This post originally appeared on Marketplace Partner, RealMassive News Blog and is republished with permission. Find out how to syndicate your content with theBrokerList.
November 13, 2015
by Tanya Hamlin, Partner Relations at RealMassive
Whether you are a new entrepreneur looking for your first office space or a seasoned executive searching for the perfect location for your growing company, it is in your best interest to use a Tenant Rep broker to help you with your next transaction.
Prior to joining RealMassive, I worked at a prestigious, local commercial real estate firm on their Corporate Services team for over two years. We had some of the best brokers in Austin working for all varieties of tenants – those needing anywhere from 3,000 to 150,000 SF. Our team worked tirelessly to find our clients an ideal space, in their target location, at the right price. No easy feat, especially considering that they receive compensation for their time only after the lease is signed.
Why You Should Use a Tenant Rep
City Codes and Regulations
A few years back, my son’s after-school-care organization needed a larger space close to the elementary they serviced. They knew of a great off-market space that was owned by a first-time landlord seeking to support small businesses.
The building owner employed a knowledgeable landlord broker to handle her end of the transaction, but the small business owners felt they didn’t need to hire a tenant rep broker of their own. Assuming they would have to cover the cost of hiring a tenant rep broker, the first time tenants had no idea that the commission does not come out of their own pocket, but from the landlord rep’s firm. Since the owner was a friendly acquaintance, the thought was that they could handle the negotiation directly. So, they signed the leased and expected to be moving in within a short period of time.
Unfortunately, the building’s age rendered it out of compliance with the city’s ADA Code (wheelchair ramps, accessible bathrooms and hallways, etc.). The onus for compliance typically falls on the owner to make the space leasable, a detail which would have been easily discovered by a tenant rep.
At this point, our tenants were paying rent on the new space, paying rent on temporary space in which to operate out of, and paying for the construction costs to adequately update the building in order to receive permits from the city to occupy the new space. After 8 long months of unnecessary costs, stress, and frustration, our tenants finally moved into their new space. This situation illustrates the importance of having a tenant rep broker to be on your side; their number one responsibility is to represent your fiduciary interests above all else.
Tenant Reps Know the Value of Commercial Real Estate in their Market
A growing startup tech firm wanted to migrate from the west coast to Austin. It was part of a larger corporation, but was given a strict budget for office space. Startup “X’s” executive team aspired to be in the heart of downtown. Other “must haves” included ample parking, and a modern, creative finish to attract top talent. A major impediment however, was the firm’s budget expectations for Austin’s CBD. X’s tenant rep did provide strong alternatives to a downtown location that would still meet his client’s expectations. Unfortunately, X dismissed anything beyond their strict and unrealistic parameters and focused solely on CBD options. Deep into lease negotiations on a downtown office space, the landlord received a much more favorable offer and choose to not continue with X. Company X was now back to square one.
The tenant rep, once again, urged them to review a previously presented option, one with workspace upgrades, nearby restaurants, retail, entertainment, and within an acceptable proximity to CBD. He helped them to see that it met their budget, met their parking ratio needs and could also have the cool, creative interior they desired to attract tech talent. Company X realized that this space was the best for them at the time, signed the lease and a new, happy tech tenant relocated to Austin. Though not uncommon, this scenario could have been prevented had the tenant rep been empowered with current and accurate market rent rates. With RealMassive’s open data marketplace, tenant reps can confidently educate their clients with comparable listing data, collaborate with them remotely, and significantly shorten the search cycle; saving both the tenant rep and tenant time.
They Know the Many Negotiation Points of a Lease
Commercial real estate leases often contain multiple clauses that dictate the terms of your lease – your tenant rep broker is the one who will guide you through the contract process and make sure it aligns with your business’s goals and growth. Below are a few examples where it’s imperative to have a savvy, knowledgeable tenant rep broker negotiate the terms of the lease that suits your business best.
- With a Termination Option you can ask for a grace period to terminate a lease with minimal impact on your bottom line.
- Right of First Refusal allows your business “dibs” on any available space in the building before the landlord puts it on the market. This is an incredibly valuable option if you are a growing/expanding company that anticipates the need for additional space. Your tenant rep broker will advise what’s best based on your company’s needs.
- A Renewal Option allows your business to renew a lease for another term, typically at a discounted rent rate. For example, you can ask for one or two renewal options with rent at 95% of market value.
If you’re a prospective tenant, I hope you find RealMassive a helpful and informative tool as part of your search. We can’t represent you (corporate policy that we don’t assist or get paid on the transaction), so I highly recommend that you use a tenant rep broker to help guide you through your transactions. It is their primary function to place your fiduciary interests above all else.
If you are a tenant rep broker, we applaud the value you bring to this complicated ecosystem, and we’ll continue to support you. RealMassive’s mission is to empower CRE professionals by providing accurate marketplace information.
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