Tenant Representatives Serve Our Best Interests.
“Tenant Representatives Serve Our Best Interests. They're not just trying to make a deal and call it a day," says Baruch Fogel, M.D., President and CEO of Western Medical Management.”
Dr. Fogel, who has worked with other tenant representatives from the area, adds, "We know that no one can effectively represent both parties in a negotiation, and both sides deserve their own strong advocates.”
John Goesling, treasurer and former CFO of Nordstrom, reports that working with a firm that is "free of any relationships with developers with whom we might be negotiating” offers tremendous value. The trend is clear: there are now hundreds of real estate brokers in the United Stales who specialize in tenant representation.
The Risks of Using Full-Service Brokers
Recognizing the single-agency trend, some full-service brokers have established tenant representation divisions, separated from conflicting activities by the proverbial Chinese wall. But in spite of the barrier and the verbal assurances, the perception of conflict of interest remains, as does the very real temptation to promote deals that will enhance the firm's bottom line. There is also the possibility — in fact, the likelihood — of information passing unwittingly between owners' and buyers' representatives. Negotiations can clearly be skewed if one party learns of the other's vulnerabilities.
“Anyone who understands the value of an independent tenant representative would never use anyone else," says Michael Gibbons, a partner in Brown, Gibbons, Lang and Company, a Cleveland-based investment banking firm. "We have considerable expertise in real estate," he continued, "and we know that when we lease office space, we want to be represented by people concerned with our needs exclusively. In our last experience, our tenant representatives saved us 25% - 30%."
An Increasing Range of Services
Having established the standards for objectivity and allegiance to clients, tenant representatives have taken on responsibilities that go far beyond finding space and negotiating leases. As corporations have downsized, managers have turned to tenant representatives to supplement or replace their real estate departments. For one telecommunications giant, the representatives complete internal approval documents, run financial evaluations, meet with internal customers, and act as project managers.
For others, they are the liaison between their client and the client’s architects, space planners, engineers, construction managers, contractors, attorneys and accountants. Their role also includes tying real estate decisions to overall corporate strategies, which may involve working with insurance and environmental concerns and dealing with parking, signage and competitive restrictions.
Fees vs. Commissions
Although most tenant representatives are still compensated by landlord-paid commissions, hourly fees and annual retainers are also part of the picture. As tenant representatives become ongoing consultants rather than simply dealmakers, many parties will conclude that tying compensation solely to square feet is, like dual agency, a practice whose time has passed.
Parts of this article are based on "From Gunslinger to Team PIayer: The Transformation of the Tenant Rep." by Maria Woo, and on "Staying on Top of the Tenant Rep Game, "by Ruth Prins, both of which were published in Real Estate Forum.
Representation Saves Time and Money in Renewals
Although you might think that negotiating a renewal without a tenant representative will reduce your costs, in fact, the opposite is true. At Zeve Associates, our experience and knowledge of the marketplace can reduce your occupancy costs — including all fees for our services — below what you can achieve on your own. We have one goal: to save your time and money. With all the opportunities available in today’s market, the best terms made yesterday are higher than what they will be tomorrow! For a no-obligation evaluation of your current occupancy portfolio, please call us at 949-759-6661.