Most business owners searching for office or industrial space in Tucson make a reasonable assumption: the broker showing them buildings is working for them.

Often, that assumption is wrong.

In commercial real estate, two fundamentally different types of brokers operate in a transaction. One works for the landlord or seller. The other works for the tenant or buyer.

The difference affects what information gets shared, how negotiations are handled, and what the final lease or purchase terms look like.

This article explains who represents tenants in commercial real estate, how each type of broker gets paid, and what that means when you’re evaluating commercial tenant representation for an office lease negotiation or industrial lease negotiation in Tucson.

The broker showing you buildings is not automatically your broker. In many cases, they were hired by the landlord before you ever walked in the door.

The Landlord’s Broker: Who Do They Work For?

When a property owner lists a building for lease or sale, they hire a listing broker. That broker’s job is to fill the space at terms that work for the landlord, ideally the highest rent, the fewest concessions, and the least negotiating friction.

This is a legitimate service. Landlords need representation. But the listing broker’s legal and professional duty runs to the property owner, not to you.

Here is where it gets complicated: listing brokers often show their own listings to prospective tenants. They may be the first broker you speak with when you call a number on a sign or search a commercial property database.

If you tour a building with the listing broker and move forward without hiring your own tenant representative, you may be negotiating against someone whose job is to protect the other side’s interests.

Legal Note

In Arizona, agency relationships and potential conflicts should be disclosed as required by applicable law and professional rules. Ask every broker you meet:

Who are you representing in this transaction?

The answer should be clear and unambiguous.

The Tenant Rep Broker: Who Do They Work For?

A tenant representative, often called a tenant rep broker, is hired to represent the person or business leasing space.

Their role is fundamentally different from the listing broker’s. A tenant representative works to negotiate favorable economics, concessions, and lease terms for the tenant.

A dedicated tenant advocate can search the broader market on your behalf, evaluate competing properties, analyze comparable transactions, and enter negotiations focused on your objectives.

For business owners and owner-users buying a building, the equivalent is a buyer’s representative: a broker whose job is to help identify suitable properties, evaluate opportunities, and negotiate the purchase price and terms on the buyer’s behalf.

A tenant representative’s compensation may come from the transaction, but their professional obligation runs to the client they represent.

How Do Commercial Real Estate Brokers Get Paid?

Commercial real estate commissions are commonly paid by the landlord or seller as part of the transaction.

When a tenant brings their own representative, the commission associated with the transaction may be shared between the listing broker and tenant’s broker according to the applicable agreements.

If the tenant does not have separate representation, the commission arrangement may be different.

The important point for a business owner is that choosing independent tenant representation does not necessarily mean writing a separate check to a broker. Compensation and representation should always be discussed with your broker at the beginning of the relationship so you understand exactly how they will be paid.

A Common Misconception

“I’ll save money by going directly to the listing broker.”

Going directly to the listing broker does not automatically mean the landlord will reduce the rent or purchase price by the amount of a cooperating broker’s commission.

What it does mean is that you may be entering negotiations without a broker whose sole responsibility is representing your interests.

Tenant Rep vs. Landlord Broker: Side-by-Side Comparison

Understanding Dual Agency and Conflicts of Interest

Situations can arise where the same brokerage, and in some circumstances the same broker, is involved with both sides of a commercial real estate transaction.

Where permitted, these arrangements are subject to applicable disclosure and consent requirements.

The practical issue is straightforward: landlords and tenants frequently have competing objectives.

The landlord may want a higher rental rate, fewer concessions, stronger guarantees, and more landlord-friendly lease provisions. The tenant generally wants the opposite.

That is why business owners should understand exactly who represents whom before negotiations begin.

A cleaner arrangement for many tenants and buyers is working with a broker who is exclusively representing their side of the transaction and is not simultaneously serving as the listing agent for the property being considered.

Ask your broker:

Do you or your firm represent any of the landlords or sellers whose properties you may show me?

If the answer is yes, ask how potential conflicts are disclosed and handled.

Three Questions to Ask Any Broker Before You Start

You do not need to be a commercial real estate expert to protect your interests. Start by asking three questions.

1. Who are you representing in this transaction?

Are they representing you, the landlord, or potentially both sides?

The answer should be clear. If it is not, ask for clarification before proceeding.

2. Do you carry listings for properties we might consider?

If a broker or brokerage represents both sides of a potential transaction, understand how that relationship will be handled before you tour or negotiate.

3. What is your experience with this property type and submarket?

Commercial real estate is highly specialized.

A broker who primarily handles retail properties or works predominantly in another market may offer a different level of local knowledge than an office or industrial specialist who regularly negotiates transactions in Tucson.

Experience with the specific property type, submarket, landlords, recent comparable transactions, and prevailing lease terms can materially affect the quality of the advice you receive.

Why Tenant Representation Matters More in a Tight Market

When vacancy rates are high and landlords are competing aggressively for tenants, tenants may have greater negotiating leverage.

When vacancy is low, the dynamic changes.

Landlords may be less willing to move on asking rents. Concessions can become more limited. Free-rent periods may shrink. Tenant improvement allowances can tighten. Attractive properties may also receive interest from multiple prospective tenants.

In that environment, knowledgeable representation becomes particularly important.

A tenant representative who understands the submarket, knows the relevant landlords and properties, and has access to recent comparable transaction information can help you determine where you have leverage and where you do not.

Market Context

When vacancy becomes particularly tight in a submarket, tenants may find themselves competing for the same space.

The landlord’s broker understands those market dynamics. Your representative should understand them too and should evaluate relevant comparable transactions and market conditions before you make an offer.

What About Owner-Users and Commercial Property Buyers?

If you are buying a building rather than leasing one, the same basic principle applies, potentially with even higher financial stakes.

Purchasing commercial real estate can be one of the largest transactions a business owner undertakes.

The seller’s broker represents the seller’s interests. A buyer who proceeds without separate representation should understand that distinction clearly.

A buyer’s representative can help:

• Identify on-market and potentially off-market opportunities

• Analyze comparable sales

• Evaluate asking prices

• Coordinate due diligence

• Identify potential property and transaction issues

• Negotiate purchase price and other business terms

• Coordinate with lenders, attorneys, inspectors, and other professionals involved in the transaction

Representation is also worth considering when deciding whether to buy vs. lease commercial property in Tucson.

For qualified owner-users, financing options may include SBA commercial real estate programs as well as conventional financing. Your broker can help evaluate the real estate side of those alternatives, while lending and tax professionals can advise on financing and tax implications.

What About a 1031 Exchange?

Owner-users and investors considering a 1031 exchange face additional timing and transaction requirements.

Because federal tax rules governing 1031 exchanges are specific and time-sensitive, buyers should coordinate closely with a qualified intermediary and their tax and legal advisors.

From a real estate perspective, an experienced buyer representative can help identify potential replacement properties and move efficiently through property evaluation and negotiations within the applicable transaction timeline.

Working With a Broker You Haven’t Vetted?

Before you tour a single building, ask one question:

Who is this broker’s client, you or the landlord?

The answer affects how information is shared, how properties are presented, and whose interests the broker is responsible for protecting during negotiations.

Commercial Real Estate Group of Tucson provides commercial tenant representation, buyer representation, and lease negotiation services for tenants, owner-users, and buyers across Tucson and Southern Arizona.

We do not represent landlords or sellers. Our representation is focused on the tenant or buyer side of the transaction, so our property recommendations, market analysis, comparable data, and negotiating strategy are developed around our client’s objectives.

Whether you’re negotiating an office or industrial lease, evaluating a commercial property purchase, or considering a transaction involving a 1031 exchange, talk with us before you sign.

Talk With a Tucson Commercial Real Estate Broker

Michael Coretz, Broker/Owner
Commercial Real Estate Group of Tucson
520-299-3400
michael@cretucson.com
www.cretucson.com

Our Difference Is Your Advantage™