DIY…. when Leasing Office Space is a Risky Approach
The process of securing office space for your organization, whether it is a new location or extending a lease in your current building is a complex and time consuming process. This endeavor is filled with numerous opportunities to make a decision that doesn’t best compliment your business objectives.
Tackling this process without the benefit of an experienced tenant representative to guide you the process and structure a transaction that best serves your operational needs and financial objectives only increases the chances of making the wrong move.
In my twenty plus years of experience it is typically the smaller organizations who tend to take the do-it-yourself approach, probably because they either (1) don’t understand the value of the service; or (2) have a misconception that by eliminating the tenant representative’s fee, they will get a better deal.
What Benefit does the Tenant Representative Provide?
The logic behind tenant representation is that in order to reach an equitable solution to a particular need (leasing office space), the corporate tenant needs access to market information, transaction expertise and negotiation skills equal to that of the landlord who utilizes professional representation.
A Tenant Representative will:
Analyze your space needs: The tenant rep can assist you in determining your space needs ranging from the optimal amount of space required as well as evaluating various layout options. This will prevent you from spending time evaluating buildings or negotiating for space that doesn’t best serve your needs, as well as prevent you from leasing too much space. The building owner or his agent is not in the business of economizing your office space.
Identify and investigate all property options: This involves more than getting on-line and scanning listing services for availabilities. A tenant rep can identify a property that is not an obvious choice to meet your needs resulting in lower costs. A tenant rep will know the market inventory, where deals are being signed and under what leasing terms. They can also provide insight as to how various building owners operate their properties and the various features of a particular property.
Create leverage in the negotiation process: Even in a tight market, competition for your tenancy is the great equalizer in negotiations. A tenant rep will implement an effective negotiation strategy designed to win the concessions that meet your actual needs and structure the best leasing terms attainable in the marketplace. The mere presence of a respected tenant rep sends a message to Landlords that you will see all opportunities in the marketplace and you have someone in charge that understands all the nuances of the process.
Protect your interest in lease negotiations:The tenant rep knows ins and outs of the real estate transaction including all the provisions contained in a lease agreement. A real estate lease is complex legal document with provisions that contain significant financial implications beyond the rental terms. How operating expenses are handled, interruption of basic services, sublease provisions, the list goes on and on.
Provide a buffer between you and the Landlord: Lease negotiations can be difficult as each party is attempting to extract concessions (dollars) from each other. The tenant rep can handle the difficult and sometimes tough conversations that arise in the negotiation process and keep emotions out of the dynamic. After all, you have to live with the Landlord for years to come after the deal is done.
Manage and coordinate all the participants in the process:The leasing process involves many participants beyond the Landlord and Tenant to include the building owner’s agent, architect / space planners, interior designers, engineers, contractors, construction managers, property managers, office furniture vendors and lawyers. A single point of contact who understands the process and the role of the various participants in the process best serve the tenant.
These are just a few benefits the tenant representative provides to the corporate office space user and if I were to note them all, this would be a book and not a blog post. The tenant rep is an expert in evaluating, selecting and negotiating for office space. Even the very largest corporations with full fledged real estate departments and experienced real estate professionals on staff utilize tenant representatives and understand the costs savings achieved by utilizing a tenant rep far exceed their fee that is almost always already budgeted into the rental rate by the building owner.
It is hard to argue to the point that a professional tenant rep will help you achieve better results in a process the business owner or executive only does every 3 to 10 years.
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