What Does a Tenant Representative Do?

Commercial leasing has two sides, and each can have its own broker. The building owner hires a listing broker, sometimes called a landlord rep or leasing agent, to market vacant space and lease it on the best terms the owner can get. That is the name you see on the sign in the lobby and at the bottom of the online listing.

A tenant representative, or tenant rep, is hired by the company that needs space. The job is the mirror image: find the right premises and secure the best terms the tenant can get. The same person may hold the same license as a listing broker. What differs is who the client is.

People new to commercial real estate often assume the broker who shows them a space is a neutral guide, as a helpful salesperson might be. In practice, a listing broker has agreed to act for the owner. They can be courteous, accurate and useful, and their task is still to get the owner a good deal.

The work is broader than finding listings. A typical assignment runs through these stages.

1. Needs analysis: turning headcount, work model, budget, location and technical needs into a written requirement.
2. Market survey: identifying every space that could fit, including subleases, space coming available that is not yet advertised, and buildings where an owner might create a suite.
3. Tours: arranging and attending visits, and pointing out what a first-time visitor would not notice, such as inefficient floor plates or building systems that will not suit your equipment.
4. Requests for proposal: asking several landlords to put terms in writing on the same basis, so they can be compared.
5. Financial analysis: translating each proposal into total cost over the term, since headline rents hide large differences in free rent, construction money and expenses.
6. Negotiation: trading proposals with landlords, usually several at once, and settling the business terms in a letter of intent.
7. Lease stage: working alongside your attorney so the lease matches the agreed terms and the business points are not lost in drafting.
8. After signing: helping coordinate architects, contractors, project managers and movers, and tracking key lease dates afterward.

Our guide to how tenant representation works covers each stage of that process in detail. This guide is about the role itself.

The difference in client leads to practical differences in what each broker will do for you.

• Shows you the whole market. A listing broker shows the buildings they are hired to lease. A tenant rep is free to show any building, and to tell you which ones to avoid.
• Creates competition. A tenant rep's main source of leverage is having several landlords pursue the same tenant. A listing broker has no reason to send you to a competitor.
• Keeps your information private. Your budget, deadline and level of interest are valuable to the other side. A tenant rep keeps them confidential, while a listing broker's duty of confidentiality runs to the owner.
• Tells you what a deal should look like. A tenant rep sees what concessions landlords are currently giving and can say whether an offer is ordinary, good or poor.
• Raises the points you did not know to ask. Flexibility rights, limits on expense increases, restoration obligations and after-hours charges rarely appear in a landlord's first proposal.
• Advises against a deal. Sometimes the right advice is to renew, wait or take less space. A tenant rep is able to give it.

Brokers are licensed and regulated by each state, and state law defines the duties a broker owes to the person they represent. The details differ from state to state, but the general idea is consistent: a broker acting as your agent owes you duties such as loyalty, confidentiality and care, and must put your interests in the transaction ahead of the other party's.

Two terms are worth knowing. Dual agency describes one broker representing both landlord and tenant in the same transaction, which many states restrict or allow only with written consent from both sides. Designated agency describes a structure, recognized in some states including Illinois, in which a brokerage appoints specific individual brokers to represent a client. Both exist because a single firm can end up with clients on opposite sides of one deal.

The practical step is simple. Ask any broker you speak with, early and directly, whom they represent, and get the answer in writing. A tenant representation agreement should state that the broker represents you. Have your attorney review it, and ask your attorney about the agency rules in your state. This guide is general information, not legal advice.

If a firm both lists buildings for owners and represents tenants, ask how it handles the situation when its tenant client is interested in a building it lists.

It helps to know the limits of the role, so that the right people are involved.

• Legal advice. A broker negotiates business terms. An attorney reviews and negotiates the lease language. You need both.
• Design and engineering. Brokers coordinate with architects and engineers and know what to ask, but the drawings and technical assessments come from licensed professionals.
• Tax and accounting advice. How a lease is treated on your books is a question for your CPA.
• Deciding for you. A good tenant rep presents options and a recommendation. The decision stays with the company.

The most useful time is before you contact any landlord or listing broker, and well before a lease expires. Early involvement lets the representative shape the requirement, protect your information and build competition from the outset. A tenant rep can also help in situations that are not a new lease: a renewal, an expansion, a sublease of surplus space, an early exit or a purchase.

Before you engage one, a few questions are worth asking.

• ✓Do you or your firm also represent landlords? If so, how are conflicts handled?
• ✓How are you paid, and by whom, in this type of transaction?
• ✓What companies like ours have you represented?
• ✓Who will actually do the work day to day?
• ✓What does your agreement commit us to, and how can we end it?

Tenant Advisory Group was founded to do this work. Our business is tenant and buyer representation, in office, clinical and industrial space, in Chicago and in other markets across the country.