The Complete Guide to Tenant Representation

and Why you Need to Hire A Tenant Representation Broker

What is a tenant representation broker

What is a Tenant Representation Broker?

When it comes to finding the perfect commercial real estate space for your business, you want to make sure you have someone on your team who is looking out for your best interests. That’s where Tenant Representation Brokers come in. A Tenant Representation Broker, also often shortened to “tenant rep broker,” is a real estate professional whose sole focus is representing the interests of tenants in the commercial leasing process.

Tenant Rep. Brokers help business owners and executives navigate the often complex world of commercial real estate so they can find the perfect space for their business at the best possible price. Whether you are a multi-location national brand looking for their next location, or if you are a start-up business looking for your first space, Tenant Rep. Brokers can help. From warehouse users, to retail locations, Tenant Representation Brokers are available for any and all product types.

The First Capital Property Group Tenant Rep. Broker team is experienced in small tenants to large tenants, office to industrial users, established operators to new operators. As we further dive into The Complete Guide to Tenant Representation and Why You Need to Hire One, you will explore topics such as:

  • Who Should Hire Tenant Representation Brokers
  • What does a Tenant Representation Broker Do
  • How Tenant Representation Benefits Business Owners like You
  • Are Tenant Representation Brokers Beneficial in a Renewal
  • When to Start Looking for a Tenant Representation Broker
  • Finding the Right Tenant Representation Broker
  • The Cost of Hiring a Tenant Representation Broker

The Complete Guide to Tenant Representation and Why You Need to Hire One also dives into some of the most common terms and topics that come to light during a lease signing that you should know! These include:

  • What is a Personal Guaranty of Leases
  • What you need to know about Tenant Improvement Allowances
  • The difference in Rentable and Useable Square Feet

The major perk of hiring a Tenant Rep. Broker is that they will walk you through every step of the process, navigating the above terms and more.

Who Should Hire Tenant Rep. Brokers?

Tenant Rep. brokers are valuable to nearly every business regardless of type, size, location, or reach.

Typically, any business or retailer that falls into the below categories would benefit from a Tenant Representation Broker:

  • Seeking a new office, retail, flex, industrial or medical space
  • Currently on a lease that is nearing its expiration date
  • Someone who is currently outgrowing a space, ready to downsize, or whose needs are not being met by their current space
  • Anyone who is feeling lost or overwhelmed in their space search, or lease renegotiation/renewal

The kind of company or businesses that can use a Tenant Representation Broker, and often do, vary greatly:

  • Size: Large or Small
  • Reach: Local, regional, national or international businesses
  • User Type: Retailers, restaurants, medical users, warehouses, manufacturers, distributors, office users, or special user types
  • Funding: Private, public or non-profit organizations
  • Industry Type: Cold storage to healthcare, tech start-up to national restaurateurs
Reasons to hire a tenant reprsentation broker

What Does a Tenant Representation Broker Do?

A Tenant Representation Broker’s focus is to help companies, organizations, business owners, etc. navigate the leasing process from identifying their needs, finding ideal locations and site selection, to negotiating and finalizing a lease, and through lease expirations and growth. The commercial real estate (CRE) industry is a fast-changing industry with market shifts happening continuously. Tenant Rep. Brokers are experts in the CRE industry alleviating the need for companies, organization, business owners, etc. to research and learn the cur-rent market when you are ready to renew a space, find a new space, expand, etc. This saves you time and effort; a Tenant Rep. Brokers market knowledge is used throughout the entire process.
Tenant Representation Brokers help with:

  • Choosing whether to stay in a current space or relocate to a new space
  • Identifying your needs for a space and finding the right space to meet those needs
  • Negotiating strong lease terms for your space
  • Navigating the ins-and-outs of signing a lease and answer any questions
  • Deciding if leasing is the right options instead of purchasing

The decision to stay in your current space or to identify other options is one that Tenant Representation Brokers will walk through with you. Identifying whether your current space is meeting your business needs in the present and throughout the next term is crucial for choosing if you want to renew or relocate. Your Tenant Representation Broker will walk with you through the decision taking into account the current market status and options available to you. Whether you renew in your current location, or decide to look for other locations, a Tenant Representation Broker will help you navigate both paths.

Tenant Representation Brokers aim to please, they want you, as the client, to find a space, or renew in a space, that meets all of your needs and more. Identify those needs, with your business goals for future growth and more, factor into finding the right space; the right location, size, and space features will be discussed in depth with your Tenant Representation Broker to help them identify potential sites when they complete their market survey. Once potential sites are selected, your Tenant Representation Broker will coordinate tours of each site where you will be able to drive the market, see the neighborhood, check for building quality, amenities, and floorplans, but also check specific space details such as the amount of natural light, or the distance from elevator access and electrical capabilities, that mean the most to your business.

After finding spaces that fit your needs, your Tenant Representation Broker will begin working towards the best deal terms for a lease. Combining their knowledge of the market, and experience, guided by your space needs, your Tenant Representation Broker will submit a request for proposal from the landlord or landlord broker to find out what deal terms they have deemed the most important, then submit a Letter of Intent (LOI) to them with your deal points which prompts the final negotiation process. An LOI is not a legally binding docuemnt but it highlights the deal terms being asked for. Until both parties agree on the terms, the final lease is not completed.
The Tenant Representation Broker provides valuable assistance with this process by leveraging the rates and terms that are market standard, ensuring you understand the terms you are agreeing to, fighting for the important aspects identified previously and handling the communication between you and the landlord broker / landlord.

Your Tenant Representation Broker does not stop helping once your lease is signed; throughout your lease’s lifespan, your Tenant Representation Broker will continue to help you stay on top of the market, check in to ensure your still happy in your current space, be a resource should you decide you want to expand or open an additional location and help you when it is time to renew your lease. If the need arises, they can also help you with subleasing a space.
Instances where there is a difficult landlord, and troubling communication patterns, a Tenant Representation Broker can act as the mediary between you, the tenant, and the landlord to alleviate any tension and problem solve.

IS LEASING THE RIGHT CHOICE?
As you and your Tenant Representation Broker explore your space needs and business goals, if it makes more sense due to current market trends to look into exploring purchasing a space, that is also something your Tenant Representation Broker can help with.
If you have a current space that you would like to explore selling, that is also something Tenant Representation Brokers are well versed in helping with.

How Tenant Rep. Benefits Owners Like You

Navigating the process of finding a space, and negotiating a lease is often challenging and time consuming; that is where hiring a Tenant Representation Broker is beneficial. There are numerous reasons why working with a tenant representative is advantageous for businesses of all sizes.

how tenant representation brokers benefit owners

Tenant Representation Brokers are incredibly knowledgeable about the ins-and-outs of commercial real estate leasing—something that most business owners don’t have much experience with, or desire to engage in while they’re busy in the day-to-day operations of their business. Property listings are often hard to find, and can be wildly inaccurate
or even incomplete making it hard for you to decide if a space could be a fit. Tenant Rep. Brokers have access to more resources and listing platforms that business owners and landlords do not have access to. In addition, Tenant Rep. Brokers also have direct access to the listing brokers and are able to quickly get updated information or know where to go to find the information needed.
Not all available properties or spaces are even listed – which further emphasizes the importance of a broker who is well versed in Commercial Real Estate. Tenant Rep. Brokers have network connections that allow for them to know when there are “Off-Market” properties available allowing for you to get first access before other potential users.
The expansive commercial real estate knowledge allows for your Tenant Rep. Broker to be able to advise you to whether or not leasing a space is the best business decision for you based on market factors.
In some instances, it may be more advantageous to purchase a space, or to make use of creative solutions such as co-working spaces. In short, knowing what is out there on and off the market, and the options that Commercial Real Estate knowledge provides is worth hiring a Tenant Representation Broker.

Tenant Reps also have extensive experience negotiating leases on behalf of their clients. Because they’ve negotiated countless leases, they know exactly what to say (and what not to say) to get the best possible terms for you. Tenant Rep. Brokers are able to negotiate with the knowledge of what is standard for the market – lease rate, CAM, escalations, compliance fees, renewal options, exclusivity rights, tenant improvement allowances, and more.
Their experience dealing with those terms, and the countless others included within the lease negotiation process is also another reason why having a Tenant Representation Broker is time consuming for owners and business owners like you!

In addition, tenant representatives have strong relationships with landlords, other brokers, and property managers. Like we have already mentioned, this comes in handy for getting their clients access to off-market opportunities, but this is also crucial for getting access to landlords / brokers of a property, and when it’s time to negotiate the lease.
Landlords are busy people, just like you, and they often either don’t answer their phone, or hire a landlord broker to handle the leasing of their property. Landlord Brokers are used to working with other brokers instead of with tenants directly; this leads to Tenant Rep. Brokers being more successful with getting the landlord brokers to answer the phone.
Tenant Rep. Brokers have the support of their company’s reputation and historical deals completed with other firms working in their favor. A reputable Tenant Representation Broker representing a business communicates the reputability of the business which may not be immediately conveyed through tenant-landlord direct communication.

Having a tenant representative on your side also gives you someone to lean on throughout the leasing process. From identifying appropriate properties, to negotiating your lease, and beyond, a good Tenant Rep. Broker will be there to offer advice and support every step of the way.
A Tenant Rep. Broker will be well-versed and experienced in helping a business identify exactly what they are looking for, and provide creative solutions to properties that might at-first-glance not work. From the size, parking, and location to amenities and buildout, a Tenant Rep. Broker guides owners to the ideal space.
“Time is Money” – Tenant Representation Brokers allow for business owners to focus on their business goals.

Are Tenant Rep. Brokers Beneficial in a Renewal?

When engaging a Tenant Representation Broker for the numerous reasons we have already explored, the value is clear, but does it make sense to use a Tenant Rep. Broker for a Renewal? If you are wanting to stay in your same space, exercise a renewal option in your lease or make adjustments to your current lease, a Tenant Rep. Broker is just as valuable to you! A Tenant Representation Broker will advocate on their client’s behalf throughout the lease negotiation process just the same in a renewal.

One of the benefits of having a Tenant Representation Broker is the added leverage they bring to the table. Landlords who think that a tenant is going to stay regardless of the deal terms presented, are less likely to provide competitive market standard deal terms for a renewal. Having a Tenant Representation Broker communicates to the landlord that you are serious and are exploring all options.

Even if you are planning to renew in your current space, your Tenant Representation Broker will explore other options for you in the marketplace to ensure you will receive the best deal points at your current location. If they happen to find something that is even better than your current location, together you can make the new lease transition happen smoothly. This market research the Tenant Rep. Broker will complete also provides insight to the state of your current lease’s deal points – are they competitive? Are you paying above market rents? These are important factors to take into account when going through a renewal.

A Tenant Representation Broker knows that the landlord wants to keep their building occupied; tenants staying in their spaces is the best case scenario for landlords. Occupied spaces means landlords do not have any downtime in rents paid, do not have to engage a landlord broker to list the space and incur marketing costs, or pay high tenant improvement allowances. Tenant Rep. Brokers have the experience and know-how to navigate the Landlord-Tenant dynamic to ensure both parties are happy at the end, and often can rework current lease structures to be more favorable to you.

Even if you have a great relationship with your landlord, hiring a Tenant Representation Broker for your renewal is the smart decision. The thought that you may receive better terms because you have a good relationship with your landlord can lead to you missing out on actual improvements to your lease structure due to not knowing what is market standard. Lease negotiations can become tense, hurting your relationship with your landlord – a Tenant Rep. Broker would act as the third party mediary ensuring after your renewal is complete, you still have a strong relationship.
Lastly, regardless of whether or not you have a Tenant Rep. Broker assisting you in your renewal, your landlord will be spending the same percentage of the deal to get the deal done. In instances where there is only a landlord broker in a renewal deal, they will receive the percentage points that a Tenant Rep. Broker would earn. Remember, Tenant Representation Brokers cost the tenant nothing.
Tenant Rep Renewal

When to Start Looking for a Tenant Representation Broker

Determining when you should begin to look for a Tenant Representation Broker partially depends on your needs but in short, as soon as you are considering any change in space needs, or need new space is when you should being looking for one. The process for choosing the right Tenant Rep. Broker should not be rushed base on deadlines of a current lease, or foreseeable business needs. Every Tenant Rep. Broker is unique, and you want to ensure that you are able to choose the one that best understands your needs, and goals while having the time to dedicate to your property search.

The time needed after securing a Tenant Representation Broker is better if it is plentiful. The more time you have to explore the market’s availability, the better. Time allows for you and your Tenant Rep. Broker to identify multiple options, compare landlord offers against each other and leverage those to get the best deal points, negotiate with the landlord of the property you decide you want, and ensure that you have enough time to complete any construction or build-out needs in your new space prior to moving in.

The Sooner the Better to Engage a Tenant Representation Broker

Finding the Right Tenant Rep. Broker

Not all Tenant Representation Brokers are the same; each one has slightly different specialties and focuses. Remember those relationships we talked about being an important benefit of a Tenant Rep. Broker? It’s important to make sure you find the right Tenant Rep. Broker with the right experience, connections, company behind them and market reputation.

The best place to start is by asking for recommendations from other business owners in your industry or network. Once you have a few recommendations, schedule consultations with each of the Tenant Representation Brokers on your list so you can get to know them better and determine whether they’re a good fit for your needs.

When meeting with potential tenant representatives, be sure to ask them about these key areas:

  • Their experience representing businesses like yours
  • Their understanding of the local market
  • Their past successes in similar lease negotiations
  • Their availability —make sure they’ll be able to give your property search the attention it deserves
  • The resources available to them and if they have the support of their company behind them

Finding the right Tenant Representation Broker using the above criteria will make your property search process more enjoyable and successful. The right Tenant Representation Broker will also understand that during the few months they spend working with you the important part of their role is matchmaking you with the right location, property management team, and landlord that will be your long-term home.

The Cost of Hiring a Tenant Representation Broker

Perhaps the most surprising and encouraging benefit to working with a Tenant Representation Broker – in nearly every case it costs business owners nothing! Landlords build leasing commissions into the budget for their real estate investments and are glad to pay their landlord representative and outside tenant rep. brokers.

Paying these commissions are the landlord’s way of encouraging Tenant Representation Brokers to bring their clients to their building – don’t worry, these commissions are very close to being standard across a market, with some exceptions being if a landlord has extra motivation to fill their building and wants to provide additional incentives. Your Tenant Rep. Broker has your best interest at heart, and a fiduciary responsibility to you and your interests. The relationship built from a successful deal is far more valuable, especially at FCPG where we hold extra importance to the relationships we build with our clients.

While a Tenant Representation Broker costs nothing to you, some other fees to be aware of during a lease signing process include: legal fees and construction / buildout costs.
Legal fees can be accumulated when you engage an attorney to review a lease; this is often a wise decision since a lease is a legal document and Tenant Rep. Brokers, while experienced and knowledgeable, are not attorneys. Depending on the complexity and length of a deal, these fees can accumulate quickly.
Build out costs for your new space can also rapidly accumulate. These fees can be structured into your lease as
tenant improvement allowances, but often a build out expands beyond the tenant improvement allowance.
Items such as furniture, internet, artwork, etc. can add up quickly beyond the initial estimates.

No Tenant Representation Fees

Topics and Terms to Know

Tenant Representation Brokers will walk you through every step of finding your ideal space, to completing your lease signing; this includes ensuring that you understand everything along the way. The following Topics and Terms are good to know regardless and beneficial for you to be prepared to encounter as you navigate finding your space.

The Difference Between Rentable and Usable Square Footage2023-03-16T16:58:38-04:00
The Difference Between RSF and USF
The Difference Between Rentable and Usable Square Footage
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The Difference Between Rentable and Usable Square Footage

Everything You Need to Know About Tenant Improvement Allowances (TIA)2023-03-16T16:58:53-04:00
Everything you Need to Know About TIA
Everything You Need to Know About Tenant Improvement Allowances (TIA)
Gallery

Everything You Need to Know About Tenant Improvement Allowances (TIA)

Personal Guaranty of Leases – What Tenants Need to Know2023-03-16T16:59:10-04:00
Personal Guaranty of Leases: What Tenants Need to Know
Personal Guaranty of Leases – What Tenants Need to Know
Gallery

Personal Guaranty of Leases – What Tenants Need to Know

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