Can You Lease Office Space Without a Broker?

A commercial lease is a contract between a landlord and a tenant. A tenant does not need a broker to sign one, and landlords lease space to unrepresented tenants regularly. If you find a space, agree on terms and have a lease reviewed and signed, you have a valid deal.

We are a brokerage, so weigh our view accordingly. The useful question is not whether you can go without a broker. It is what you take on when you do, what you get in return, and whether that trade suits your situation. For some companies it does.

The most common reason founders consider going direct is the belief that removing a broker removes a cost, and that the landlord will share the saving. It is worth understanding how the money actually moves.

When an owner hires a listing broker, the two sign an agreement that sets the commission for leasing the space. That agreement typically anticipates that a tenant may arrive with its own broker and provides for the fee to be shared in that case. If no tenant broker appears, the arrangement between the owner and its broker still applies, and in many agreements the listing broker simply keeps more of the fee. The commission was a budgeted cost of leasing the building before you ever toured it.

Some listing agreements do pay a lower total commission when there is no tenant broker, which leaves the owner with a real saving. Whether any of it reaches you depends on your asking for it and on the owner agreeing, and you will be asking without knowing what the listing agreement says.

• You can ask the landlord for a rent credit or added concession in place of a tenant-side commission. Some owners will agree to something.
• You will not see the listing agreement, so you cannot verify what the owner is saving.
• Any credit should be measured against the terms you might have obtained with representation and competing proposals.

In short: the saving is possible, uncommon and hard to verify. It should not be the main reason for the decision.

Going direct moves a defined body of work to you and your team. None of it is beyond a capable operator. All of it takes time, and some of it depends on information that is hard to obtain from outside the industry.

• Finding the options: public listing sites show part of the market. Space that tenants are quietly trying to shed, and space an owner has not yet advertised, usually reaches brokers first.
• Knowing the market: asking rents are published, but the terms on signed deals mostly are not. Without them, you cannot tell whether a proposal is strong or ordinary.
• Running a process: contacting several landlords, scheduling tours, issuing a requirement and keeping multiple proposals moving in parallel.
• Negotiating the business terms: rent, concessions, allowance, security, expansion and exit rights, with a listing broker who does this every week.
• Coordinating the specialists: attorney, architect, contractor, furniture and technology vendors.
• Managing dates: making sure the new space is ready before the old lease ends.

The listing broker will be helpful throughout, and it represents the owner. Our guide on tenant representatives and landlord brokers explains that relationship. The practical effect is that the one experienced real estate professional in your deal works for the other side.

The cost of an unrepresented deal rarely shows up as a bad rent figure. It shows up later, in clauses you did not know to ask about: a sublease right that needs open-ended consent, a restoration duty, a security deposit that never steps down.

There are situations where a broker adds less, and it would be misleading to pretend otherwise.

• Coworking and flexible office memberships: terms are largely standardized and the commitment is short. Many companies sign these directly.
• Very small, very short commitments, where the amount at stake does not justify a full process.
• A company with an experienced in-house real estate lead and current market data of its own.
• A space arranged through a relationship, such as a sublease from an investor’s portfolio company or a suite in a building owned by a board member, where the terms are friendly by design.
• A simple short extension on terms you have independently confirmed are in line with the market.

Even in these cases, two things still apply. Have an attorney who handles commercial leases review the document. And know your alternatives before you agree to terms, since an owner who senses you have none has little reason to move.

A renewal is the case people most often assume is safe to handle alone, on the theory that the relationship is already in place. It is frequently where the largest gap opens, because the landlord knows what a move would cost you and knows whether you have looked elsewhere.

If you decide to proceed without representation, these steps close as much of the gap as possible.

• ✓Have we retained a commercial leasing attorney before negotiating, not only for the final document?
• ✓Have we identified at least two or three real alternatives and obtained written proposals from them?
• ✓Are we comparing proposals on total cost over the term, including operating expenses, build-out and security?
• ✓Have we kept our budget, deadline and level of interest to ourselves in conversations with listing brokers?
• ✓Did we ask the landlord for a credit in place of a tenant-side commission, in writing?
• ✓Have we negotiated sublease, assignment and change-of-ownership rights, not just rent?
• ✓Do we understand the build-out responsibilities and who bears the cost of a delay?
• ✓Have we started early enough that walking away from this building is still possible?
• ✓Do we know what we must remove or restore when the lease ends?

The choice is not always all or nothing. If you have found a space on your own and are partway into a conversation with the landlord, you can still bring in a tenant representative, though it is easier early. Some listing agreements limit a broker’s fee when a tenant has already been registered directly with the owner, so raise the question promptly and expect the broker to explain how it would be paid.

The usual arrangement, in which the landlord pays the tenant’s broker as part of a standard lease, is the reason most tenants choose representation: the advice does not require a separate check from the tenant. TAG works this way on standard lease transactions and tells clients at the outset when a particular deal, such as some subleases, would be structured differently. Whichever path you choose, decide it deliberately, with a clear view of what you are taking on.