Tenant representation in the commercial R.E. industry

Selecting space for your organization and successfully negotiating an acceptable lease are complex, time-consuming tasks that are full of potential pitfalls. The pitfalls only multiply if you undertake the process on your own, without the benefit of an experienced commercial real estate professional serving as your tenant representative. Hiring a tenant representative who acts on your behalf can eliminate many of the hassles in site selection and negotiation. It can prevent potentially disastrous missteps. And it can cut much of your real estate expense. More importantly, aligning yourself with an experienced tenant rep can turn up real economic opportunities and help turn your space into a strategic asset. Working on Behalf of Tenants, Not Landlords Many commercial real estate professionals exclusively represent tenants. Such exclusive tenant reps never work on behalf of owners and developers. Other real estate professionals divide their practice between both tenant and landlord representation. The Society of Industrial and Office Realtors reports that more than half of those who have earned SIOR's coveted professional designation - "Specialist, Industrial and Office Real Estate" - have practices that include tenant representation. Tenant reps have made a name for themselves during the past 10 to 15 years, since real estate agency laws required real estate brokers to disclose that they are working on behalf of the landlord, not the tenant. Your goal in working with a tenant rep is to obtain true economic savings and secure space on terms that best serve your needs over the life of your lease. While working on your behalf, a good tenant representative should generate savings and benefits that far exceed the cost of his or her professional compensation. From Needs Analysis to Exit Strategy You can expect a proactive tenant representative to: * Analyze your space needs. * Investigate all available properties and determine which are the most appropriate for your needs. * Create a bidding war among several landlords for your business. * Protect you during lease negotiations so that you come away with terms that meet your present and potential future needs. * Serve as a buffer between you and the landlord. * Identify lease provisions that could cost or save you money during the lease term. * Handle the paperwork and other details of the lease negotiation. * Settle disputes that arise even after the lease is signed. Spotlight the Savings When you see rental rates quoted for space, those rates include the marketing costs for any leasing representative or for the developer's in-house marketing. Compensation for the tenant representative is also part of the stated price. A good tenant representative should be able to save you that amount and more. Here are a few examples of the savings a tenant representative can win for you: * Ensure you get the most value in any improvement allowances. * Safeguard you against signing onto any provisions that run against your economic interest. For example, many leases tie rents or expenses owed to the landlord to the Consumer Price Index (CPI) or some other index. Landlords will likely ask that these rents or expenses float with an index. The tenant representative can ferret out such a provision and negotiate a CPI cap for the lease. * Define lease terms to benefit you. * Win concessions that anticipate your actual needs. For example, a tenant representative can negotiate to receive a rent concession for "moving and set-up time for racking." This means your lease begins, but you won't pay rent during the time it takes to become operational—move in, set up racks, etc. Because you will still operate out of your old space during moving and set-up time, this concession prevents you from paying double rent during the overlap period. The tenant rep is a specialist in selecting space and negotiating leases. Making effective use of a real estate professional will generate cost savings and give you space and terms you can live with during your entire lease.