|What Does a Tenant Rep Do for Me?|
Selecting space for your organization – and successfully negotiating a lease you can live with – are complex, time-consuming tasks, full of potential pitfalls. The pitfalls only multiply if you undertake the process on your own – without the benefit of an experienced commercial real estate professional serving as your tenant representative.
The tenant rep can assist you in calculating your actual need for space and determining your particular layout needs. This can prevent you from wasting time on property negotiations that are not right for your organization. Most importantly, it can prevent you from leasing too much space. The landlord has no incentive help you economize on space and save money.
This involves more than scanning the available listing services. A professional tenant rep can identify a property that is not an obvious choice to meet your needs. This could result in lower rental rates and space that is overwise better suited to your needs.
A good tenant rep can launch a successful bidding war and prevent you from being a “captive audience” to one developer. The optimal number of bidders is usually three. Even if there is one property that you and your representative agree is the best, creating a three-way competition will optimize your negotiating position. The result can be concessions and incentives that exceed the norm in the marketplace, such as free rent for several months or an allowance for tenant improvements (TIs).
The tenant representative knows all the ins and outs of real estate transactions and can help you avoid possible pitfalls. For example, a tenant representative would ensure you retain such options as subletting in case you eventually shrink your organization or outgrow the space. Options for an exit strategy are overlooked at your peril.
A tenant rep can act as the “bad guy” when necessary during negotiations. At the same time you are securing major economic concessions, relying on a tenant rep to act as “bad guy” can keep your relationship with the landlord cordial. You may need the good will later on.
These often are hidden in the document and are easily overlooked.
Having a tenant rep prepare all proposal requests and letters of intent can help to resolve issues before the final lease is prepared. A professional tenant rep is familiar with real estate forms and documents and can help you avoid disasters by signing something by accident or out of ignorance.
The tenant representative can serve as an experienced set of ears and eyes to verify the details of a transaction. The rep’s transaction files can provide the documentation necessary to clarify what was said and done during the negotiation.
When you see rental rates quoted for space, those rates include the marketing costs for any leasing representative or for the developer’s in-house marketing. Compensation for the tenant representative is also part of the stated price. A good tenant representative should be able to save you that amount and more.
For example, without good representation, the tenant may sign on to an improvement allowance of $50 per square foot, not knowing that the actual market price for such work is $30. The tenant representative knows the market and would negotiate that any remaining funds be applied to lower the rent. (For a 60,000 sq. ft. building, that would mean a savings in $1.2 million!)
For example, many leases tie rents or expenses owed to the landlord to the consumer price index (CPI) or some other index. Landlords will likely ask that these rents or expenses float with an index. The tenant representative can ferret out such a provision and negotiate a CPI cap for the lease.
If your lease holds you responsible for ongoing maintenance, as many do, the tenant representative can assure that the definition of ongoing maintenance does not include the repair of pre-existing deficiencies, such as roof problems that may already have plagued the building. The tenant rep will know how to look at the move-in condition as a benchmark indicating the point at which your wear and tear commences.
For example, a tenant representative can negotiate to receive a rent concession for “moving and set-up time for racking.” This means your lease begins, but you won’t pay rent during the time it takes to become operational move in, set up racks, etc. Because you will still operate out of your old space during moving and set-up time, this concession prevents you from paying double rent during the overlap period.
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