About Tenant Representation
Why Do I Need a Broker to Help Me Find Space?
Of course you can find many available spaces on your own, thanks to internet searches and simply driving by properties with availability signage. What you need a broker for is their expertise surrounding the leasing process. A good broker is much more than a space finder. You should view them as you would an attorney or accountant. You want their advice as to what space is best suited for your business and for what are the best terms that the space can be leased. A good broker will assist you in all aspects of the commercial real estate transaction. That starts with understanding your business and ends with the signing of a lease.
What is a Tenant Representation Letter?
A representation letter is something a Tenant Rep Broker will ask for you to sign. It has several purposes. First and foremost, it demonstrates your commitment. Once the Tenant Rep has that letter from you, they know that they are much more likely to get paid a commission on your lease. This means that they will work harder for you. In fact, a good Tenant Rep Broker will not work on a client's behalf without an exclusive representation letter. If you want to get the most out of the brokerage community, it is recommended that you sign an exclusive agreement rather than working with several different agents on a non-exclusive basis.
How do Tenant Rep Brokers get Paid?
Commercial real estate agents are typically paid a commission upon the signing of a lease. The commission is typically paid by the owner of the building and is often paid one-half upon lease execution and one-half upon tenant's occupancy and rent commencement. The commission is most often calculated as a percentage of the lease value.
The Landlord's broker is the one who typically receives the commission and then pays a portion of the commission to the Tenant Rep Broker. If there is no Tenant Rep Broker working on your behalf, the Landlord's broker will receive the entire commission OR the Landlord will retain a portion of the budgeted commission for themselves. Commissions are only paid if a lease is successfully executed.
Summary
Having a Tenant Representative greatly improves your leverage when negotiating a lease with a Landlord. The knowledge of market trends, rental rates, rent concessions, other professional service providers (contractors, architects, attorneys, designers, marketing professionals, lenders), as well as the fiduciary advocacy received on your behalf, creates a professional and long-term position for your overall business success.