The logistics of placing a client in a commercial leasing space are complex
Being a commercial real estate (CRE) advisor means more than just selling. For many of us, the work of tenant representation makes up as much as 25 percent of our work. It’s an important part of what we do.
There are several reasons a company would use a CRE advisor to help find an office to lease. Company principals may not know if they want the business to stay in the same location or whether they should relocate it to another part of town. On the other hand, they might have a preference for a certain part of the town but no knowledge of the office market.
Finding out what the client really needs
The CRE advisor will consult with the company to discover its needs (immediate and future) and its preferred leasing terms. The process of searching for space then begins. As a CRE advisor, I have access to online search tools that are far more comprehensive than any free tools available to the public. I’ll present the client with two or three spaces I’ve found in my preliminary search and we’ll consider each. After we determine which of these might best serve the client’s needs, I’ll set up a tour.
Incidentally, this isn’t like a tour of residential real estate, where an agent gets the key from a lockbox and takes the customer through a vacant property. In commercial leasing, you have to coordinate with the leasing agents and get their permission to tour the space. That’s because a business is sometimes still on the premises, or the landlords require the leasing agent to accompany tenant representatives and their clients on the property.
After we tour the offices, the client will tell me which ones he or she likes best. I’ll contact the leasing agents and ask for proposals from the landlords. Once I receive the proposals back, I’ll present them to my client and explain what each landlord is offering.
Negotiations with the landlord begin when the client decides on one of the proposals. We’ll negotiate a number of items: rental rates, the term of the lease, how much free rent the tenant gets up front, how much tenant improvement allowance we can get (or some combination of all those things).
Coming to a final agreement
Once we agree on the terms, we’ll have an attorney review the lease agreement. At that point, we may still go back and forth with the landlord on some of the lease terms. A lot of unforeseen costs and obligations can lie buried within the landlord’s lease agreement, which of course, is usually crafted to favor the landlord rather than the tenant. After everyone is satisfied with the terms, the client signs the lease and pays a deposit.
Tenant representatives work primarily with industrial, office and retail. In the major metropolitan markets, advisors sometimes specialize in tenant representation only — they never represent a landlord and don’t engage in sales transactions.
It’s a lot of work, involving a high level of detail. But in the end, it’s satisfying when you’ve effectively matched a client with a suitable leasing space. It’s what we do.
David Kinnard, Advisor
SVN | Commercial Advisory Group