Welcome to the topic “What To Expect During The Tenant Representation Process“
Many people can be skeptical of using tenant representation in their lease transaction, mainly because they don’t know the benefits. It’s surprising how so many are still unaware of how a tenant representative broker can assist in making their leasing transaction easier, smoother, and accomplished in a way that lowers their bottom line.
If you want to get a better idea of how tenant representation works in 2023, you must first understand what exactly it is that tenant representatives do.
A tenant representative broker is one who represents only the tenant’s interests in a commercial real estate transaction. His or her job is to help businesses find their desired commercial space, and negotiate the best lease terms.
Since a tenant broker is working only for the tenants, there is no conflict of interest, like there is when a business owner works with the landlord’s agent, who is actually working in the landlord’s best interests.
Unlike a landlord’s agent, who may tell you the landlord “likes you and is giving you a great deal”, a tenant representative is a commercial real estate expert who works exclusively for you and actually puts your best interests first.
Keep in mind that tenant representatives take care of a lot, from researching properties, assessing your size, location and amenity requirements, communicating with properties to set up tours, analyzing and explaining the financial representations of each offer presented, pushing to get the best deal on each lease term, and often even quarterbacking the tenant improvement and move-in process once a lease is signed. Thus, it’s vital that you consider all the relevant factors before hiring a tenant broker.
What To Expect From The Tenant Representatives During The Dealing
So you have hired a tenant broker. The question now arises what benefits can you hope to get from this? How will getting a tenant broker on board make a difference to your business as you consider an office relocation, expansion, restructure or lease renewal?
When you work with a tenant representative broker, you have an expert on your side for the entire leasing process. He or she will be prioritizing your unique business needs and ensuring that you end up with a space and a lease that suits your company’s requirements and goals.
Not only that, but the tenant representative will also ensure that you have all the relevant information to make the right choice. He or she will help you see any hidden costs, potential pitfalls, distinctive benefits, and everything related to a particular commercial space. It’s the job of the tenant broker to see things that might sometimes be overlooked by others.
With a tenant representative on your side, you have a better chance of fully understanding the various leasing options you have. This includes being told about spaces and off-market opportunities you may not have known existed, learning the reputations of various landlords and property management companies, and also being informed on how to compare and contrast the financial implications of each property proposal, especially when rates and terms are not always presented in the same way.
When you hire a tenant broker for a new location or relocation, you are much more likely to learn about a wider variety of property options than you could find on your own. Not only do brokers have software tools at their disposal that are not available simply through an internet search, but they often have resources and broker networks that will make them aware of spaces that might not even be listed, or who’s listing wouldn’t necessarily show up in a typical search of your parameters.
No one can know about the challenges of a leasing process better than tenant representatives. So working with one will ensure that you are never overwhelmed. Your tenant broker will be there to guide you through the entire transaction, representing you during the negotiations and helping you finalize all the details, even after lease signing.
What Happens During The Tenant Representation Process?
You are beginning to understand how beneficial tenant representatives can be for your property dealings. It’s time to learn about what exactly goes on during the leasing transaction. How does the whole thing proceed? This information will help you be prepared for what comes next.
Discussion To Decide The Strategy
When you first hire a tenant broker, they will ask you a whole host of questions in order to understand exactly what you are looking for. Only then can he or she prioritize your interest. So the tenant representation process begins with a detailed discussion wherein the business owner identifies their goals, be it searching for new space, or expanding, renewing or restructuring their current one.
The goals of the tenant representative will also include understanding each business’s needs regarding why they might be making this change, and what key factors they will want to prioritize in the process. Estimated amount of space and use of the space will of course be discussed, as well as things like building class, must-have amenities, or proximity to public transport.
Oftentimes businesses have specific requirements that are must-haves for their employees or particular situation. During this initial meeting, the budget will of course be discussed as well. It’s important that the tenant representative understands the business owner’s budget, and that they set proper expectations regarding what might be achievable once they understand the business’s goals.
Time For Market Research
Once your tenant representative broker understands exactly what you are looking for, they will begin the search. Depending on the base requirements of location and size, this initial search can provide any number of options, which must then be scrutinized and narrowed down further depending on more specific details.
Often this will include contacting the agents of each property and asking them more probing questions about the space. Your broker will also use his resources to find off-market properties that might be worthy of your consideration.
If your requirements are extra stringent, dependent on the nature of your business or other such factors, then the broker will instead simply begin with distributing a marketing flyer through the broker community advertising the bullet point requirements of the type of space needed.
For example, we’ve had clients needing sound-proof space, space that allows animals, space with a certain percentage of natural light, space with very specific dimensions, or other such punch-list items that can be trickier to find. Naturally, you cannot visit all the sites or talk to all the property owners out there. So your tenant broker will ensure that the list is narrowed down to meet the criteria you had discussed during your initial meetings.
Working with you, he will come up with a handful of properties that might work based on your requirements, and then coordinate with the landlord’s agents to arrange for property tours.
Help You Make An Informed Decision
Once you’ve found a few spaces that might work, your tenant representative broker will draft Request for Proposals (RFPs) for your review, and submit them to the property on your behalf. You can leave it to him or her to manage the proposals received and evaluate the financial implications of the proposed terms.
This is especially important when Landlords list rental rates and tax and operating expenses differently, as well as offer more or less abatement or tenant improvement dollars. The tenant representative will assemble all of the pertinent information in a cohesive way that spells out all the costs each year of the lease term, taking into account the escalations, and will present it in a way that allows you to compare apples to apples.
There are also a lot of other factors you might overlook when you don’t have an expert on your side. What are the renewal options? What about early termination rights? What is normal as far as a tenant’s rights to sublease, a holdover clause, or who pays for the HVAC if it breaks? All these things matter for commercial space and if you don’t know what is standard in the market you might end up very frustrated down the road.
Get Down To Negotiations
This is perhaps the most crucial phase of the tenant representation process. This is the time when your tenant broker will ensure that you don’t end up with a shorter end of the stick.
Remember, you have to secure the legal terms and also do what’s best for your business. The landlord will try to come up with lease terms that suit his interests.
It’s the tenant broker who will make sure that you don’t agree on anything that can be harmful to you in the future.
The legal team is involved during this phase, too, as all the legal terms and conditions have to be finalized now. A good tenant representative should also have a good team behind him, and will refer you to a responsive and affordable attorney who can make sure the lease is written in a way that minimizes your risks.
Remember, some of these legal terms and clauses can be quite tricky. You wouldn’t want to agree to something that harms your interest in the long run. A tenant representative broker will ensure that there are no hidden terms and you know exactly what you are signing up for.
Get Done With Closing
This is the final stage. Everything’s decided, and it’s time to sign on the dotted lines. But before that, it has to be ensured that the lease terms are indeed in line with what was agreed upon during the negotiations. If everything goes well, contracts are exchanged, and the transaction is complete!
Ensure A Smooth Transaction With A Tenant Broker
Commercial real estate can be tricky, and sometimes landlords will try to get the better of you. Having an experienced tenant broker can save you from a lot of hassles and also give you peace of mind. You can then shift your focus to your business while your representative takes care of the rest. Have any more questions about the tenant representation process? Don’t hesitate to reach out!
If you have any questions about “What To Expect During The Tenant Representation Process” leave a comment below.