Tenant-Only Brokerage or Full-Service Firm?

Commercial brokerage firms organize themselves in two broad ways. A full-service firm offers many lines of business under one name: leasing buildings on behalf of owners, representing tenants, managing property, arranging sales and financing, appraising, and often project management and consulting. A tenant-only firm, sometimes called an occupier-only firm, represents companies that use space, as tenants or as buyers of their own facilities, and declines assignments to lease buildings for landlords.

We should say where we stand. TAG is on the occupier side: we represent tenants and buyers. That is a business choice we made, and it shapes how we see this question. We have tried to describe both models the way a fair-minded person at either kind of firm would recognize.

The conflict in the full-service model is not about individual honesty. It comes from the shape of the business. Three features produce it.

• Shared buildings: the firm that represents you may hold the listing for a building on your short list. The firm then has a client on each side of the same negotiation.
• Ongoing owner relationships: a large owner may give a firm listings, management contracts and sale assignments across many properties over many years. A tenant is usually a client once every several years.
• Shared information: the firm as a whole may know a landlord’s position on a building and a tenant’s budget and deadline. Firms use internal separation to keep these apart.

Full-service firms are aware of all of this and address it. Tenant representation is commonly run as a distinct group with its own people. When a client pursues a building the firm lists, different individuals are assigned to each side, disclosures are made, and state license laws govern what consent is required. Many tenants are represented this way every year and are well served.

What a tenant should understand is the difference between a conflict that is managed and a conflict that does not arise. Managed conflicts depend on procedures working and on individuals following them under commercial pressure. Whether that is acceptable for your deal is a judgment for you to make with clear information.

The scale of a full-service firm has real value for certain requirements, and a comparison that ignored it would not be honest.

• Geographic reach: offices and staff in many cities and countries, under one contract and one set of standards.
• Research: dedicated research staff and proprietary data on transactions and market conditions.
• In-house specialists: project management, workplace strategy, lease administration, labor and location analysis, and capital markets advice.
• Depth for very large or complex assignments, such as a headquarters campus or a multi-country portfolio.
• Market presence: a firm that leases many buildings knows a great deal about those buildings and their owners.

The last point cuts both ways. Knowledge gained from representing landlords is useful market knowledge. It is also knowledge the firm holds on behalf of clients whose interests are opposed to yours.

The main advantage of a tenant-only firm is simple to state: no building on your list is a building the firm has been hired to lease. Its advice on which building to choose is not complicated by a duty to an owner, and it has no landlord relationships to protect when a negotiation becomes difficult. Every client relationship the firm has is with an occupier, so its habits, data and reputation are built around that side of the table.

The limits are just as real.

• Reach: many tenant-only firms are smaller and work in other cities through partner firms. Ask who those partners are and how they are chosen.
• Breadth: services such as project management or lease administration may be referred to outside specialists instead of delivered in-house.
• Not conflict-free in every sense: any broker’s fee usually rises with the size and length of the deal, whatever the firm’s model.
• Occupier-to-occupier conflicts: a tenant-only firm may help one client sublease or sell space that another client wants, or represent two clients competing for the same suite. Ask how it handles that.

A tenant-only label is a statement about one kind of conflict. It is not a guarantee of skill, effort or judgment. Those have to be assessed the same way for any firm: by the people, their references and their process.

There is no universal answer, and the patterns below are tendencies.

A company with a large, multi-country portfolio that wants a single contract covering transactions, project management and lease administration will often find a full-service firm’s platform hard to replace. A company in a market where one firm lists a large share of the suitable buildings should weigh the conflict more heavily, since the odds of landing in a dual representation situation are higher. A company whose main concern is negotiating leverage on a specific lease or renewal, and that values undivided loyalty above platform breadth, will often lean toward a tenant-only firm.

For a growing technology company, the deciding factors are usually less about the model and more about attention. Ask where your requirement ranks among the firm’s assignments and who will actually work on it. A modest requirement can receive senior attention at one firm and be handed to a junior team at another, and that happens under both models.

Ask a full-service firm:

• ✓Which buildings in our search area does your firm list or manage, and for which owners?
• ✓If we pursue one of them, who represents us, who represents the owner, and what will we be asked to sign?
• ✓What separates the tenant team’s files and conversations from the landlord team’s?
• ✓Do members of our team also take landlord assignments?
• ✓Has your tenant team recently negotiated hard against an owner your firm represents elsewhere? Tell us about it.
• ✓Would we be free to bring in another broker for a building your firm lists?

Ask a tenant-only firm:

• ✓Do you ever represent a landlord or a seller, and if so, in what circumstances?
• ✓How do you work in other cities, and who are your partners there?
• ✓Which services do you provide yourselves, and which do you refer out?
• ✓What happens if two of your clients want the same space, or one client’s sublease is on another’s list?
• ✓Where does your market data come from without landlord assignments?
• ✓How does your fee vary between the options we might choose, and how do you keep that out of your advice?

Then put the same request to both: show us the written agreement that defines the relationship. The answers, and the willingness to give them, tell you more than the label on the door.