Tips on Using a Tenant Representative for Leasing an Office or Retail Space
Your primary business is running your company. How often do you lease 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 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 qualified tenant representative.
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. Many believe the Landlord tacks the fee on top of the lease rate or the Tenant will have to pay the fee themselves. Neither is true.
In the vast majority of properties, 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 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 listing agent, who represents the Landlord - no matter what they tell you - will get the whole thing.
When it comes to negotiating for office or retail 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.
What about lease renewals? Should you also engage the services of a tenant rep? Absolutely! Your tenant representative will survey the market to be sure that the terms of your renewal are the best achievable. You will also be made aware of any other opportunities that are available and the cost effectiveness of a relocation. You will always have more leverage renewing with your current Landlord if you have a Plan B and he knows it.
How will a tenant rep save you money?
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.
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.
A tenant representative working in their local market will have a great deal of information readily available about space that is on the market. Much of this data may even be committed to memory due to the constant research and activity. You would be starting from scratch without that knowledge.
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.
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.
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 work letters and vary from market to market. A tenant representative knows how to customize the documents to meet your needs.
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 use a commercial real estate broker?
Take advantage of the ability to get personal assistance in your market from a knowledgeable and experienced commercial real estate office tenant representation expert. 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.