If you’re not engaging a Tenant Representative to help you find space, you might as well just hire Uber….
It is a fact that in almost every business, the physical cost of the business’s occupancy (their location(s)) is one of the largest expense line items a business will have. This is the cost of the space where the business is located or operated from, commonly referred to as ‘The Rent.” Sometimes this is one location, other times its many locations in various markets. It could be the rent in a downtown high rise office building, or it could be rent for a small restaurant location in a suburb.
A common trend I have continually run into over the last 20 years in the business is a situation that goes something like this:
“Entrepreneur Ernie” has a successful e-commerce business and is looking to move to larger office space, to accommodate his growing company and new employees. Ernie goes to church with a guy he knows. We will call him “Broker Bob.” One Sunday, while Ernie and Bob are chatting, Ernie mentions his desire to move and grow his office space, and asks Bob to assist, because he likes Bob and thinks Bob is a nice guy. In the weeks following, Bob shows Ernie 7-8 office spaces and they finally find one that ‘feels like home’ to Ernie; so Ernie signs a lease for his new office space, prepares to move and thanks Broker Bob for helping him find this great new space.
What’s wrong with this? At first glance, really doesn’t sound like too much is wrong; right? Two guys, ‘buddies,’ one has a need, the other is in the business of filling those needs, seems perfect really. But let’s dig deeper for a moment and apply commentary of the four key processes that higher quality brokers use for a tenant representation assignment, as seen in this scenario. The Key Components are:
Let’s move beyond the ‘friendship’ that these two professionals possess. Let’s look at the need. Ernie has a rapidly growing tech company and all he knows is he’s outgrown the space. But Broker Bob doesn’t conduct an in-depth review of Ernie’s business and space needs. A STRATEGY is where we create a comprehensive project plan and list out the objectives, team players, expectations and goals that we intend to achieve.
The next phase is to ANALYZE. This is a very important part of the process, where a comprehensive Needs Analysis is completed, that involves a space planning, growth needs, budget discussions, location, specific or unique building requirements along with any other criteria that may be unique to the business. In today’s world, this can be things like high bandwidth (fiber), Green Building Certifications and other similar criteria that may not be readily apparent.
The next step is a phase we call MARKET. This is really where I frequently see “Broker Bob” jumping ahead, right off the bat. This is where a Market Survey is produced, based on the information collected in the previous ANALYZE phase. This listing, or “Tour Book” as it’s sometimes referred to, is produced and site tours are conducted. Properties are then deleted or short listed; and once completed, the short listed properties receive a Request for Proposal (RFP) that has been compiled, based on discussions with the Tenant (“Ernie”) and their Tenant Representative Advisor.
The final phase is what we call OCCUPANCY. Negotiation of the deal and the physical moving and occupying of the space take place in this phase. RFP responses are collected and a financial analysis of each option is performed to compare ‘apples to apples’ and make sure sound decisions can be made. Other important factors are lease negotiations which involve many complex and often mis-understood lease clauses, tenant improvement allowances and construction details, and lease commencement and rent commencement negotiations.
As you can see, the commercial real estate leasing process is by no means standardized. It varies and it can be extremely complex. Tenant representatives who specialize in representing commercial real estate tenants, in seeking and leasing space, are the experts to guide you through this process.
I will close with this….There is nothing wrong with using your ‘best friend” to guide you through the commercial real estate leasing process, IF they are qualified to do so. In fact, if they are, this is great. But if they are NOT qualified, it’s about the same as just hiring UBER to drive you around to various properties so you can tour them.
Commercial real estate professionals and tenant representatives are much, much more than just your ‘tour guide’ or driver, they are your secret weapon to make sure you make the right space decision for your business.
About Carlton Dean – Carlton is a SIOR and a CCIM, two of the most respected designations in the CRE industry. He has nearly 20 years of experience in the commercial real estate industry. Carlton is the Managing Director for SVN| SouthLand Commercial and is based out of the Tallahassee, Florida office but serves clients throughout the entire Southeastern US. Click here to view his full profile and listings, or if you would like to contact him, you can call him at 850-877-6000 ext. 101, or email him at [email protected] You can also follow him on Twitter at @CarltonDeanCRE.
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