Choosing the right Tenant broker is the first and most important decision you’ll need to make when embarking on the commercial real estate leasing, lease renewal negotiating, subleasing or buying process.
As a prospective buyer or tenant of commercial real estate, it’s beneficial to take advantage of the service a professional tenant representation advisor can add to a process that can quickly become risky, expensive and time consuming. Like any large business undertaking, failure to seek professional advice on an area outside of your expertise may lead to bad business decisions.
Fortunately however, most business owners are only faced with a corporate real estate transaction or challenge every couple of years. That being said, if you don’t already have one, how do you go about choosing a Tenant broker who’s qualified to achieve your goals? And if you do, how do you determine your current representative is up to the job this time around?
Below are eight hard and fast rules to thoroughly consider for choosing the best tenant representation advisor for the job:
1. Choose an advisor who will represent your best interests, not the landlord’s or seller’s, to avoid a Dual Agency situation
First and foremost, choose a tenant representation advisor without the conflicts of interest associated with representing both landlords and sellers. And whatever you do, don’t choose the landlord’s/buyer’s broker to represent you! While this may seem obvious, it’s the biggest mistake tenants and buyers make, often perpetuated by the listing broker who may claim you will save you money because they don’t need to pay your representative and you will save time as you can negotiate direct. It’s important to understand the listing broker is potentially motivated to create a dual agency situation because they will typically receive the entire fee for negotiating for the tenant, who lacks their negotiating expertise and real estate market knowledge. Hence the landlord wins, you get a raw deal (you may not even know it), and can only hope that the listing broker assists you with the often time consuming tenant improvement and relocation process once the deal is closed and they’ve been paid.
While dual agency is perfectly legal in California and can sometimes result in a fair outcome, it is fraught with potential conflicts that must be managed by the broker to protect the best interests of both parties to the transaction and himself. Quite frankly, no matter how convinced the listing broker is that he can avoid conflicts of interest in a dual agency situation, it’s practically impossible to do so. Thus, choosing a tenant representation advisor is essential to achieve optimum results. In doing so, you instantly avoid the conflict of interest risk and can be confident that you have an expert on your side (not the landlord’s!) that will work hard and provide the expertise and knowledge to understand and achieve your needs and represent your best interests only. Would you hire the same attorney as your adversary to represent you in a lawsuit? Of course you wouldn’t. Hiring a real estate representative should be treated in the same fashion.
2. Choose a broker who is a specialist in Tenant Representation
Besides not having conflicts of interest to manage, a specialist in tenant representation provides many other services exclusive to his specialty and will provide a much higher level of service and commitment than a generalist that represents both landlords and tenants. With depth of experience and expertise in specializing in representing tenants comes the wisdom to apply the knowledge, tools and resources to achieve your objectives and to serve your best interests. A tenant broker will also likely be able to dedicate more time and energy to serving your needs than a broker that represents both landlords and tenants. They will not be overwhelmed with having to juggle as many transactions and constantly preparing time consuming marketing reports to landlords. They’ll also be there for you to project manage any tenant improvements and facility needs you have, either immediately after the transaction has closed or at any time during your lease.
3. Choose a tenant representation advisor who has experience in your immediate area
There’s no substitute for true market knowledge; knowledge, which can only be gained through extensive transaction experience in a defined geographic area. It is, quite simply, the only way to acquire the market ‘intelligence’ required to drive the hardest bargain for a tenant or buyer. An experienced tenant representation specialist who works in your target market knows not only what is available in your market before anyone else, they know every landlord’s negotiating strategy, motivations, financial constraints, operating expenses and other key information they can use to your advantage. Be careful of tenant brokers who don’t specialize geographically. They don’t have the required market knowledge to get you the best terms, and must rely on unreliable and incomplete third party databases for market data.
4. Choose a tenant representation advisor who has experience in your particular product type
The importance of specialization also applies to the type of property contemplated in the lease or sale transaction. There are stark differences between industrial, office and retail properties. The physical aspects of each are substantially different, as are the lease structures, term, conditions and operating expenses, among other things. For example, a full service gross office lease is a completely different challenge than a single tenant industrial triple net lease. So, make sure that the tenant representation advisor you choose has a track record of handling transactions like yours.
5. Choose an advisor who has experience representing your type of business
Understanding how your business utilizes space and its specific operational requirements, as well as how your space requirements may change in the future, is an important component in choosing your next location. A tenant representation advisor who has experience in representing businesses like yours in your industry and location will help streamline the process of finding the right property, especially if your operation requires specialized improvements, proximity to other service providers or regulatory approvals. If your tenant representation advisor does not possess a complete understanding of what you do, valuable time could be wasted and opportunities may be lost. The first thing your advisor should do is ensure they fully understand your business and, in turn, your real estate needs. Experience in representing similar companies will expedite this process and may even be able to offer valuable recommendations on office space options you hadn’t considered.
6. Choose an advisor who has a clearly defined process for achieving your needs and a high level of accountability to you throughout that process
While every real estate transaction will have its unique challenges, the tenant representation advisor you choose should demonstrate to you that they employ a logical, step-by-step process for handling your assignment. Unexpected surprises will be minimized if your advisor handles the mechanical aspects of your transaction in sequence and in timely fashion before moving to the next step. As important as the process is, your advisor should have a way of holding themselves accountable to you as the transaction progresses, so that you are assured that nothing is overlooked and your interests are being thoroughly served from start to finish. Surprises are great at parties, but not in real estate transactions.
7. Choose an advisor who has the necessary tools and support to give you the highest level of service
Having the best information at your disposal is a key element in the making of a good real estate decision. Knowledge is power and, as such, your broker should have access to the best market information, analytical tools and human resources available to assist the tenant broker in executing the transaction on your behalf. Ask for a list of these resources with an eye for their relevance to your requirement. The best tenant representation advisors at the top brokerages have access to the best resources and the most in-depth and timely information on the latest available commercial real estate and they know how to use these tools to your advantage throughout the real estate process.
8. Choose an advisor who you trust and you connect with on a personal level
Choosing a tenant representation advisor with all the skills, experience and expertise for achieving your real estate needs is all well and good but don’t overlook the personal touch. We all naturally associate with people we like and have something in common with. Once you’ve selected who you believe can best represent your needs, be sure you both get to know each other on a personal level as best as possible. With good instincts this shouldn’t take long. If you and your tenant representation advisor get on great, not only will you both gain each other’s trust, but your representative will likely have a higher level of commitment to you on an emotional level and will want to work harder for you than if you were just another one of their clients.
Finally, when a tenant representation advisor claims they are the most qualified for the task at hand, don’t necessarily take their word for it. Always ask for references and to see case studies that clearly demonstrate their claims. Don’t hire a tenant representation advisor unless they can demonstrate they’ve achieved great results for someone like you!