Why Companies Should Hire a Tenant Representation Broker When Negotiating with Landlords

If you need to address upcoming corporate real estate needs, it is critical that you consider hiring a tenant representation broker — someone who will be on your side of the table representing your best interests because you can rest assured that the landlord will have representation.
Picking a real estate brokerage firm that isn’t representing landlords will help avoid conflicts of interest especially when dealing with your current landlord.
What hiring a tenant representation broker gets you
A tenant representation broker has a fiduciary obligation to the tenant to ensure the tenant’s needs are met. He or she will provide market knowledge, assist with negotiations and help the tenant avoid mistakes.
When hiring a tenant representation broker, look for a firm and broker who exclusively represents tenants and understands your industry. You’ll want someone you trust and feel comfortable with. A tenant representation broker will also be available to you after your lease is signed if you have any questions or issues that crop up.
Think of the tenant representation broker as an extension of your internal staff. If your company needs help in the future, you’ve built a relationship with a broker that can help you with future needs, whether that is expanding into another city, or expanding or downsizing your current space.
What a brokerage firm representing both sides gets you
The vast majority of real estate brokerage firms represent both landlords and tenants to maximize their revenue opportunity in the marketplace. These dual agency firms straddle the fence. You’ll have brokers who represent landlords, brokers who represent tenants and brokers representing both parties, all working for the same firm.
More often than not, brokers at these firms will be encountering each other, sometimes daily. Maybe their cubicles or offices are on the same floor. Perhaps they chat in the break room. Sure, they may argue that a glass wall exists, but the potential for conflicts of interest is present.
Remove the conflict of interest and trust your broker
Hiring a real estate brokerage firm without a landlord representation business removes perceived or actual conflicts of interest.
A tenant representation brokerage firm can approach a real estate transaction without bias and find what a tenant wants without being in tangled web of pressure experienced by dual representation brokerage firms to show buildings leased or owned by companies it represents.
Real estate is a business of trust. It’s best not to even enter into a compromising situation by hitching your wagon to a company that represents both landlords and tenants.
Don’t try to renew a lease on your own
Some tenants think they can save money by simply not hiring a broker, especially if they plan to stay in the same space. This can and often is disastrous for the tenant for a couple of reasons.
The most common misperception is when tenants think they are getting a good deal when a landlord provides discount over the asking rate, say 5 percent, on the premise that the landlord won’t need to pay a commission to a tenant representation broker. The reality is that landlord actually makes often more than double their commission which is simply giving more money into the hands of your opposition.
The second reason is that tenants are losing access to valuable market intelligence that can significantly reduce a tenant’s financial obligations. For instance, a tenant could end up with a situation in which a landlord broker uses an overpriced comp from another tenant who didn’t use a broker and grossly overpaid to renew their lease. But in this scenario, more realistic comps from a tenant broker would have shown this tenant should have actually qualified for a 10 percent discount.
We recommend that a tenant take time to research brokerage firms and find a tenant representation broker who will answer all their concerns, provide expert advice and represent them in the market without the risks of conflicts.
This post originally appeared on SiteSelectionGroup.com