Benefits of Utilizing a Tenant Agent
If you are considering leasing commercial real estate to house and grow your business, you will want to obtain the appropriate expertise to help make your experience a profitable and enjoyable one. Commercial brokers vary in focus and expertise: some specialize in listing properties for landlords; others are transaction facilitators; still others focus specifically in helping tenants. This article addresses the different types of commercial brokers and the benefits of working with a tenant agent.
Types of Brokerage Relationships. Colorado real estate law allows commercial leasing brokers to work in three distinct capacities:
- Landlord Agent
- Transaction Broker
- Tenant Agent
By Colorado law, Landlord Agents exclusively represent the landlord’s interests. Transaction Brokers assist both the tenant and the landlord throughout the transaction without advocating for either party. Tenant Agents exclusively represent the tenant’s or buyer’s interests. With all these choices, how do you decide which type of broker is right for you?
Landlord Agents develop their expertise in marketing office, industrial and retail space. A good landlord agent is knows how to best present his/her property and get leases signed. Transaction Brokers are skilled in the art of facilitating. They are adept at considering the goals of both the landlord and the tenant, and figuring our ways to meet both these sets of needs. Tenant Agents develop their expertise in the areas of relationship-building and advocacy. The tenant agent’s role is to understand both the financial and non-financial goals of his or her client, and to skillfully advocate for the client-tenant.
Cost and Savings. Regardless of relationship category, leasing brokers are generally paid one-half of the listing broker’s commission for bringing a tenant to the table and helping consummate a lease. Usually, leasing brokers are compensated by the landlord’s listing broker. The leasing broker is paid a success fee, typically in the 2.5 to 5% range, when a lease transaction occurs. This fee is built into the cost structure of the rents so you, as tenant, do not pay a higher rent for utilizing a tenant agent. Having tenant agent represent you will not cost your more…it could save you significant time and money.
Value Proposition. The tenant agent’s job is to position you in the market so that landlords are competing to have you in their building. This competitive process allows the markets to do their job producing the most attractive lease opportunities. Reduced rental rates, increased tenant-finish allowances, renewal options and free rent are optimized for the tenant when landlords are in competition for your business. And in today’s soft market landlords are fiercely competitive, so it pays to have them competing for your business.
What Landlords Look For From Tenants. If you are a Tenant looking for new office, retail, industrial, or flex space, what can you do to present yourself to property owners in the best way to give yourself an advantage during the lease negotiation? Here are a few suggestions:
- Business Plan – Even if you’ve been in business for years, providing the framework of your business is always appreciated. If you’re a new business, Landlords are duly impressed with even the basic rudiments of a business plan. It demonstrates that you are serious about your enterprise and it gives everyone a sense of security about your company’s ability to not only pay the bills, but also to grow and prosper.
- Financial Statements (both business and personal) – Some Tenant’s cringe when this one is demanded. Their finances are typically quite private and a request to see them is somewhat akin to asking them to undress in public. Your broker should help you with this by providing forms that can be less disclosing, suggest ways to limit the presentation, and request assurances of confidentiality. But your ability to show financial wherewithal will, without question, help your case for negotiating a better lease than if you just claim that you have enough money in the bank to cover the rent.
- Background Information and a Résumé – Securing space for your business is not unlike many of the other applications you’re going through setting up your business. Often, the more personalized you can make this process the better it will be for you. Hand over as much of the marketing materials on your business as you can. Supplying your professional resume’ often helps a local Landlord recognize you not only as a source of rental income, but also as a person with a past and intentions for a future.
- Letter of Intent (LOI) or Request For Proposal (RFP) – These things have been discussed forever in this column. Most legal professionals can’t stand them; most agents like to use them on a daily basis. It is critical to their implementation that it understood that they are not legally binding, but they are a strong first step in the negotiation process. Unlike legally binding contracts there is rarely any money involved with an LOI or an RFP, but they are signed by the parties involved and become a part of the file for the transaction.
- Your Own Lease – The vast majority of lease transactions that happen in this market are done with the Landlord’s lease. But if you have a lease that you have been party to in the past and found that it was a fair one, provide it as a part of the negotiation. It’s highly doubtful that the prospective Landlord will use it (quite likely they have invested more money than they care to talk about with their own legal counsel preparing the lease they want to use!) but providing one of your own demonstrates an intention that is far too uncommon in this business. This document needs to be offered with the initial application package. If it’s brought in later, it probably won’t mean much of anything to the Landlord.
Other Benefits. In addition to helping you negotiate the best lease rate and terms, a tenant agent is a ‘connector’ as well. He/she connects you with the expertise you need, including knowledgeable real estate attorneys, furniture suppliers, phone/data professionals, sign vendors, space-planners and contractors. Lastly, the tenant agent’s job is to make the process enjoyable to you, the tenant. Most business people get involved with leases only once every several years. The tenant agent deals with commercial leasing on a daily basis. The tenant agent’s job is to be your experienced guide and trusted advisor, so that you, the tenant, can relax and enjoy the process, knowing your interests are well cared-for.
Mark Casey is founder of Casey Partners, Ltd. Greentech Property A d v i s o r s ™ , headquartered in Boulder. Mark holds a Master of Business Administration (MBA) from the University of Virginia, and is a graduate of the Authentic Leadership Program at Naropa University. He is a member of Commercial
Brokers of Boulder and Denver Metro Commercial Association of Realtors. For more information, visit www.caseypartners.com or call 303-665-6000.
