality.I don’t mean to imply that landlord agents take advantage of business tenants. They have an obligation of fairness to the tenants, but the level of service provided by a tenant rep matches the level of service of the landlord rep and evens the playing field.A tenant rep brings a wealth of market knowledge to the table for the benefit of the business tenant. This knowledge includes familiarity with the properties that are available, whether listed or not, but also includes information about market rents, reputations of landlords and their agents, and other types of market-specific information that someone who is not involved in the market on a daily basis would not know.As the tenant rep works with the business owner through the process, a deeper understanding of the needs of the business is developed by the tenant rep, making the rep better able to match the needs of the business with what’s available in the market.A tenant rep can bring objectivity to the space search process as well, especially when comparing competing properties that have been identified by the business.Business owners often face time constraints that prevent them from properly evaluating spaces that could work, and may not even look at enough spaces to make an informed judgment.Financial analysis of the various space options doesn’t seem to take place as often as it should. Good tenant reps are able to offer this service, furthering their value and objectivity.Tenant reps can generally negotiate better lease terms than business owners who handle the process themselves. For most business owners, the leasing process occurs once every three or five years, and they simply don’t know what types of terms owners might be offering. At the moment, it is as much of a tenant’s market as we have seen in many years. However, business owners can still leave too much on the table if they are not fully conversant with the types of “deals” that landlords are willing to make to keep or attract tenants.Tenant reps who are active in the market have this information and can negotiate for the benefit of the business tenant, providing leverage and buying power that business owners might not have on their own.Tenant reps also can act as a sort of buffer between the landlord and the tenant in situations involving tense negotiations. The tenant rep can be the “bad guy,” and the groundwork for a long-term relationship between the landlord and tenant can be laid.The tenant rep also is in the best position to assemble the project team that will be needed in each case. Tenant reps build relationships with other professional service providers, and if they fully understand the needs of a business, they are able to recommend the best people to meet those needs.Tenant reps act like corporate real estate departments for those businesses that don?t have one, and even for those businesses that are headquartered out of the area and need some local real estate expertise. Business owners in need of new space, or facing renewal negotiations for their existing space, should seriously consider hiring a tenant rep. It is a far more efficient route to take than going it alone.Dan Scanlon, JD, CCIM, is an adviser with Grubb & Ellis|Coldstream Real Estate Advisors Inc., Bedford. He can be reached at 603-206-9605 or firstname.lastname@example.org.