AVOID PITFALLS AND UNCOVER ECONOMIC OPPORTUNITIES
Selecting space for your organization and successfully negotiating an acceptable lease are complex, time-consuming tasks that are full of potential pitfalls. The pitfalls only multiply if you undertake the process alone, without the benefit of an experienced commercial real estate professional serving as your tenant representative.
Hiring a tenant representative who acts on your behalf can eliminate many of the hassles in site selection and negotiation. It can prevent potentially disastrous missteps, and can cut much of your real estate expense. More importantly, aligning yourself with an experienced tenant rep can turn up real economic opportunities and help turn your space into a strategic asset. What Makes Tenant Representatives Different? Many commercial real estate professionals exclusively represent tenants. Such exclusive tenant reps never work on behalf of owners and developers. Other real estate professionals divide their practice between both tenant and landlord representation.
Tenant reps have made a name for themselves during the past 10 to 15 years, since real estate agency laws now require real estate brokers to disclose that they are working on behalf of the landlord, not the tenant. Your goal in working with a tenant rep is to obtain true economic savings and secure space on terms that best serve your needs over the life of your lease. While working on your behalf, a good tenant representative should generate savings and benefits that far exceed the cost of his or her professional compensation. What Services Do Tenant Representatives Provide?
1. Analyzes your space needs: The tenant rep can assist you in calculating your actual need for space and determining your particular layout requirements. This can prevent you from wasting time on property negotiations that are not right for your organization. Most importantly, it can prevent you from leasing too much space. The landlord has no incentive to help you economize on space and save money.
2. Investigates all available properties and determines which are the most appropriate for your needs: This involves more than scanning the available listing services. A professional tenant rep can identify a property that is not an obvious choice to meet your needs. This could result in lower rental rates and space that is otherwise better suited to your needs.
3. Create competition for your business amongst several landlords: A good tenant rep can create a competitive bidding process, and prevent you from being a “captive audience” to one developer. The optimal number of bidders is usually three. Even if there is one property that you and your representative agree is the best, creating a three-way competition will optimize your negotiating position. The result can be concessions and incentives that exceed the norm in the marketplace, such as free rent for several months or an allowance for tenant improvements.
4. Protects you during lease negotiations so that you come away with terms that meet your present and potential future needs: The tenant representative knows all the ins and outs of real estate transactions and can help you avoid possible pitfalls. For example, a tenant representative would ensure you retain such options as subletting in case you eventually downsize your organization or outgrow the space. Options for an exit strategy are also examined.
5. Serves as a buffer between you and the landlord: A tenant rep can act as the “bad guy” when necessary during negotiations. At the same time you are securing major economic concessions, relying on a tenant rep to act as “bad guy” can keep your relationship with the landlord cordial. You may need the good will later on.
6. Identifies lease provisions that could cost or save you money during the lease term: These often are hidden in the document and are easily overlooked. Tenant reps are highly skilled in sniffing these out and negotiating favorable terms.
7. Handles the paperwork and other details of the lease negotiation: Having a tenant rep prepare all proposal requests and letters of intent can help to resolve issues before the final lease is prepared. A professional tenant rep is familiar with real estate forms and documents and can help you avoid signing something disastrous by accident or out of ignorance.
8. Settles disputes that arise even after the lease is signed: The tenant representative can serve as an experienced set of ears and eyes to verify the details of a transaction. The rep’s transaction files can provide the documentation necessary to clarify what was said and done during the negotiation.