Friday, April 19, 2019

What is a Tenant Rep Broker?

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A commercial real estate professional’s work is generally divided between agency assignments - listings - wherein an owner is represented or tenant or buyer representations. In the former - an agency - needed is a buyer or tenant for a vacant building. So, we are hired to locate an occupant. The latter? Yep. We are engaged to source a spot for a buyer to by or a tenant to lease.

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.

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