In this age of corporate governance, it’s vital to know who’s representing you in every major transaction of your business. Even when there are no legal implications, it never hurts to take stock of who’s working for you and your best interests.
Matthew Feeney, Managing Principal with CresaPartners in Philadelphia, encourages business owners in the market for commercial space to weigh their options when seeking representation. “Most firms in any market are full-service real estate companies. In larger markets there are firms that just represent tenants. The differences may not be apparent to a tenant, but they can be very important.”
Smart Business spoke to Feeney about the principles behind a brokerage firm that focuses on the tenant.
Why might a firm choose to represent just the tenant?
In our case, we were founded by former corporate real estate executives who saw the value in having a firm just represent their interests. In addition, we realized that most firms are not large enough to have an internal real estate group and saw that we could fill that void on an as-needed basis. A firm that represents the tenant is more able to dedicate its resources to servicing the needs of the tenant exclusively and eliminate conflicts of interest.
What should someone know about working with a ‘full-service’ firm?
If you are representing owners of real estate, they will have certain demands on your time. In addition to marketing the space and attending space showings you will also be responsible for layers of reporting on the activity in the market as well as developing proposals when requested. I have heard from those that perform this function that this is very time consuming. The more time you spend performing this role, the less time you have to spend servicing the needs of the tenant. In many full-service firms the agents have decided to either only represent buildings, or only represent tenants. While this may reduce the potential for a conflict, the fact remains that the agents still do work for the same firm. That’s one obvious conflict, but beyond this is the fact that representing buildings versus tenants really is two different skill sets. The building agent is selling a product, while representing a tenant really involves selling a service.
Why choose sides?
People have started to wake up to who is really representing them in a transaction and where their interests lie. Some of this has been brought into focus by the residential market, where they now have to disclose that they’re either a seller’s agent or a buyer’s agent or in some cases a dual agent.
On top of this we have had some corporate malfeasance in the past couple of years, and people have started to look for full disclosure on financial reporting and business practices. These events provided the impetus for Sarbanes-Oxley and have raised the level of awareness as to who’s watching the store and who’s representing whom in a process. All of these factors have led firms to examine whom they wish to represent in a real estate transaction.
What are some of the major differences in working with a ‘full-service’ firm versus a firm that only represents the tenant?
The sell for someone who represents both landlords and tenants would be that they have access to all the information. Because they represent both buildings and tenants, they see all the deals that are running through those properties, and they because they represent owners know where owners are going to be willing to cut their deals. But because a tenant-only firm doesn’t represent buildings or owners, they’re able to represent all the alternatives in the market without any bias. A tenant firm can push the landlord for better terms and can be objective about the property without any concern about alienating an owner who might be a potential customer.
We also find that specialists have the time and expertise in the planning process to ensure that clients are not only getting a good deal, they’re getting the right deal. Those are two different things. A $20-a-square-foot deal in the wrong location or for a space that doesn’t meet your business needs isn’t a good real estate transaction. A $22-a-square-foot deal in the right location with the flexibility to meet your business needs is a solution, not a deal.
What should a business owner think about when hiring a representative?
These are major decisions for most companies and you need to be sure that the firm you have chosen has your complete trust. Secondly, it helps to understand who from that firm will actually work on your project and whether or not they have the experience needed to complete it successfully. Finally, you are going to be spending a fair amount of time with whomever you hire. I would make sure that the chemistry is there for the team to work together. It can be a nine- to 12-month process and it sure is better if you can have some fun going through it.
MATTHEW FEENEY is Managing Principal with CresaPartners in Philadelphia. Reach him at (610) 825-2159 or mfeeney@ cresapartners.com.