Today,
I delve into the world of buyer and tenant representation also know as Tenant
Rep. By the way - this genre of commercial real estate practice evolved in the
mid eighties. Largely responsible was the legendary Dallas Cowboy quarterback
Roger Staubach. Prior to that time most of us were generalists and even today
most of us work both sides of the fence - owners and occupants.
When
do you require a Tenant Rep Broker? Most typically a need arises. Such as - the current physical
plant can no longer house the operation or the opposite - swimming in excess
square footage is the company. A lease expiration portends a requirement as one
of three decisions must be made - stay and extend the term, move, or stay
month-to-month. Mergers and acquisitions can create a Brady Bunch of facilities
with a consolidation warranted. Opening a location in a new market creates a
search criteria. Sure. You could attempt to navigate the waters without help -
but you recall what someone once said about the person who represents himself.
What
is typical? Standard
among most practitioners in this space is an engagement agreement whereby you -
the occupant - “hire” the broker to conduct a search and market your
requirement. Included in this marketing is a notification sent to cooperating
professionals, solicitation of owners with buildings meeting the criteria, and
a vetting of potential buildings submitted for consideration.
Who
pays? The
cool thing about engaging a Tenant Rep is the owner of the building pays him.
You may be thinking - I know I must somehow pay more. In actuality, you don’t.
Most market lease rates and sales prices contemplate a broker fee. If
you forego representation - you pay more because you lose the benefit of her
market knowledge - which leads to more favorable rates and terms.
Are
other services included? In
some instances - yes! Many Tenant Rep outfits employ project managers, space
planners, architects, and move advisors. All are included with no cost to you.
How
does the process work? Steps
may vary. But generally - you engage the professional, your requirement is
clearly defined, marketing collateral is created, your requirement is published
to the brokerage community, submittals are received and vetted, buildings are
previewed, alternatives are toured, requests for proposals are submitted,
proposals are received and compared, negotiations commence, negotiations are
finalized, a lease or purchase agreement is signed, the deal is closed,
improvements to the space - if any - are completed, you move in. Whew! Now you
understand why you shouldn’t try this untethered. It’s a complicated process
with many steps.
