When it comes to leasing commercial workspace, too many Tenants mistakenly believe that the Landlord’s Leasing Agent/Broker will somehow represent them in negotiations. Unfortunately, this is never the case.
The important question that this article answers is, “Who really represents whom in a commercial lease negotiation?”
As a Tenant, your wants and interests are different than the Landlord’s, at times even diametrically opposed. Despite what traditional Commercial Real Estate Brokers say, it’s impossible for one Broker or his company to truly represent both sides of a lease negotiation fairly and faithfully. Despite the camouflage paint, traditional Commercial CRE Brokers always have conflicts of interest because they have a built-in bias that favors Landlords as their traditional bread and butter, not you as the Tenant.
Too often, a Tenant begins the process of leasing workspace without hiring a true 100% Tenant Representative to exclusively represent its highest and best interests. Tenants often don’t realize that a Tenant Rep is not at their expense, since the Tenant Rep normally splits the leasing commission with the Landlord’s Listing Agent. The leasing commission gets paid whether or not a Tenant actually has a dedicated advocate during his or her transaction.
At some point, many Tenants find themselves too far down the road in a transaction to fully benefit from the expertise, advocacy and unbiased representation of a true Tenant Rep. This can result in a number of troubling issues and frustrations for the Tenant. These include losing the upper hand in negotiations, being subject to unfair pricing and unsatisfactory terms and too late realizing that things could have gone far better if they had a professional dedicated solely to representing their best interests.
It’s important for every Commercial Tenant to understand the vast difference between a Tenant Representative and a traditional Commercial Real Estate Broker.
Helping us answer this critical question and more is William Gary, Principal at MacLaurin Williams in Denver/Boulder, Colorado, and founder of The Tenant Rep Channel. Gary’s firm is committed to exclusively representing Commercial Tenants and Owner-Occupants and creating valuable resources that help to educate the public on the value of exclusive, 100% Tenant Representation.
Differences Between Tenant Representatives & Traditional Real Estate Brokers
Gary allowed, “Avoiding conflicts of interest and acting as a fiduciary and loyal and true advocate for our Occupier Clients is critical, including when they need our help outside of our home market in Metro Denver/Boulder. Consequently, we decided that we needed to have highly skilled, like-principled 100% Tenant Rep Firms already identified, vetted and on-board with MacLaurin Williams in major markets.
All of our 100% Tenant Rep Offices have the same serious mission to help Tenants and Owner-Occupants, not Landlords. So we conceived The Tenant Rep Channel (TRC).
We help each other to help our Clients.
When Occupiers need help with workspaces elsewhere, we’re already working with the best-in-class, 100% Tenant /Buyer Representatives there.”
The Tenant Rep Channel only works for Occupiers, no Landlord’s Agents or regular Commercial Brokers are allowed. No Dual Agents, no Designated Agents, no Facilitators or Intermediaries and certainly no Transaction Brokers. So that also means no double-dipping on fees, like with traditional or regular Commercial Brokers.
We don’t allow the lawful but awful Conflicts of interest that injure Occupiers.
As Gary notes, “This is precisely why MacLaurin Williams’ tag line is Be Represented. Not brokered.™ Worldwide.”
Taking The True Pledge
A real 100% Tenant Rep should be able to meet all the criteria needed to take the Exclusive Tenant Rep Pledge. A Landlord’s Listing Agent or traditional CRE Broker simply cannot make this pledge to Tenants and Owner-Occupants. A real Tenant Rep never puts him or herself in position to double-end an Occupier’s transaction and double-dip on fees/commissions. That’s what traditional CRE Brokers frequently attempt to do. It’s quite often their highest goal.
Furthermore, a 100% Tenant Rep acts as a true fiduciary, advocate and loyal, obedient Agent for an Occupier. On the other side of the table, the opposing Landlord’s Listing Agent does this for the Landlord. A true 100% Tenant Rep also conscientiously avoids and turns away from conflicts of interest. Traditional CRE Brokers frequently create and run towards them to try and double their fees in your transaction.
Vision & Mission of the Tenant Rep Channel
After resigning from another 100% Tenant Rep organization, MacLaurin Williams still wanted to have a 100% Tenant Rep Network to best serve its multi-market clients. Gary explains, “We wanted to compete harder and more effectively against the large Tenant Rep chains, as well as the traditional CRE Brokerage Houses that all claim to perform tenant representation.”
Initially, The Tenant Rep Channel was intended to be an informal 100% Tenant Rep Network just for MacLaurin Williams’ own use. But it escalated when Gary asked two other highly experienced, 100% Tenant Reps, Chris Carmen (Indianapolis) and Craig Melby (West Palm Beach/Asheville) if they might have a use for it, too. They were immediately interested and so The Tenant Rep Channel grew from that initial seed.
Unlike traditional CRE Broker Networks, The Tenant Rep Channel is an informal, virtual model that doesn’t have initiation fees, dues, required conferences, travel expenses for airfares and hotels, by-laws or contracts. The mission: just keep it simple and base it around a shared Google map + list of major markets that every participating Tenant Rep Firm must prominently display on its own website.
Amazingly, the bigger independent, 100% Tenant Rep Firms are just as interested in The Tenant Rep Channel’s marketing tool as smaller firms. They still feel a need for a big coverage footprint to compete head-to-head more successfully against the big traditional CRE Brokerage Houses, such as CBRE, JLL, C&W, Colliers, Newmark, Avison Young, etc., plus Savills Studley and Cresa as tenant rep chains.
The Tenant Rep Channel’s growing success comes from its ability to provide a big coverage footprint for independent, 100% Tenant Rep Firms. It’s a very real, 100% Tenant Rep Network, with most TRC Principals having 20 and 30 years of highly valuable CRE experience. It’s a super heavyweight group in terms of talent and professional skills.
Omni Realty Group is proud to be a big part of The Tenant Rep Channel’s rapidly expanding network.
How Awareness of Conflicts of Interest Will Reshape Commercial Real Estate
With more education and awareness of the inherent conflicts of interest in the traditional CRE Broker Model, combined with new resources like The Tenant Rep Channel, you might anticipate that a major shift would take place in the Commercial Real Estate Industry where Tenants and Buyers would flock to and favor 100% Tenant Reps over traditional CRE Brokers.
However, Gary notes, “Too many Occupiers still believe that CRE Brokers are pretty much all the same, other than some work for big firms and some for smaller shops.” He goes on to add, “Occupiers often know some CRE Brokers as friends or family and they’re comfortable hiring them without understanding the complexity of local agency laws.”
As 100% Tenant Reps, we’ve not done a good enough job of making it clear that the Commercial Real Estate Industry is terribly plagued by conflicts of interest and that these conflicts of interest frequently do serious damage to the best interests of Occupiers. Most people can grasp that their attorneys should not have any conflicts of interest in their legal matters; it’s more of a Win vs. Lose situation. But Occupiers don’t make the same leap when it comes to hiring CRE Brokers to handle their CRE transactions.
The bottom line is that in order to reshape the Commercial Real Estate Industry, it’s incumbent upon 100% Tenant Reps Companies to better explain “why” conflicts of interest are so damaging for Occupiers. We need to educate Tenants and Buyers on what can go wrong. Simply saying, “We don’t have conflicts of interest,“ doesn’t resonate with Occupiers. It’s not nearly enough.
Occupiers need to learn why conflicts are harmful for them; how they can waste tons of valuable time and spend significantly more money; money that is their valuable net profits.
William Gary concludes with these final thoughts, “One thing that we initially hoped would occur on The Tenant Rep Channel is happening. By being connected through this network, creative ideas are getting shared worldwide and some really innovative things are blossoming organically.
The 42Floors Elite Site Widget, which is a full market, Commercial Property Search Module for our own websites, is one example. I urge every 100% Tenant Rep to check it out and really assess the value it could have for your business. We all need to get serious about educating Occupiers on the stark differences between 100% Tenant Representatives and traditional CRE Brokers!”
* Note: Reprinted with permission of Michael J. Kushner, CCIM, based on Canonical Reference to OMNI Realty Group’s blog article, Who Really Represents You in a Commercial Lease Negotiation, dated January 23, 2018, posted at http://omnirealtygroup.com/2018/01/24/really-represents-commercial-lease-negotiation/#comment-49873.