Everything You Need to Know about Office Tenant Representation
Our Guest blogger is Steve Goldstein of Chicago Broker/Jameson Commercial . Steve has been active in Chicago as an office tenant representative since 1991. We’ve known Steve since starting our consultancy in 2001. His local network and expertise are second to none. In this post, Steve shares why a prospective office tenant should engage a broker for this critical business decision. Let Steve protect your investment and your business – at no cost to you!
Tenant representatives help business owners understand the market, identify, and develop negotiating leverage to help them lease or purchase a commercial property for their workspace. They are often called tenant advisory or corporate property representatives but are most commonly known as tenant reps.
Tenant Reps assist business organizations in leasing a commercial property while advising them throughout the process. They work from the initial need assessment to site selection and occupancy to lease buying, expiration, renewal, and beyond. The fees for their service are paid for by the property owner, so this is a service that every tenant or buyer of commercial space should utilize.
Your tenant rep also works as a member of your team, similar to a facilities manager, whose main job is to find the ideal workplace for their client and to help them negotiate the most tenant favorable terms possible. To achieve the goals, a tenant rep carries out a thorough market survey and provides you with the best options while focusing on your business needs and goals.
What are the work responsibilities of an Office Tenant Representative?
A tenant rep works in liaison with the client (i.e., tenant) and aims at facilitating lease between a commercial property owner and the tenant (business organization). Here are a few things that a tenant rep can do on your behalf:
- Suggest whether you should renew the lease or relocate to another location
- Find an ideal property for your workspace
- Negotiate tenant/buyer-friendly lease terms
- Communicate with the landlord and resolve your queries
- Sublease a part of your workplace or help you sell your property if need be
For a comprehensive understanding, you should also know what an office tenant rep cannot do for you:
- make any final decisions – their role is to help you get and organize information so you can negotiate the best deal
- Support the landlord
- Replace your real estate lawyer, architect, or contractor
Most of us think we don’t need a tenant rep to find an office property, as it can easily be done. However, that’s only half the job done as negotiation, and locking the deal can be the most daunting part of the entire process. Here are three other reasons why business owners typically hire office tenant reps:
- They understand your current and future needs and can work to obtain your goals for the commercial property while you focus on your business
- You can access to an extensive range of properties through your representatives proprietary databases and subscription databases containing detailed property information
- They can negotiate the terms for you, keeping you out of the fray with your new landlord or management company so that when the lease is settled, and you move in, the tenant rep was the “hired gun” that did the negotiating, and now you can enjoy the benefits of their efforts.
Do You Need an Office Tenant Representative for Lease Renewal?
– it’s essential (and smart)
Transacting for commercial real estate without a tenant rep is like leaving money on the table. It’s very likely that your landlord has representation in the form of their leasing agent or possibly their management company and has likely already agreed in their listing and management agreements to pay them a brokerage fee for your renewal.
If you work with them directly without your own representative, you let them make a double commission for the lease. Besides this, you are also entering the negotiation with less leverage than they have (remember this is what they do everyday 24/7/365) and less information about what is happening in the market.
By using your own representative to approach this negotiation, you get the benefit of market data, experience, and the agent’s know-how on your side. Steven R. Goldstein has been assisting his clients since 1991 in the Chicago metropolitan area. Using proprietary methods and state-of-the-art technology, he collects real estate market data and then guides business owners throughout the transaction process.
Typically, a lease or purchase of commercial real estate can involve hundreds of thousands, if not millions of dollars, and it’s foolish to enter into these discussions without expert guidance and resources to help you get the best deal. There is only one opportunity to get leverage in negotiations, and that’s is before the lease is signed.
But what if you’ve already leased a property that’s nearing to an end? Will it renew automatically, or should you apply for a renewal? And in both cases, do you need a tenant rep?
It is advisable to use the services of a tenant advisor, even if your current lease has an auto-renewal option. This ensures that the process is secure and favorable for the tenant by reconsidering the lease terms and policies. You can always refuse the pre-agreed upon renewal option and negotiate market terms. Your tenant rep can help you determine if your option to renew or expand is at, below, or above current market terms. Your tenant rep will use this opportunity to seek out alternative landlords with competing properties and engage them in the process to create leverage for you in your renewal or expansion discussions with your existing landlord. You can find a reliable and experienced tenant rep at chicagobroker.com, who will help you negotiate the right deal on the right terms. Besides, he will also find suitable alternative spaces that will strengthen your negotiation front and also provide an easy exit if needed be. This also increases the chances of further discounts on lease renewal if your existing landlord expects you’ll vacate the space at the end of the term.
When is the Right Time to Hire an Office Tenant Representative?
The answer is: ASAP! Hiring a tenant rep should be done as early as possible since site selection and lease negotiation is a time-consuming process. Planning ahead ensures you’ve ample time for:
- Compare and analyze various property options
- Negotiate on multiple leases and different terms to find the best one
- Renovate or build-out the workspace before moving in
Allotting ample time for each step is mandatory, or else, it could result in rushed decisions that can lead to financial losses and work disruptions.
How much will an Office Tenant Rep Charge?
Well, the good news is a tenant rep won’t cost you a penny. They are often paid the fee, also called commission, by the landlord, once the lease transaction is complete. Typically the commission amount is subject to property size, lease type, and duration, so their compensation is not tied to what you pay in rent.
How Can I ensure I am hiring the Best Office Tenant Representative?
Now that you know why you need a tenant representative and how important he is for leasing commercial property, make sure you’ve hired the right person.
As it’s a cut-throat market, finding the right talent is quite challenging. But, here we’ve outline core key points to ask when hiring an office tenant rep:
- Work experience – How long have they been active in the market? What similar transactions have they recently been involved in that can provide comparable data to add value to your negotiating leverage?
- Specialized property niche – do they focus on the office, or are they a general practitioner. It’s best to hire a tenant rep that is focused on office for an office negotiation and use another specialist for other areas of specialization.
- Additional services, such as recommendation for architects, project managers, infrastructure managers – do they have in-house resources that can assist you, or do they seek the best outside resources to help their clients achieve their goals. Sometimes the in-house resource people are not as strong as the independent architects, planners, and construction managers that are available in the market to help tenants and buyers.
Steven Goldstein and ChicagoBroker.com have been active in Chicago as an office tenant representative since 1991. Please let us know if we can be of service with any of your commercial real estate needs. We are available 24/7 to answer any questions or assist with any real estate needs.
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