Why Tenants Need Reps
This article was originally published on Jane Roundell's LinkedIn.
When we meet with prospective clients, we often hear questions like “why do I need a broker?”
As tenant representatives at Cresa, the world’s largest office “occupier-only” brokerage firm, we are neither conflicted by nor encumbered with divided allegiances. Rather, we act wholly on the tenant side, both large and small, with the sole mission to achieve the best possible results, not only financially, but holistically, for our clients.
What does that mean for you, the occupier? We have your back – your decision makers will be confident they are making the right decision. You get to sleep at night knowing that you have the professional and knowledgeable support you need. You can pay attention to your core business while someone else does the heavy lifting.
We also hear questions, such as:
- Why do I need a tenant rep’s advice when I’ve been in my building for 15 years and have a good relationship with the landlord?
- Wouldn’t I get a better deal if I negotiated directly with the landlord and eliminated the cost of a commission?
- I didn’t need a rep with my apartment lease and aren’t all leases really the same?
Many of those questioning us are successful business people who run their companies. Our replies address issues exclusive to office leases, such as:
- The difference between rentable versus usable square footage when calculating rents.
- Free rent: How much did the landlord offer a new, outside tenant versus a renewal?
- TI: The allowance a landlord is willing to spend on a build-out is totally negotiable. Understanding and valuing what improvements you need up front makes a big difference.
- Other, more obscure escalations and cost structures, all of which add up.
- Fixed percentage escalations versus direct operating escalations.
- Other negotiable items can include utility issues, e.g., submeter versus direct meter, versus inclusion, capacity and electrical capacity recapture rights.
The bottom line is there is always money left on the table when a tenant does not have proper representation.
A fairly recent factor adding to the complexities of commercial tenancy has been the advent of co-working space. It may sound surprising, but tenant representatives are able to secure the best deals at the WeWorks, Reguses and Knotels of the world. Determining whether a direct lease is more beneficial than a co-work lease isn’t necessarily straightforward based on ancillary charges.
Incentives, which we see in the Financial District, above 96th Street and in Long Island City, to name a few, are great boons to newer and growing businesses. They can include cash incentives for new hires, reduced tax payments and utility costs, and abatements of sales tax. In these cases, “the more the merrier” is literally true, helping small businesses expand even faster.
Perhaps the most striking aspect of working with experienced tenant representatives is that they understand occupancy and are able to help you utilize space in the most efficient ways possible. In our case, we have helped several clients reduce their footprints in recent years because it made sense - in dollars and cents!
Just as it has been said that a lawyer who represents him- or herself has a fool for a client, we know that tenants – no matter how successful their businesses – lose significant advantages when negotiating directly with landlords and leasing agents. In fact, these negotiations more often result in unforeseen expenses that could have been avoided. We don’t believe in nasty surprises!