What Is Tenant Representation?
Tenant Representation is the term for the group of services provided by a commercial real estate broker to a commercial tenant during the commercial leasing process. Some of these services include:
- consult with the tenant on the tenant’s needs, current market conditions and trends
- provide market surveys of available spaces
- identify potential off-market leasing opportunities
- schedule and conduct tours
- prepare offer documents, either through a request for proposal or letter of intent
- negotiate with landlords or their agents as an advocate for the tenant
- assist with engagement of other professionals as needed, including legal, space planning, project management, interior design and construction trades
All of these services are provided with fiduciary duty from the Tenant Rep to the client. This is an important aspect of Tenant Representation that we will discuss more later.
Some describe Tenant Representation as the commercial real estate version of a “buyer’s agent” you would likely hire when purchasing a home. While there are parallels to the residential buyer’s agent concept at a high level, Tenant Representation involves significantly more time, effort, due diligence and duty to the client, given the complex nature of commercial leasing transactions.
Why should my business seek Tenant Representation?
Why can’t I just browse the internet and call around myself?
There are a few stark realities of shopping for commercial space online that you should be aware of up front:
- Remember that it’s the internet, and you get what you pay for. Information on free commercial real estate websites is often 3-6 months stale, which hurts you in two ways:
- You will see properties that were already leased in the last 3-6 months
- You won’t see properties that are new to the market within the last 3-6 months
- If you get lucky and discover a property that is available, you’ll find yourself on the phone with the landlord’s broker. They will come across as the nicest and friendliest person you’ve ever spoken to—but they represent the landlord, and they are professionals at what they do. Their job is to maximize the landlord’s advantages in every way throughout the process.
- The commission being paid by the landlord is designed to compensate both the landlord’s broker and the tenant’s broker. If you show up without representation, the landlord’s broker keeps it all, and you’re still left to fend for yourself in the leasing process.
What is a Tenant Rep specialist going to do for me?
Fiduciary Duty
When you hire a Tenant Rep specialist, there is a fiduciary duty created between the Tenant Rep and you. That means your Tenant Rep specialist is obligated to advocate for your best interests throughout the process.
Experience matters
By hiring a Tenant Rep, you have an experienced professional on your side whose career is dedicated to negotiating leases. That means you’ll have a specialist on your team to guide you through the process, provide you with all available information, create advantages for you whenever possible, and help you avoid leasing pitfalls that you might not even know exist.
Options
Your Tenant Rep specialist, not being obligated to any building or landlord, will make sure you see and consider any and all options in the market that meet your requirements.
Market Data
Off-Market Opportunities
Is Tenant Representation really free?
What does Tenant Representation actually cost?
You may hear some commercial brokers claim that Tenant Representation is “free”. Is this true?
The answer is: Sort of.
Let’s explore both sides of that statement.
Tenant Rep brokers typically work on a contingent-fee basis. That means they only get paid if you sign a lease. They typically don’t require any type of fee up-front—and if you never sign a lease, they never get paid. Up until the point you actually sign a lease, they are wagering their time, effort and expertise on you and your business. If you walk away from a deal or change your mind halfway through the process, you have truly taken the Tenant Rep broker’s time for free.
Furthermore, some Tenant Rep brokers point to the fact that they are paid by the landlord as justification for saying their services are free. The underlying fact is true. For instance, when you engage Vogel Advisors as your Tenant Representative, our agreement specifically states: “…at no time will you owe Vogel Advisors a commission.” We can say this with confidence, because similar to residential real estate, we split the commission being offered by the landlord’s broker. We do not receive any payment from the client.
However, let’s be candid. All of a landlord’s expenses, from property taxes to landscaping to leasing commissions, are paid from rent and are a component of their business model. Without you, the tenant, paying rent, none of these things could be offered or afforded.
So, it could be argued that the most accurate way to describe a Tenant Rep broker’s compensation is: “Risk free, with no direct cost to the client / tenant.”