Having someone on your side of a commercial real estate lease negotiation turns your business space into a strategic asset.
If you’re thinking of getting a lease for office space, retail space, industrial space or a warehouse, ask yourself first:
- Do you have the time and expertise to research the real estate market, including opportunities that are currently available or will become available in the future?
- Do you know the effective leasing rates and inducements being offered to those leveraging their real estate requirement?
- Do you have the time and expertise to deal with brokers and landlords in a site search, while at the same time handling all of your other job responsibilities?
- Do you know how to use real estate to improve the financial and competitive position of your business or corporation?
- Do you know that the quoted rental rate of your building includes brokerage fees?
If you answered, “no” to any of these questions, then you need a tenant representative.
Selecting space for your organization and successfully negotiating the most attractive lease arrangement are complex, time-consuming tasks full of potential pitfalls. The pitfalls multiply if you do this process on your own without an experienced commercial real estate professional serving as your tenant representative.
Hiring a tenant representative who acts on your behalf will
- eliminate many of the hassles in site selection and negotiation.
- save you a substantial amount of time.
- prevent potentially disastrous missteps.
- cut much of your real estate expense.
An experienced tenant rep can turn up real economic opportunities and help turn your space into a strategic asset.
That’s real money, considering that real estate costs are typically the second largest line item expense, normally equating to some 25% to 40% of a corporation’s budget.
Select Group of Real Estate Pros
Only a select few real estate professionals, such as the Commercial Real Estate Group of Tucson, 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 and have a conflict of interest.
Tenant reps have made a name for themselves during the past 15 to 20 years since real estate agency laws required real estate brokers to disclose the party for whom they are working.
A portion of your rental rate covers broker fees, including for tenant reps. If you don’t use one, the landlord’s leasing agent gets all those fees.
Your goal in working with a tenant rep is to obtain true economic savings and secure space on terms that best serve your needs.
8 Ways a Tenant Rep Helps
You can expect a tenant representative to help you with commercial real estate in these eight ways:
1. Analyze space needs. The tenant rep will assist you in calculating your actual need for space and determining your particular layout needs. This will prevent you from wasting time on property negotiations that are not right for your organization.
Most importantly, it will prevent you from leasing too much space. The landlord has no incentive to help you economize on space and save money.
2. Investigate all available properties and determine which are the most appropriate for your needs. This involves more than scanning the available listing services.
A professional tenant rep will identify a property that is not an obvious choice. This could result in lower rental rates and space that is better suited to your needs.
3. Create a bidding war among several landlords for your business. A good tenant rep will leverage your lease requirement by launching a successful bidding war 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 will be concessions and incentives that exceed the norm in the marketplace.
4. Protect you during lease negotiations so that you come away with terms that meet your present and potential needs.
The tenant representative knows all the ins and outs of real estate transactions and will help you avoid possible pitfalls.
For example, a tenant representative would ensure you retain such options as subletting or termination in case you eventually
- shrink your organization
- outgrow the space
- need to close the office.
Exit strategy options are overlooked at your peril.
5. Serve as a buffer between you and the landlord. A tenant rep can act as the “bad guy” when necessary during negotiations. That will allow you to secure major economic concessions while keeping a cordial relationship with the landlord.
6. Identify lease provisions that could cost you money during the lease term. These often are hidden in the document and are easily overlooked. The tenant rep will reveal the hidden costs of leasing.
7. Handle the paperwork and other details of the lease negotiation. Having a tenant rep prepare proposal requests, financial analysis and letters of intent will help to resolve issues before the final lease is prepared.
A professional tenant rep is familiar with real estate documents and knows how to adequately compare proposals. The tenant rep will help you avoid disasters caused by signing something by accident or out of ignorance.
8. Settle disputes that arise after the lease is signed. The tenant representative will serve as an experienced set of ears and eyes to verify the details of a transaction.
The rep’s transaction files will provide the documentation necessary to clarify what was said and done during the negotiation.