Tenant Representation -
Large and Small Corporate Space-
users Benefit from Effective Advocacyby Kenneth Merin,
President, Kenneth Merin AssociatesReal estate professionals who previously have been involved exclusively in the representation of newly developed buildings are discovering a valuable marketing niche in the specialty field of representing corporate tenants. Is there in fact a need for such a specialist? The answer to this question varies. However, it is clear that virtually all consumers of office space can benefit from true tenant advocacy by an experienced professional.
The best suited tenant representative is a real estate professional with constant exposure to the marketplace in negotiating specific transactions. The consultant should be a highly specialized firm which consults to and represents corporate clients on matters relative to the acquisition and disposition of corporate facilities. These matters range from optimization of existing commitments through and including feasibility, site search, acquisition and development, together with associated equity, lease and finance considerations.
It is not always simple to determine what benefits the tenant representative will bring to a specific transaction because the savings might be found in future cost avoidance rather than specific savings off the rental rate per square foot, for example. The primary benefit of working with a professional tenant representative is having an ability to look to someone involved in the market on a daily basis who is not trying to sell a specific product. In many respects, a professional tenant advocate overlaps the characteristics of an exclusive broker, except that a true tenant representative never represents buildings. Exclusive brokers are brokers first and do not view themselves as consultants.
A consultant working as a tenant advocate does not have any uniform basis upon which to compute compensation. We have worked with clients on a shared savings basis, and on hourly fees or lump sum fees when the scope of the work was clearly defined. Whether it be on a contingency fee basis or a fixed fee basis, you should look at the tenant representative as a professional akin to an attorney or other individual compensated on a fee basis. One measure of the creativity of the professional and his potential ability to facilitate a creative solution to the real estate needs of a potential client is in the advocate's willingness to structure a compensation package which matches the needs of the tenant.
In qualifying a professional, the tenant must look to the experience of the individual who will be handling the assignment. While some large companies are growing out of this concept, most tenant representation is offered by small independent regional firms. The background of a successful tenant representative should include a substantial history of representing the developer's side of the equation, but the firm should be free of conflicts of interest and not represent any building on behalf of developers as a listing broker. At Kenneth Merin Associates, we only represent listings when they are available by virtue of being declared surplus, and our client is a corporate user in need of our expertise to market the surplus real estate.
The employment of a tenant representation professional is worth the time and effort involved during the selection and contract negotiation phase except, perhaps, when the prospective tenant is one who is constantly in the subject marketplace with a field real estate staff. However, out-of-town based companies benefit even under these circumstances. In one case, we placed three dozen different sales offices for an insurance company throughout the New York metropolitan area.
When in-house real estate personnel learn to work comfortably with the concept of third party tenant representation, real estate managers can employ their talents as managers without incurring the overhead associated with carrying a staff.
A good tenant representative knows the ins and outs of concession packages and when and where to probe for lower rental. His expertise in lease negotiations should enable him to know when it is appropriate to seek greater tenant fit up, or whether, for example, the developer is more inclined to beef up the electrical or HVAC rather than the sheetrock allowance.
Above all, the true tenant representative has integrity and the time to work on your project with the diligence and skills you would bring to bear on it if you had the time and the expertise.
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