1. The landlord will start returning calls

If you have ever attempted to find office space on your own, you know how hard it can be to get a landlord to return your calls. You might have called the number on a “For Lease” sign, but never heard back (even though your company would be a perfect fit for the space being offered!).

The problem is that landlords are often busy people and do not have time to return every call they receive. A landlord may also hire their own landlord broker, who is probably more accustomed to working with other brokers than with individuals.

Hiring an experienced tenant rep can solve this problem in a couple of ways:

• First, a tenant rep has the backing and reputation of the company they work for, giving them more authority when calling landlords.
• Also, the leasing broker has likely worked with the tenant rep or his company before (they may even have another deal in the works) and therefore, they are more likely to return their call. These professional relationships are an invaluable benefit and make it much more likely that a landlord will consider your interest in the space they are offering.

2. Not all properties are listed in one place

When looking through listing sites, it can be difficult to get the full picture of what’s available on your own.

• Out of Date Information: While spending time clicking through LoopNet, for example, looking for a suitable space can be a good way to get a feel for the market, many brokerage firms do not keep their listings up to date on free listing sites such as this.
• Incomplete Information: Searching for properties on leasing firms’ websites has its own downfalls. While these are often up to date, it requires a lot of time and effort to go site to site to find every space available in the market.

A tenant rep broker has numerous resources to solve these problems and find the most inclusive list of real estate options on the market.

• Complete Listings: Commercial real estate brokers have access to the most complete listing databases like Costar, essentially the MLS of commercial real estate.
• Industry Relationships: Tenant reps have professional relationships with both leasing brokers and landlords, which allows them to easily get updated information on what’s available now.
• Off-Market Options: Through their industry connections, tenant rep brokers may also have information on spaces that are not on the market yet, as well as companies that are attempting to sublease some or all of their space.

Not only do tenant reps have resources to find you all the options available, they will take the time to cull through the list and present to you the options that best suit your needs.

3. The space you want might not be the space you need

Even if you are successful at getting your phone calls returned and finding available space through online searches, the challenges do not stop there if you choose to go through this process alone.

It is important to begin the site selection process with a needs assessment. Does your vision match up with what you need? A tenant rep broker will ask you the necessary questions and run the preliminary analysis to help you determine exactly what you need in your new office space, factoring in of course your desired budget.

Space Needs

Often, companies are looking for new space when their current space no longer fits their needs.

• Is your company growing or downsizing?
• What is your company’s projected growth?
• How does your company utilize space? Are you mostly in private offices, like a traditional law firm? Or are you looking for an open, collaborative space?

Your tenant rep will ask you several questions along these lines to help you determine what size space you need, how much space you may need in the future and how to manage your potential growth.

Parking Needs

Having parking available to employees is essential for most office tenants in Tampa, but securing enough parking spots is not as simple as it may seem. Parking is usually limited (especially in crowded areas like downtown) and can cost upwards of $200 a month per spot.

Your tenant rep can help you negotiate an optimal parking arrangement in your lease by:

• Helping you research other transportation options for your employees
• Negotiating a lower monthly price
• Estimating how many parking spots you are likely to need
• Providing creative parking solutions

If you feel that parking is important to your office search, hiring a tenant rep can be a great way to avoid overpaying and ensure your employees will have a place to park when they get to work every day.

Location Needs

Deciding where you want your office to be located is arguably the most important decision you will make during your search. Each submarket is different and, while you may have a specific location in mind, you might find that it is not the best area for your needs.

A tenant rep broker will have experience leasing space in all the Tampa submarkets and will help answer any questions you may have about the pros and cons of a specific area.

• Will clients be able to find the office easily?
• Are rental rates in the submarket within your budget?
• Is it easy to access the building from major thoroughfares?
• Where do your employees and leadership live?

These questions and more all need to be answered before you commit to a location, so using a tenant rep with experience in the Tampa real estate market will streamline the process and help you get the best location for your needs.

Amenity Needs

Let’s face it, leasing an office with access to a gym, food court and outdoor spaces sounds like a dream come true. These amenities and more are all offered in buildings around Tampa, but how do you know which ones will give you the most bang for your buck?

If amenities are important to your office search, a tenant rep broker can give you an idea of:

• What amenities are common in the area
• Whether the amenity is worth a higher rental rate
• The best amenities for your needs

These are just a sampling of the needs assessments a tenant representation broker can help with in your search for office space. Leases are long term commitments, so it is important to be certain the space you move into will be suitable for your company in the long run.

4. They Will Negotiate Your Deal Terms

Going into the negotiation process alone can be overwhelming and incredibly challenging. A landlord could quote you any rate or terms they can think of, and you have no way to know if they are standard for the market unless you do a substantial amount of research beforehand.

Things like code compliance fees, renewal options and exclusivity use terms are just a few items for negotiation, and it can be hard to know how to negotiate these if you do not have experience in the real estate industry.

Yet again, this is where hiring a tenant rep broker can save you a lot of headache and money. The tenant rep adds value to the negotiation process by knowing what economic and non-economic factors are common in the market, as well as walking you through the negotiation process and explaining things to you along the way.

Most importantly, tenant reps require no out-of-pocket fee from the tenant, so you really have nothing to lose and a lot to gain by hiring one to help negotiate your deal terms.

Tenant reps have dedicated their careers to learning the commercial real estate market and working with clients throughout the leasing process. In other words, your lease is not the first they have negotiated and is unlikely to be the last. By hiring a tenant rep, you can help your company get the best lease terms possible without the stress of worrying about whether you are doing everything correctly.

5. Tenant representation brokers know if you should lease at all

This benefit of a tenant rep may seem strange, but there are several reasons leasing a space for your business may not be the best solution.

Sometimes purchasing a building can pay off in the long run, and the emergence of co-working space has opened the possibility of having an office without entering a long-term lease agreement.

Purchasing space

Depending on market conditions and the needs of your company, purchasing office space could be more cost effective than leasing it. A few reasons you might want to consider purchasing a property, rather than leasing  are:

• Rental rates are exceptionally high
• You plan to stay in one place for an indefinite period
• You want to be your own landlord

A tenant rep broker will be able to help you define your needs and decide if purchasing your own building will be more beneficial. If you do decide that purchasing makes more sense than leasing, your tenant rep will be able to help you navigate that process as well. 

6. You can focus more on your business

Perhaps most importantly, a tenant rep broker takes the weight of the real estate process off your shoulders and allows you to focus on your business goals. You are busy managing supply chains, customer relations and any number of things that your time is better spent on than searching for office space on your own.  Even large companies with on-staff real estate professionals typically use tenant rep brokers to leverage their market expertise.

Rather than spending the hours and even days and weeks to educate yourself on the real estate market, find a suitable space, and negotiate the lease on your own, let a tenant representation broker handle the process for you.

Think of a tenant rep as your own personal assistant whose goal is to help your company find the best office space possible with the least impact on your bottom line. The tenant rep will handle everything, from needs assessments to financial analysis to a final lease summary, while allowing you to be as hands on or off as you choose to be.

Time is money, and a good tenant rep can help you spend that time focusing on your own business.

7. Real estate is complicated

At the end of the day, real estate is a complicated industry. There are so many industry-specific terms, legal details and market intricacies that it is almost impossible for someone not actively involved with real estate to know everything.

What is a Tenant Representation Broker?

Tenant representation brokers are basically what they sound like; they handle the tenant side of commercial real estate transactions. Sometimes referred to as tenant advisory or corporate services, a tenant rep is there to assist companies and organizations throughout the entire leasing process, from the initial needs assessment and site selection to occupancy, lease expiration, and beyond.

While there are many benefits to hiring a tenant representation broker, one of the biggest is that they take the stress of the real estate process off your plate. Finding the right real estate solution truly is a full-time job, and a tenant rep will run the process for you, presenting you with the best options to fit your company, while you focus on what matters most to you.

What does a Tenant Representation Broker Do?

A tenant representation broker helps facilitate the leasing transaction between a tenant and a landlord. Rather than going through the process alone, a company can hire a broker to represent them throughout the entire leasing process. A tenant representation broker can assist you with:

• Deciding whether to relocate or renew
• Finding the right space for your needs
• Securing space on favorable terms
• Questions during your lease
• Selling or purchasing space

Deciding Whether to Relocate or Renew

One of the primary jobs a tenant rep performs for their clients is helping decide whether the tenant should renew a lease for their current space, or begin searching for a space to relocate to once their lease is over.

We discuss renewals later in this article, but the basic premise is that tenant reps will generally recommend a renewal if the tenant is happy with their space and could not achieve significant savings by relocating elsewhere.

However, if the tenant does want to relocate, the tenant rep will assist throughout that process as well.

Finding the Right Space

Assuming the tenant is looking for new space, the first job a tenant rep performs for a client is site selection, which is the process through which the right space is chosen to meet the tenant’s needs. In general, the site selection process includes:

• A needs assessment outlining the client’s requirements
• Surveying the market to see which spaces are available
• Taking the client on tours of potential spaces

Needs Assessment

During the  needs assessment phase,the broker meets with the client to discuss their current real estate needs, future growth plans, and more. An experienced tenant rep can help the tenant narrow down their wish list and define a specific space requirement that will best suit their needs, including location and size, as well as other factors like type and quality of office space, potential for growth, term, etc.

DETERMINING LOCATION

Each submarket in Tampahas its own defining characteristics, including average asking rates and typical office types. These defining qualities must be weighed against a tenant’s priorities and goals to find the right area for what the tenant wants. A tenant rep broker will listen to the tenant’s needs and can recommend the submarket best suited to what the tenant requires.

For example, office space downtown is typically considered the most desirable in Tampa, but it is also the most expensive, has parking challenges, and would likely not be ideal for companies with limited budgets. In contrast, office space in the Northwest is typically more affordable, but would not be ideal for a company whose employees and leadership all reside in the Southwest.

Obviously, location of employee residences is an important factor in choosing a submarket. Good tenant rep firms can produce employee “center of gravity” maps that assist in identifying office locations that are most convenient for their workers.

ESTABLISHING SIZE REQUIREMENT

Estimating what size of office to lease is often the hardest thing for a tenant to do, but tenant rep brokers specialize in doing just that. By considering how many employees there are, the desired office layout (private office vs. open floor plate), how quickly the company plans to grow, etc., a tenant rep can estimate how many square feet the tenant will likely need.

Whether you are a startup with high growth potential or a large, an established company looking for a new headquarters, finding the right amount of space for your needs is an important step in the leasing process.

Market Survey

Once the tenant has identified the type and general location of space that will work best, the tenant rep will begin gathering a list of available spaces that meet the criteria. To do this, a tenant rep broker will use a mix of techniques, including:

• Listing services
• Personal industry connections
• Market research
• Tenant requirement notices

An experienced tenant rep will take this opportunity to have a brief conversation with the listing broker to makes sure the terms they are willing to offer generally fit within the tenant’s criteria.  For example, if the tenant requires a short-term lease but the landlord is unwilling to do anything less than seven years, that property will likely be eliminated from the survey. Tenant reps attempt to identify these and other potential “deal killers” early to make the tour and negotiation process as efficient as possible for everyone involved.

Tours

After discussing with the client and narrowing down the list to about five to ten spaces, the process of touring can begin.

The tenant rep will contact the brokers that represent each of the buildings identified to set up a date and time to come see the space. This market tour generally happens in a single day, and if coordinated properly, lasts about 30 minutes per property (including drive time between each building).

During each visit, the client will have the opportunity to take an in-depth look at each building and specific space to gain a better understanding of things such as:

• Building quality
• Amenities offered
• Parking
• Lighting
• Green space
• Distance from elevator
• Quality and layout of the suite.

Each tenant has their own opinion as to what’s important in a new space and visiting in person is the best way to make an informed decision on such an important  commercial real estate investment.

Securing Space for the Tenant

Once the tenant rep has helped the tenant narrow down which space or spaces they would like to lease, the second part of the tenant rep’s job begins.

Using a mix of market knowledge, industry connections, and experience, the tenant rep will work to ensure that their client receives the best terms possible for their lease.

Request for Proposal

By now, most tenant rep brokers will have had at least a brief conversation with the landlord’s broker about basic terms the tenant would like to see in a proposal. The tenant rep then sends a formal request for proposal requesting information on the terms the landlord is willing to offer. The letter does not bind the tenant to anything but gives the tenant rep and their client a starting point for negotiations.

In this letter, the landlord will outline the rental rate, concessions, and a variety of other details related to the available space that they are willing to offer. Rarely does the landlord send their best offer in this initial correspondence,  and it’s the tenant reps responsibility to negotiate on the client’s behalf the most favorable terms possible.

Letter of Intent

The letter of intent (LOI) is the tenant’s response to the landlord’s offer. In this document, the tenant makes a counteroffer with the terms they are willing to sign a lease for, including rental rates, parking, and tenant improvement allowances. The tenant rep will counsel their client as to what is common in the market and which favorable terms they should ask for.

Like a request for proposal, an LOI is non-binding. The landlord will likely not agree to all the terms of the initial LOI, however, which leads to the back-and-forth commonly associated with real estate deals.

Negotiations

If the initial LOI is not accepted by the landlord, the tenant rep and their client will need to reevaluate their terms to see if any compromises can be made. They will be in constant contact to review deal points, compare offers, and adjust requests based on current market conditions. The tenant rep broker is vital during this time and will help guide their client through the process.

A tenant representation broker adds a lot of value to this process by:

• Creating leverage by knowing what rates and terms are common in the market
• Helping the tenant understand the terms and jargon within the lease
• Working hard to negotiate the best terms for all deal points, but especially those that are most important to the tenant
• Handling communication with the landlord

The tenant rep’s knowledge of the market and past experiences can make the difference between an average lease and one that is very favorable to the tenant.

Market Intelligence

Since real estate is a rapidly changing industry, tenant reps must constantly stay up-to-date on the market if they want to get their client’s the best terms possible.

Most of this research consists of the tenant rep learning about the latest comparable leases and sales, which developments are nearing completion and which are just beginning, and any major zoning or tax changes that could affect the Tampa market. To effectively represent a tenant’s best interests, a tenant rep must be confident in their market knowledge and use it effectively as leverage in discussions with the landlord.

Market intelligence is used from the initial Request for Proposal all the way to the signing of a lease, so it is important to find a tenant rep with the experience and resources to gather the most relevant information.

While individual deal transaction information is rarely made public, some of the market level knowledge eventually makes its way to the public in the form of market reports, which several of the top commercial real estate companies in Tampa release on a quarterly basis.

Reviewing the Lease

Once both parties agree on the LOI and the landlord has drafted a lease, the tenant rep performs a comprehensive review of the commercial terms to verify their accurate compliance with the final letter of intent.

While a broker is not allowed to give legal advice, they will work with the tenant’s legal counsel to negotiate legal terms and offer advice to make the lease as favorable to the tenant as possible. This helps reduce review time and make the tenant confident before signing the lease.

Project and Construction Management

After the tenant has signed their lease, they will likely be planning some form of renovations to their new space. That means having to manage contractors, designers, and any number of other construction-related professionals. Rather than trying to handle everything themselves, most tenants choose to draw on the experience of their tenant rep.

The tenant rep’s goal is to make sure a sufficient tenant improvement (TI) allowance is defined BEFORE the lease is signed. From there, a tenant rep will work with the tenant and project manager to make sure the project stays on time and under budget.

While tenant rep brokers do not handle every detail of space build-outs once the lease is signed, most tenant reps will likely be able to refer you to a project manager that can assist you with the process.

Assistance During the Lease

The job of a tenant rep broker does not stop when a lease is signed. The broker/client relationship will often continue throughout the term of the lease, whether by something as simple as supplying the tenant with market information, to something as complicated as helping the tenant deal with a challenging landlord.

Whatever the tenant’s needs, a good tenant rep broker will do their best to continually offer assistance when needed.

Space Expansion and Lease Renewals

If the tenant decides to renew or expand, the landlord will likely want to renegotiate the lease and try to get the tenant to pay more rent. In this scenario, a tenant rep broker will play a similar role to what they played when the lease was originally negotiated. The tenant rep will inform the tenant of current market conditions to help make sure they get the best terms possible.

EXPANSIONS

Sometimes a tenant’s space needs can change mid-lease, in which case they may need to negotiate an expansion or downsizing with the landlord. In this situation, a tenant rep broker will step in and assist with finding the best option for the tenant.

LEASE RENEWALS

When a tenant’s lease term comes to an end, they basically have three options:

• Renew the lease at the existing space
• Terminate the lease and find another space
• Expand/downsize at the current property

The conversation typically begins with another needs analysis to determine which of these options is the best solution.

If the tenant wishes to leave the space and search for another property, the tenant rep will put the site selection process into motion once again.

Subleasing Space

The need to sublease space can arise for numerous reasons. The two most common being:

1. A company who is obligated to lease too much space and wants to sublease a portion of their space. This happens when:
   1. Either they took more space than they needed intentionally and intend to sublease until they can grow into the space
   1. Or a tenant is downsizing their offices and no longer needs to occupy their entire space
2. A company who wishes to leave their space before the lease comes to an end, whether this be to expand, downsize, relocate, close the office, etc.

Regardless of the reason, subleasing, or the process of transferring an active lease to another tenant, can be a very complicated process, one which most tenants would rather not go through on their own.

An experienced tenant rep will know not only whether the tenant can sublease (some leases do not allow it), but can market the space for sublease and find a suitable tenant.

Dealing with a Challenging Landlord

Most of the time landlords and tenants get along very well. However, an occasion may arise when a tenant begins having problems with their landlord that they would prefer not to handle alone. In this situation, the tenant rep broker will step in and try to work out a solution between the two parties.

The tenant rep’s priority is protecting the interests of their client, so they will do their best to make sure the tenant is being treated fairly and is receiving the terms in their lease.

What if You Don’t Want to Lease?

Although a tenant representation broker’s primary job is assisting with leases, they also occasionally become involved with sales or purchases of property. If you are attempting to buy or sell a property, or even trying to decide between leasing and buying, a tenant rep can be a great resource.

Purchasing Space

Whether you are searching for a commercial real estate investment property or have decided that purchasing makes more sense than leasing, a tenant rep will be able to walk you through the process.

Just as a tenant rep knows about market rental rates and which space are available to lease, they will also likely know of comparable sales in the market and which properties may be available for purchase. This type of information can be difficult to find, especially in Texas, where sale prices do not have to be disclosed, so having an experienced tenant rep handling the research can save you a significant amount of time.

Selling Space

Just as a tenant representation broker can assist you with the purchase of a property, should you want to sell existing property, a tenant representation broker can also assist in this process as well.

One of the most frequently asked questions by our tenant representation clients is why they should use a tenant representation broker to manage their lease renewal. Many tenants believe that because they plan to renew and are not looking for new space, that they don’t need to use a broker.

While it’s true that tenant representation brokers add value via the site selection process, they are also there to serve and advocate for their clients throughout lease negotiations and provide market intelligence necessary to secure the best transaction possible.

But, would you write your will without the help of a lawyer? Invest millions of dollars without the help of a financial advisor? That is essentially what you’re doing when you choose to not use a tenant representation broker on your real estate transaction.

1. To Create Leverage

Oftentimes, landlords will not give concessions if they are certain the tenant will stay. So, in order to get the best transaction, we have found that tenants should treat the renewal process the same way as if they were planning to move. This means actually going through the site selection process, even if you don’t think you intend to relocate.  

2. To Gain Market Insight

Taking the time to go through the site selection process is not solely about leverage. It can also help you better understand the market, which may have changed radically since the last time you signed a lease.

Understanding the current market may give a you new perspective on how good, or sometimes how poor, your lease terms actually are.

Working with a reputable tenant representation brokerage can give you access to up-to-date market data such as vacancy and rental rate trends as well as lease comparables (“comps”) in your submarket and, sometimes, your building, so you can see how the deal you’re being offered compares.

3. To Negotiate Better Terms

Renewals are a landlord’s best case scenario, as it saves them money in a number of ways:

• Keeping the space occupied means that they do not incur any downtime, meaning no break in rental income
• Avoiding vacancy means that the landlord does not incur any marketing costs.
• Typically, landlord out of pocket expenses such as finish out allowances are smaller on renewals.

But what if I have a great relationship with my landlord?

Because office lease terms typically span 5 to 10 years or more, many of our clients develop strong relationships with their landlords. Sometimes tenants feel like this great relationship means that they will be able to secure better terms on their own, without the help of a broker. We caution against this mentality.

Some landlords will even tell tenants that it will cost them less to do the deal directly because the tenant will “save” the landlord money on the tenant representation broker’s commission. Here’s why:  

In Tampa, generally landlords budget 6% of the total transaction value for broker commissions. Of that, 2% goes to the landlord’s leasing broker and the other 4% goes to the tenant representation broker. If a tenant chooses to do a direct deal (without the assistance of a tenant representation broker) the landlord’s broker will earn 4% instead of 2% – doubling their commission. So it is in their interest to transact with the tenant directly.

Landlord brokers will typically say that the 2% extra is what the tenant should see in savings in their lease terms. But in our history, we have found that to not be the case. Tenants are not as in tune with market dynamics as real estate professionals and end up with less favorable economics than could have been achieved without the help of a skilled tenant representation broker. In our experience, the value added by a tenant representation broker far exceeds 2%.

What if I already have a renewal options in my lease?

Even if you have a renewal option in your existing lease, it is wise to go through the entire process to secure the most favorable economics.

A lease renewal very rarely gets executed exactly per the language in a tenant’s existing lease. Including a renewal option in a lease is always good to have in place as a safety net, but, in practice, almost all renewals are negotiated similar to the way a new deal would be.

What’s next?

If you have an upcoming lease expiration or renewal option, I would be happy to meet with you to discuss your potential options. Reach out today to schedule your phone consultation with the our team.

Our very own Steven Silverman was interviewed by Tampa’s @FOX13News about the state of Tampa’s Commercial Real Estate. “We spend more time trying to help Tenants and Landlords now than we’ve ever spent” The current market presents many challenges and opportunities for both Businesses and Owners. It is important to have a resource that truly understands the current state of commercial real estate in Tampa.