For over a century, commercial real estate brokers have had their familiar “For Lease” signs on buildings, marketing vacant space for building owners. We at Coldwell Banker Commercial, Sunstar Realty will on occasion also offer property management services to landlords. We assist Landlords with financing and additionally advise them in the purchasing and selling of real estate portfolios.
Landlord representatives usually referred to as “leasing agents” or “leasing brokers,” serve a key role in commercial real estate by locating tenants for their clients’ buildings. Accomplishing that goal is a lengthy, multi-step process that includes positioning the product in the marketplace, identifying suitable prospects, creating and executing marketing plans, negotiating the transaction, and managing all of the steps associated with the leasing process. Landlord representatives must have their fingers on the pulse of their market. A thorough knowledge of tenant demographics, occupancy rates, leasing rates, and industry trends is essential. Beyond technical expertise, however, they must also be adept at relationship building, and must know how to coalesce the varying needs of tenants, landlords and leasing brokers into workable, win-win-win deals. The Landlord Tenant relationship is actually a partnership where both parties have to succeed to make the relationship work.
The objectives of the tenant in a commercial lease transaction are generally diametrically opposed to those of the landlord. While the landlord will want the longest lease, at the highest rent with the least concessions, in virtually every transaction the tenant wants exactly the opposite.
The landlord is king, and a brokerage firm’s business is that of the palace guard. In a soft market like we have today creativity rules the day. There are few rules, and there is no such thing as a “market” rent. Tenants falsely think it’s the market that sets the terms between the landlord and tenant, but the commercial real estate market is different — every property is unique and each landlord’s circumstance is different. It isn’t like the stock market, with millions of buyers and sellers trading with open information and resetting the market price with every buy or sell order. Furthermore, the information about actual lease transactions is typically held privately between the parties to the lease transaction. There is no public database of lease comps.
Some brokers have chosen to exclusively represent the tenant in the transaction. Many Landlord brokers did not think the trend would continue and it was just a fad. Brokers forecasted that tenant representation would go away once it became a landlord’s market again. But as vacancy rates went down, making building choices fewer and rents more expensive, the role of a tenant’s advocate only becomes more valuable. Creating leverage and developing quality options for tenants became more critical than ever. But like any paradigm shift, it took several years to educate the market about this new way of doing business. Tenant representation has become the gold standard by which sophisticated corporate executives, law firms and other private business owners seek out independent representation for their corporate real estate transactions.
Tenants want independence in their legal counsel, accounting treatment, financial advisory and insurance services … and now also their commercial real estate services. Business owners want to sleep at night knowing that their interests have not been compromised, that they have seen all of the options, and that they have the bottom line on a transaction to lease or purchase a property. Free from the shackles and chains of landlord listings, the tenant representation service provider is able to deliver that comfort.
Whichever role the broker chooses they need to be totally knowledgeable about the area in which they work. In situations where you are working outside the normal market I always refer to a knowledgeable broker in the market.