Who Really Represents Tenants in an Office Lease?
We’ll tell you who doesn’t!
In a legal proceeding, would you hire the same attorney retained by your opponent? If you were being audited by the IRS, would you represent yourself, or would you prefer your accountant, with an intimate knowledge of the laws and your circumstances, to represent you? It is safe to assume most would hire experts to ensure their interests are well protected.
Yet, it is common in commercial real estate for business owners, looking for office space, to enter one-sided relationships with building owners. The financial impact of entering the deal without representation is drastically underestimated – which can be an expensive mistake for businesses, considering rent expense typically represents nearly 20% of total overhead and is the second largest expense item after payroll.
Avoid Conflicts of Interest
There is an inherent conflict of interest when a Tenant negotiates directly with a building owner or the leasing agent that represents them. The primary goal of a leasing agent is to get the best deal for the building owner - Tenants, on the other hand, are looking for the most economical lease rate and terms.
To determine whether a broker's interests are completely aligned with yours, you should ask yourself these questions:
Am I getting a comprehensive range of office space choices, unclouded by any listings, management agreements or hidden agenda?
In lease negotiations, are my interests being represented without compromise, or is the broker influenced by a current or potential relationship with the building owners?
Could there be a real or perceived pressure on the broker to steer me toward certain properties?
Does the broker work for a full-service brokerage and property management firm?
Dual representation (representing both the Owner and Tenant) is very common in today's commercial real estate practice. Although a conflict of interest, dual representation is not dishonest or illegal as long as it is disclosed to the Tenant at the start of a relationship. It is, however, imperative that Tenants understand the implications and pitfalls of this type of arrangement.
Ultimately, no matter how much you trust the Building Owner or how tempting it is to deal directly with the listing agent, it would be foolhardy to walk into negotiations without leverage or knowledge of the market (what space is available, rental rates for comparable space, etc.). Unfortunately, it could take you countless hours, if not weeks to accumulate this type of information, and chances are you will still leave more money on the table than you realize.
Let an Expert Help You
Tenants do have recourse - they can employ the professional services of an Occupier Services Representative (OSR). However, all OSRs are not created equal, and the only way to be assured you are getting an independent broker is to hire one with no listings or Owner affiliation. Full-service firms that have a separate department for Tenants and buyers still derive most of their income from property Owners. So, although their "Occupier Services Representative" might claim objectivity, you cannot be sure that the firm's profitability or a colleague's livelihood will not color recommendations and decisions.
Cherry Associates specializes in Tenant representation exclusively; we do not own property, nor do we work for any building Owners. We have a deep market knowledge that translates to leverage at the negotiating table, and we help save our clients thousands of dollars over the lease term by uncovering the "hidden money" in leases that many Tenants aren't aware exists.
Dollars Saved in a Lease Make the Service Virtually Free
The benefits of using an OSR can include savings on square footage costs, increases in space improvement dollars, limits on expenses passed through to the Tenant, and the coordination of the space planning and construction process. The result: a significant savings of both time and money, as well as office space tailored to the personal and financial needs of your company.
Perhaps the most attractive benefit is knowing that Cherry Associates is working diligently on your behalf to find the right office space and negotiate a favorable leasing arrangement while you continue to focus on your core business. We are committed to making your lease negotiations as trouble-free as possible.
At Cherry Associates we focus on finding the right space for our clients, not just the available space. We are tenacious about uncovering every dollar of savings in negotiations. Our fees are nearly always offset or eclipsed by the savings and value we bring to the lease, equating to a free and valuable service for the Tenant. Additionally, Building Owners generally incorporate these fees into their budgeted rental rates – meaning, the Building Owner is prepared to spend that money. If the Tenant does not utilize an OSR, the money allotted for that OSR will likely just be paid to the Building Owner’s Broker.
Conclusion
No business should act without professional support on something as vital and expensive as their office space. Whether you are looking for new space or planning to re-negotiate your current lease, give Cherry Associates a call today.
