How much does it cost to hire a Tenant Representative?
It does not cost a tenant extra or increase the rental rate to hire a tenant representative to protect the tenant’s interests. In Oklahoma it is customary for the landlord to pay real estate commissions. A component of the rental rate is a real estate commission which is already factored into the advertised lease price.
The landlord’s broker offers part of that commission to the market as incentive for tenant representatives to present the landlord’s space to their clients for possible occupancy. Tenants receive all the benefits of hiring a professional for free and are not obligated to pay real estate commissions. The tenant representative earns a fee only after the successful execution of a lease negotiated to the satisfaction of their client, the tenant.
What is a Tenant Representative?
A tenant representative is an advocate who works for their client, the tenant. Tenant representatives work to secure the best possible locations; negotiate the best possible deals, lease rates and terms on behalf of their clients.
What are the benefits of hiring a tenant rep?
- Peace of mind knowing you have a professional putting your interests first.
- Comprehensive market knowledge of all available space for lease in the market.
- Organized presentation of all available leasing options.
- Negotiates the lease on your behalf.
Why utilize the services of a Tenant Rep?
Making effective use of a real estate professional to navigate the complexities of the site selection and lease negotiation process will generate cost savings and provide a superior space for your organization that should improve the financial and competitive position of your company.
Below are some of the questions a Tenant Rep will help you answer before signing a lease.
- Will driving the market looking for real estate signs be the most effective use of my employees’ time, energy and effort?
- Does the approach identified above provide the most comprehensive overview of all the opportunities available in the market?
- Are there any opportunities available that are not advertised with a real estate sign? Any tenants leaving a building or site I should know about?
- Is the quoted rental rate in-line with market rates?
- What concessions should I ask for from the landlord? What are the customary concessions?
- Is a tenant improvement allowance being offered by the landlord? If so, do I have the right to verify the estimated build-out costs are inline with what is customary?
- What is a NNN lease? Is it customary for the Tenant to pay to maintain the roof and structure?
- Do I possess the knowledge and expertise to negotiate the best possible lease terms and conditions?
9. Do I have all of the information and knowledge required to make a smart and
informed real estate decision that will benefit my company?
Selecting space and successfully negotiating the most attractive lease arrangements are complex, time-consuming tasks, full of potential pitfalls. By engaging the services of a Tenant Representative your organization will save a substantial amount of time and may avoid potentially costly and disastrous missteps many organizations encounter when treading in unknown territory.
Hiring a Tenant Rep can turn up real economic opportunities, cost savings in both time and money and create long-term value for your organization.
What are some of the services provided by a Tenant Representative?
- Identification of your organization’s space requirements.
The tenant rep will assist you in calculating your actual need for space and assist with determining your particular site layout requirements. This will prevent wasted time on properties that are not a fit and prevent you from leasing too much space.
- Organized presentation of all available properties including off-market opportunities.A tenant representative will research the market and discover all prospective properties that meet the client’s space criteria. This information should be presented to the Tenant in an organized format that is easily understood. A rating system for each property should be included to identify property amenities and negative factors regarding each site.
- Create a bidding process for landlord’s and developers to compete for your business.
A good tenant rep will know the local area landlords/developers who would be a good fit for your project. Knowing how to leverage a quality credit Tenant’s space requirement to create competition for your business among these landlord/developers will optimize the Tenant’s negotiating position and drive occupancy costs downward. The result will be concessions and incentives that exceed the norm in the marketplace.
- Handle the paperwork and other details of the lease negotiation.Having a tenant rep prepare all proposal requests, financial analysis, and letters of intent will help to resolve issues before the final lease is prepared. A professional tenant rep is familiar with real estate documents and how to compare proposals on and “apples to apples” basis.
- Serve as a buffer between you and the landlord.
A tenant rep can act as a “hard liner” when necessary during negotiations and convey to the landlord or landlord’s broker that the tenant representative is knowledgeable about the what is customary and will advise his client as to the possible detriment of what is being proposed, offered, conceded, etc. At the same time the tenant rep is securing major economic concessions for your organization and preserving a cordial relationship between you and the landlord.
- Protect you during lease negotiations so that you come away with terms that meet your present and potential future needs.
The tenant representative knows all the ins and outs of real estate transactions and will help you avoid possible pitfalls. For example, a tenant representative would ensure you retain such options as subletting or termination in case you eventually shrink your organization, outgrow the space, or need to close the office. Options for an exit strategy should not be overlooked and should be included in the lease document to the benefit of the Tenant.
- Win concessions that anticipate your company’s actual needs.
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, and you take occupancy but you won’t pay rent during this 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.
- Ensure you get the most value in any improvement allowances.
For example, without good representation, the tenant may sign on to an improvement allowance of $35 per square foot, not knowing that the actual market price for such work is $20. The tenant representative knows the market and would negotiate that any remaining funds be applied to lower the rent. (For a 100,000 sq. ft. building, that would mean a savings of $1.5 million!)
- Identify lease provisions that could cost you money during the lease term.
It’s important to understand the language! A lease is a document that will govern your business’ occupancy for the term, usually the next 3 to 5 years. The lease document will be referenced by the landlord anytime there is a question related to the obligations pledged by the landlord or tenant. Tenant representatives are a valuable resource in identifying extraordinary terms and conditions of lease presented as standard language by the landlord.These often are hidden in the document and are easily overlooked. The tenant rep will reveal any additional occupancy costs hidden in the language of the lease document and propose to strike or amend said language to the benefit of the Tenant.
- Safeguard you against signing onto any provisions that run against your economic interests.For example, many leases pass through operating and tax expenses increases along to the tenant over a base year. Which base year? What is included in the base year expenses? Can the Landlord charge items in a different base year from that in which the expenses were incurred? These are all costly issues that will be addressed by the tenant representative.
- Define lease terms to benefit you.
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.
Frank Miskovsky IV
Commercial Real Estate
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