Your primary business is running your company, so hopefully, you don’t have to lease new office or retail space or negotiate renewals more than every 3 to 5 years or so. Usually businesses lease office or retail space only a few times in over the life of the company, while landlords on the other hand lease office space over and over again.
In most cases, landlords hire a listing agent to help market the property and advise them. Do they have an unfair advantage? You bet they do!
Balance this unfair advantage by engaging the services of your own qualified tenant representative.
Many tenants think that by hiring a tenant representative they will end up having to pay more in rent. When it comes to negotiating for office space, a good tenant rep will not only save you money, but will also make sure you don’t make any critical mistakes in the leasing process.
When deciding whether to use the services of a tenant rep, consider the following:
1) Real estate fees of typically 4%-6% of the lease amount are built into the cost of the lease
2) If you do not have a tenant rep, the landlord's (listing) agent will keep the entire commission...
3) If you hire a tenant rep, the commission fee is split between the listing agent and the tenant rep.
4) The listing agent represents the landlord, and will always have their best interests in mind.
5) Not having a tenant rep will most often not save you the commission and you will most likely pay much more for your office space.
For most companies, real estate is their second-largest expense after payroll, and every dollar saved on your lease goes directly to your bottom line. Landlords will always look for the highest possible rent for the longest possible guaranteed term. Tenants typically want the lowest possible rent and the greatest lease flexibility. An experienced tenant rep will develop negotiating leverage and help you to get into a lease drafted in your best interests - not the landlord's.
Analyze and Define Your Space Requirements
An experienced tenant representative can assist you in calculating your actual need for space and determining your company's particular layout requirements. Your tenant rep can help you to evaluate your space plan and maximize the efficiency of space usage, which may decrease your rentable area . A landlord obviously has no incentive to assist you in increasing your economy of space and lowering your lease costs. By knowing your space plan, and therefore your business requirements, your tenant rep will also prevent you from wasting time on property negotiations that are not right for your organization. As part of the process of defining your space requirements, you should also consider geographical areas, the quality of space desired, the image you want your new space to portray, and how that ties into corporate objectives. An experienced tenant rep can be invaluable in that process, as well as help you to calculate the possibility for future expansions.
Investigate Properties and Determine Top Alternatives
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. An experienced tenant rep will have a general market knowledge of 'deals' available, and will verify the terms and conditions associated with each property. A tenant rep will help you narrow down the alternatives, and schedule tours with the top properties that meet your requirements. After touring the different locations your tenant rep will help you go over space plans as they relate to each property, and help narrow down your decision further, usually to a few alternatives. The tenant rep will request proposals from those properties, and perform layout efficiencies and financial analysis on the responses. At that point the tenant representative will help you to choose the top alternatives and prepare to make offers.
Create a Bidding War Among Landlords
A good tenant rep knows that creating competition for your business will maximize negotiating position, and will try to start a bidding war among landlords. 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 (TIs). The tenant rep will protect your interests during lease negotiations, act as a buffer between you and the landlord, and ensure that you come away with terms that meet your present and potential future needs. For example, a tenant rep would ensure you retain such options as subletting in case you eventually downsize or outgrow the space. A professional tenant rep is familiar with real estate forms and documents, and having them prepare all proposal requests and letters of intent can help resolve issues before the final lease is prepared, and help you avoid signing something by accident or out of ignorance.
Most experts agree that the services of a tenant rep during an office move, lease renewal, or site selection can be even more important to the tenant than anything else in the process.
Posted by Bradley J. Untrauer at 05:52 AM on Monday, November 22, 2010