When buying and selling your home, you will have heard real estate professionals being described as a “seller’s agent” or a “buyer’s agent.” Similarly, some commercial real estate agents choose to specialize their representation. Since Chicotsky Real Estate Group is more diverse, the field has specialist representatives for buyers, sellers, landlords, and tenants.
A tenant representative is a class of real estate agents with a long-term interest in helping your business succeed by maximizing your location. At Chicotsky Real Estate Group, we know from our business background that a tenant representative’s relationship is deeper and more personal than a residential buyer’s agent.
What is a tenant representative?
A commercial real estate tenant representative is a real estate professional whose focus is helping businesses, i.e., the tenants, secure commercial property to run their business. They are not tied to a landlord or particular property. Some brokerages choose to operate only as tenant representative agencies; others will have a mix under one roof.
Tenant representatives may specialize in a particular submarket of commercial real estate: industrial, office, medical, multifamily, etc. They work for professionals purchasing property or negotiating leases. The tenant rep wears many hats to accomplish their role, as you’ll see below. Their market knowledge, tenacity, and skill are crucial for finding you right location with the right terms.
Why use a tenant representative?
Small or mid-sized businesses may be tempted to handle real estate transactions by themselves. This a mistake for two primary reasons.
- A tenant representative will actually save you money in the long run while costing your bottom line nothing. The landlord or seller pays the commission fees, not the client. Their point is to make sure the commercial lease terms are favorable to the tenant, not the landlord. A representative’s savvy in negotiating the right contract will lead to long-term operational savings.
- Securing the right site is a time-consuming process. A typical search process involves:
- Finding the right geographical location based on numerous parameters relevant to your submarket (ex: foot traffic for a retail center, transportation corridors for office or industrial, proximity to a hospital for medical)
- Estimating the amount of square footage you need (now and for future growth)
- Determining the number of people occupying the commercial space (now and for future growth)
- Budgeting for rent
- Researching available properties
- Taking property tours of potential locations
- Submitting a request for proposal (RFP)
- Comparing all terms from the RFP
- Negotiating with landlord representatives
- Reviewing the lease with a real estate attorney
- Signing the lease, preparing to occupy the space
As you can see, this process easily could take months, especially if you’re willing to wait for the perfect location with the right deal terms. Does your small or mid-sized business have the time and manpower to dedicate months to a property search and negotiation?
What if you have commercial space, but need to renew, expand, or change terms mid-lease? A tenant representative is still there to assist you. They will cover all your expansion or relocation options and use market knowledge to negotiate favorable lease terms. If your best option is to move, the site selection process begins again.
A tenant representative's knowledge is especially important if you opt to try subleasing the space. They can confirm if you are allowed to sublease, help market the location, and find a tenant.
Benefits of a Tenant Representative
Working with a tenant representative is almost always free for the tenant or business. Don’t worry about the tenant representative being in the landlord’s pocket simply because he pays the fee. The tenant representative always works for you and has a responsibility to meet your needs. Landlords work with tenant representatives and pay their fees because it helps protect the relationship they foster with their tenants.
A landlord representative has one priority: to make their client happy by filling the available space with terms favorable to them. They have no obligation to show you or educate you about any other properties available in the market.
What a tenant rep does for you
A tenant representative’s objective is to find multiple sites and help you compare them to others. The tenant representative is on a mission to help their clients:
- Minimize their risk by finding the ideal location under the right terms
- Reduce their operating costs with an affordable lease and allowances
- Expedite the transaction using their market knowledge
- Analyze all available options, including properties the client may not have considered
Be taken seriously
Landlords take businesses using a tenant representative more seriously. This is especially true if your lease is soon expiring and you are entering re-negotiations. You can threaten to move, but without the backing of a real estate professional, it’s often taken as an empty threat. Hiring a tenant representative signals you are serious about researching and finding the best commercial space in the marketplace.
Not hiring a tenant representative means the landlord is always in control of the negotiation, even if you think you are getting more favorable terms.
No change in commission fees
Landlords typically budget for landlord and tenant representative real estate commission fees when operating the property. You won’t reduce costs from not having a tenant representative commission fee. The landlord’s broker ends up with more of the commission.
A partner in real estate for the long haul
It’s not uncommon for tenant representatives to work with you after the sale closes or lease is signed. When you need to expand, downsize, or explore relocation, a tenant representative assists with understanding options. Need to renegotiate a lease? A tenant representative makes magic happen. Have a challenging landlord and need an outside party to salvage the relationship? Ask the tenant representative to help hammer a solution between you.
Purchasing a commercial property
While much of this content is geared toward leasing commercial real estate, tenant representatives are just as helpful with purchasing a property. A successful site selection is crucial, and tenant representatives help with the research, provide comparable sales data, and assist with the process.
What to look for in a tenant representative
To represent your business interests, you’ll definitely want the best tenant representative you can find. This is not someone who will vanish after the transaction finishes. This is a person you want to rely upon when needs arise concerning your lease terms and property needs, especially if you anticipate growth over the next 3-7 years.
How do you find the right tenant representative? Look for characteristics such as:
Experience in negotiating leases
This is definitely one area you want to leverage all your tenant representative’s experience. The longer they have been in the business, the more curveballs they have seen thrown into contracts.
Consider looking for a tenant rep with a background in your submarket. This way, they’ll be more familiar with the specific terms for your particular needs. There could be costs and fees your business hasn’t considered that the tenant rep will educate you about and leverage in your contract.
A good tenant rep is an expert negotiator. The landlord isn’t likely to deliver their best terms in their first response to your RFP. An experienced tenant rep will comb through all the fine print and even make suggestions for the tenant to consider, like termination rights or tenant improvement allowances. They prioritize your interests and push for the terms suited to your needs. Some tenant reps like to orchestrate bidding wars between landlords so that their clients receive the most favorable terms possible in their lease.
Once you have a letter of intent (LOI) and drafted lease satisfactory to both parties, the tenant representative will make sure you understand all the terms and jargon within the contract. A broker is unable to give legal advice but they can work with your lawyer to negotiate the legal terms favorable for you.
Understanding of repairs
Few commercial spaces are perfectly built-out for new tenants to move right in. You’re likely planning on some form of renovation or construction after signing the lease. You’ll need architects, contractors, designers, and other professionals.
A good tenant rep keeps these repairs in mind when negotiating a tenant improvement (TI) allowance. Again, experience as a tenant rep plays a role here. The better their understanding of what work the location requires, the better they can leverage the TI. Your tenant rep should discuss with you the budget for build-outs, including the cost of infrastructure like Internet, or in-town moving costs from the old to the new location.
The renovation phase is another area your tenant rep can offer help, and not just in recommending a general contractor. Some tenant reps will assist you by working with the project manager to keep the renovations on-time and under budget.
Ensuring compliance
Tenant representatives should be detailed-oriented. One crucial responsibility is conducting due diligence on the property such as, but not limited to: building inspections, title searches and survey review, zoning reviews. They should have a full understanding of a property’s strengths and weakness. A client should be aware of any potential issues or concerns about the location. The tenant rep contracts should have relevant contingency provisions to cover concerns.
Market knowledge
Anyone can do a search on the internet to learn something about an area. But are you getting a good deal? Access to data on the commercial real estate market and transactions is much harder to find in a Google search. Plus there’s much to consider when purchasing or leasing commercial properties: market comparables, zoning changes, new tax structures, new developments in the pipeline–all these factors impact a business’ bottom line.
Trends change. Tenant representatives and brokers know when an offering is overpriced or a great deal. They keep their thumb on the current rate structures, lease allowances, and market drivers. They know the area’s landlords, what terms you might expect, and how to negotiate properly with them.
They nurture a network of contacts unseen by search engines. They know months before a property is listed if and when a location will be vacant. Through this network, they may have insights into a property you otherwise wouldn’t know is a potential option.
Access to data and technology
Speaking of market knowledge, the best tenant representatives make use of the latest in commercial real estate technology to evaluate properties. Their analytical tools and research resources are more powerful than the typical public person has access to. These tools aggregate and clean data to create richly detailed reports about properties. They can tell you and show you real-time information about an area’s demographics, drive times, zoning, predictive growth, and infrastructure.
The search and listing platforms available through a tenant representative make it easy to compare potential properties and their terms. These technology solutions provide all the information in one place. Some solutions even make it simple for the tenant rep to make the process even more transparent using client portals. These allow the tenant rep to share relevant information with you for access anywhere, at any time.
Modern technology means you can work with a tenant rep 24/7 and still manage your business.
Strategic mind
Up until this point, we’ve covered skills that any real estate professional can learn through time: contract provisions, researching properties, negotiating skills, and technology. Strategy is harder to teach. Commercial real estate is a wonderfully complex field. The right tenant rep needs to match the client’s needs, contribute to their bottom line, in evaluating properties. They need to weigh factors like:
- Spatial needs
- Geography
- Finances
- Brand image
- Market competition
These factors come together to present the best possible options for your next location. A tenant representative isn’t just thinking about how a commercial space will perform for you today. Their mind is on one, three, five, seven or more years down the road. Has your tenant rep asked about your business plan, company vision, or opportunities for growth?
Patience
Making a deal happen isn’t as simple as a click of a button. Tenant representatives know the site selection and lease process is a long road. They have the patience and endurance to make deals happen. They’ll explain to you every deal term five times over in ways that you can understand. They will do whatever it takes to find the right space under the right terms for their client, even if it takes over a year.
When it seems there no suitable properties available on the market, be patient. The tenant representative is focused on meeting your needs. They should never urge you to “settle” for a location that isn’t right.
Eye for detail
Tenant representatives worry about the small things so their clients don’t need to. They consider many factors that businesses may not consider in their negotiations like space planning, engineering, IT infrastructure, and demographic shifts.
A good tenant representative reads the entire RFP, LOI, and drafted lease from every landlord, earmarking what to consider and where to negotiate. They’ll walk you through every step of the process. As they say, no stone will be left unturned. Their questions and explanations should be thorough when communicating with you and the landlord’s rep.
A solid network
The best tenant representatives are not just concerned with securing the best space between four walls. They know your success relies on a fast build-out and the right infrastructure.
Your tenant rep must be a respected member of their community with an extensive network of qualified professionals. They can put you in touch with professionals who can maximize your leased space. Over time, good tenant reps develop relationships with architects, general contractors, real estate lawyers, CPAs, space planners, and IT professionals, for starters.
Since a tenant rep wants your business over the long-term, a good professional will foster relationships with you and your contacts. They want to build positive experiences with all parties involved in your site selection and location operations.
An excellent listener
A tenant representative is there to work for you. In your first meeting, they should be asking lots of questions about your brand. Your company. Your vision. Your future plans. No talking at you. They must apply what you want in their hunt for commercial spaces. You need to feel reassured from day one that this person or team will deliver on your space needs.
The best tenant reps cut to the core of your needs. The right commercial space may not hit all 12 items on your checklist, but maybe it hits the eight most crucial ones. The tenant rep who listens will realize what was most important to your needs and which terms have some wiggle room. They communicate these important issues to you and in the lease negotiation.
And, if you’re not happy with how the process is going, they should be available to address your concerns. A great tenant rep doesn’t shy away from challenges or confrontation.
Creativity in problem-solving
TI allowances, termination expiration, free rent, reduced rent, changing market dynamics, new taxes...complex commercial real estate requires out-of-the-box thinking. No two deals are exactly alike. A tenant rep must think creatively to get deals done.
How to find the right tenant representative
There’s plenty to consider when picking a tenant representative. Experience, patience, and skill come to the forefront to find the right person. If nothing else, the right tenant representative:
- Saves you time and money not just in the initial property search, but over the long-term in lease re-negotiations
- Validates you are getting the best terms from landlords
- Helps examine your space needs
- Protects your landlord-tenant relationship
At Chicotsky Real Estate Group, we have personal experience with commercial real estate contracts with a family background in business and development. Our extensive professional network and economics background empower our role as tenant representatives in the Dallas-Fort Worth metroplex.
