Lee Wagner doesn’t mince words. “Most
corporate managers simply don’t have
the time or resources to adequately deal with real estate issues,” says Wagner,
Senior Vice President in Grubb & Ellis Co.’s
Dallas office.
Real estate brokers who specialize in tenant representation can eliminate many of
the hassles in site selection and negotiation, save you a substantial amount of time,
prevent potentially disastrous missteps,
and possibly cut much of your real estate
expense.
“Tenant representatives can find a first-time office space, renew an existing space,
or relocate within the same building or into
another building,” Wagner says. “They can
also move you to a completely different
submarket altogether.”
Smart Business talked to Wagner about
what you should expect from a bona fide
tenant representative.
What are the main reasons that a company
looking for a commercial lease should
employ a tenant representative?
Primarily, a tenant rep will have allegiance only to you, like a lawyer who has a
fiduciary responsibility to his client. He or
she will give vendors and real estate solicitors a single point of contact to act on your
behalf.
A tenant rep will also balance the representation of parties. Nine times out of 10,
the landlord will have representation. Why
would you want to go into negotiations
without representation, knowing that the
other side will be represented?
Finally, your business, most likely, is not
real estate. That responsibility can be outsourced to someone who can oversee the
process and make sure it runs smoothly.
Tenant reps know changes in laws, ownerships, building availability and lease documents. This is their life — every single day.
Do companies normally have to sign contracts with tenant reps?
There should be a contract because it
helps to understand the roles and responsibility of the tenant and the broker. When you’ve got seven brokers calling on a
building that they think will be a good fit,
this leads to chaos in the marketplace. The
contract will outline responsibilities of
each party.
Any valid contract will need to have a
commencement date and an expiration
date. The term should coincide with the
objectives that the rep or broker is trying to
accomplish on behalf of the tenant.
For companies with multiple sites, sometimes the contract becomes a corporate
services contract.
What services can you expect from a good
tenant rep?
The two big things are market knowledge
and lease negotiations. They know of
opportunities in the marketplace that may
not be public knowledge. They’re constantly looking for spaces and new opportunities that are coming to the market. You
wouldn’t have access to that knowledge if
you tried to do it solo.
Typically, tenant reps/brokers will challenge clients from day one to make sure that they are getting exactly what they
need. They want to make sure that tenants
are right-sized — with some space, perhaps, reserved for a little bit of future
growth.
Good tenant reps also might be able to
create a bidding war among landlords for
your business. Then, during lease negotiations, they can identify provisions that
could cost you money. Does the lease have
those things in it that a true tenant rep
would typically fight for? Does the lease
include sublease rights? Does it allow for
expansion or contraction provisions? Does
it reflect a current operating base year?
Does it include liability issues?
Tenant reps often establish a longer-term
relationship with their clients. Then, once
the lease is signed, they can serve as a
buffer between the client and the landlord.
Plus, if the economy starts to soften up and
a company needs to contract its business, a
tenant rep can market the unused or
unwanted space. If a company needs to
expand, then a rep can help do that.
What other ways can a tenant rep save a
company money or headaches?
A tenant rep will always encourage a
client to start the process earlier than
expected. When time is on your side, you
have leverage. On the other hand, when
you’re under the gun, before you know it,
the process of finding the right location
becomes extremely difficult. It becomes
rushed.
It’s very important to have people on your
side of the table with timelines — especially with today’s economy. And having time
to decide before you act also helps ensure
that you don’t make any stupid mistakes.
Real estate decisions are big decisions.
Real estate costs are typically the second-largest line-item expense and normally
equate to 25 percent or more of a corporation’s overall budget. Mistakes, then, are
extremely costly.
LEE WAGNER is Senior Vice President in the Dallas office of Grubb & Ellis Co. Reach him at [email protected] or
(972) 450-3284.
