Landlord Representation vs. Tenant Representation: Everything You Need to Know Before You Lease Space
Looking for suitable commercial office space for many businesses can be a daunting task. If you're a new business owner in need of commercial property, negotiating the best deal for your budget is a must. It will be especially crucial for you to find the ideal office space at the best possible price. It isn't as simple as reviewing listings and choosing a space that looks nice.
If you’re serious about finding a space that meets the needs of your financial team AND the needs of your operations, then you’re going to want to hire representation. It’s a common mistake to think you can go in without one and “do it yourself”. You CAN do it yourself, but statistically you will end up paying more, not negotiating the right details and bound to a contract you can’t get out of.
What is Landlord Representation?
A landlord representative is a leasing agent that represents the best interests of the owner or landlord and is responsible for obtaining the highest amount of rent with the least amount of expense and risk possible. A landlord representative will negotiate with a prospective tenant on behalf of the landlord, to secure a rental agreement, security deposits, tenant improvement allowances, and other concessions. Landlord representatives have a lot of experience and will negotiate the best possible deal for the owner or landlord.
Landlord representatives serve a crucial role in commercial real estate by locating tenants for their clients' buildings far beyond simply reviewing the MLS listings. Looking for commercial real estate property is a long process that includes positioning real estate in the marketplace, identifying suitable businesses to occupy that space, creating and executing plans, negotiating the transaction, and managing all of the steps required with the leasing process. Landlord representatives must have a thorough knowledge of tenant demographics, occupancy rates, leasing rates, and industry trends. They are adept at relationship building and must know how to incorporate the needs of tenants, landlords, and leasing brokers into agreed-upon deals.
When a landlord representative works for a landlord, they are tasked with showing you the properties they are representing. It is their job to sell you on their properties.
Working with a landlord representative puts you in a weaker position (if you are the tenant) when it comes to negotiation. While they owe you a basic standard of professionalism, at the end of the day, the landlord is signing their checks, which means their loyalty is not to you. The landlord representative has fiduciary responsibility to represent the landlord's best interest.
A landlord representative is responsible for the following when it comes to leasing commercial real estate:
- Strategic asset analysis, including business demand, financial position, market, and competition
- Comprehensive property positioning, including developing effective marketing plans, collateral development, and budget preparation and management
- Broker relationship campaigns
- Prospective tenant analysis and canvassing programs
- Letters of intent and lease negotiation including drafting proposals for the owner or lessor as well as counteroffers
- Client reporting on activity, market intelligence and trends
- Project management, property management, sustainability consulting, investment sales, financing, and analysis, and appraisal
- Properly value and price the landlord's property for lease
- Suggest improvements or repairs
- Show space to prospective businesses
- Receive, present, and negotiate offers on the landlord's behalf
- Help the landlord get the best terms and highest rents as possible
A building landlord seeking to lease commercial space will find the most help from a landlord representative who will be their most prominent advocate.
What is Tenant Representation?
A tenant representative is a commercial real estate realtor that represents the tenant instead of the landlord. They help identify office space needs and will negotiate with the landlord or landlord representative in the best interest of the tenant. Tenant representatives earn their money by splitting the commission with the landlord's agent. They also can resolve tenant-landlord disputes and can serve as an intermediary for tenants. A tenant representative will work exclusively with a tenant to locate the best commercial property for your business.
A tenant representative is a type of commercial real estate agent who focuses solely on the needs of the tenant, rather than being tied to specific commercial real estate property or landlord. Tenant reps are the leasing industry's equivalent to a buyer's broker on the sale side of the industry.
The central part of a tenant representative's job is to find multiple sites and help you compare them. Due to this, you will get the truth about the market so you will not only get to choose the best location for your business, you also select the best one related to the others.
Since the tenant representative is looking out for your best interests, they will work aggressively during the negotiating process, keep your confidence and push for terms that meet your needs, not the landlords. Between the market knowledge, negotiating, and benefits, tenant representation can save you thousands or millions of dollars in creating a competitive environment.. It is their fiduciary duty to help prospective tenants avoid mistakes and much more.
When you begin your search for a tenant representative, look for a firm that represents tenants only, and for someone who has in-depth knowledge of the industry. Finding someone you are comfortable with, and someone you can trust is essential.
The Benefits of Hiring A Tenant Representative
- A tenant rep has the reputation of the company they work for, which gives them more authority when they begin contacting landlords on your behalf.
- The leasing representative may have a relationship with the tenant representative before. Due to that familiarity, there's a higher chance they will get a return phone call.
- Tenant representatives have access to the most comprehensive listing databases.
- Tenant representatives come with the benefit of quality relationships with landlords and leasing agents, which allow them to get updated information when commercial real estate property becomes available.
- Using their industry connections, tenant representatives can get access to information on spaces that may not be on the market yet.
- A tenant representative will make inquiries and run preliminary analysis to help you determine if your new space is within your budget and many other factors that go into finding the right space for you.
- A tenant representative knows the location of your new office space is of prime importance, so while you may have a specific place in mind, a tenant representative will know if the area is an ideal fit for your needs.
Searching for commercial property is a time-consuming task.. Completing this task without knowledge and experience could be troublesome and cost you money. It is in your best interest to give utilize the experience and expertise of a tenant representative to help you make the process as seamless as possible.
If you want your company to have the best chance of finding the perfect space with the best leasing terms for your needs, it is essential to have a tenant representative to help you in your search. By doing so, all the headaches and trouble you may incur will not exist. When you hire a commercial real estate professional to assist you with navigating the process, it provides leverage from the start of the process to the signing of the lease agreement.
If you are a new or experienced business owner, and need assistance with the commercial real estate market, find someone who will be on your side. You must find an advocate who will protect your financial and business interests and steer you towards the right retail office space.