Commercial real estate tenants will inevitably be contacted at some point by their landlord’s leasing agent. The leasing agent will want to know if the tenant plans to renew its lease. If the tenant indicates that it is interested in renewing, the landlord’s representative will propose terms for a lease renewal.
When the landlord’s agent represents both the landlord and the tenant this is called dual agency. Although the landlord’s agent has signed a contract to represent the landlord in a fiduciary capacity with a requirement to act in the best interests of the landlord, the dual agent then pledges to represent the tenant as well. When the landlord’s agent acts as a dual agent, there is always a potential conflict of interest. It is never beneficial to a tenant when an agent represents both sides of the transaction.
A tenant is better served by hiring a tenant representative to represent the tenant exclusively. The tenant representative will perform a site search of all available properties, filter those buildings meeting the tenant requirements, arrange tours of properties the tenant would like to visit, and negotiate letters of intent to lease space on behalf of the tenant. Finally, the tenant representative assists the tenant in negotiating business points for the lease agreement. As exclusive agent for the tenant, tenant representatives provide objective, conflict-free advice.
Although landlord agents work to get the best deal they can for the landlord, tenant representatives owe their loyalty and fiduciary responsibility to the tenant. The tenant gets a much better chance of a fair deal when the tenant representative is working on his or her behalf.
A good tenant representative will know the terms of recent leases in the tenant’s building as well as in the tenant’s submarket. They will save you time and money and their services will cost you nothing. Although the tenant representative represents the tenant exclusively, the landlord pays both the landlord’s and the tenant’s brokerage commissions. This is similar to the sale of a house where the seller’s agent pays both the seller’s and the buyer’s commissions
Rental rates are currently rising as the economy improves and vacancies decrease. We expect that rates will continue to increase over the next several years as the economy continues to improve. There are still opportunities to be had and we are encouraging our clients to review their leases now in order to determine if it makes sense to extend the term of their lease in order to lock in a low rate moving forward. Please feel free to contact me at any time for a free lease analysis.