The more imbalanced the knowledge in a negotiation, the more the side with greater knowledge can take advantage of the other side.
So many times in life we try to do something ourselves because we're too cheap to pay an expert. That's why the floor tile is crooked in my bathroom and the faucet at the kitchen sink is loose. Sure I can do it, but can I do it well and without a lot of education and practice.
It's the same in business. What am I doing myself that I should be paying someone else to do? Website? Marketing? Adwords? Health benefits? Negotiating a lease?
I can't possibly know how to do all these things well and have the time and tools to do them effectively and efficiently. Too often when I try to do things myself, I just don't know what I should know because I'm not an expert. I haven't studied the industries to know the nuances and norms.
So let's talk about negotiating a commercial lease. A business owner or top executive can do it herself - no question about it. But she isn't in the business of real estate so she doesn't have the tools or market knowledge to manage the process and know what is or is not a good deal.
Landlords count on the fact that tenants aren’t experts in the real estate business. It’s better for them if a tenant negotiates a lease renewal without a broker because the landlord can safely assume that the tenant isn’t shopping. One of the primary jobs of a tenant rep is to level the negotiating balance of power and knowledge.
By hiring a tenant rep broker, a business owner or top executive gets the assurance of having market knowledge - current market conditions, the process, industry norms and standards, other industry experts that will be needed (attorneys, architects, contractors, etc).
In fact, I was a landlord for 20 years before “switching sides” to exclusively represent tenants. I was the guy who signed the leases, approved budgets, and directed the leasing program. No other tenant rep I know can say that. All that experience is now working only for tenants.
The funny thing is that my clients don't pay me. Does that mean I work for free? Certainly not. I am paid, but by the landlord. At least it's the landlord who writes the check. In reality, I'm paid by the tenant indirectly because it's included in the rental rate just like the landlord agent's fee. But the landlord doesn't give the tenant the commission if a tenant rep isn't used. In fact, the landlord's agent makes double and the landlord saves a third of the commission. So it's like the tenant is paying for a service that he's not getting.
Sure, the landlord will tell the tenant that he'll give the commission to the tenant if he doesn't use a broker, but then the rental rate will likely be higher than it should be. There's a reason why landlords want to keep tenant reps out of the negotiations.
Here's the bottom line: Use a tenant rep broker when negotiating a office lease renewal or a new lease. It saves you time and money, reduces your risk and ensures that you have someone loyal to you negotiating for you. It gives the tenant leverage in the negotiations.
If your lease expires in the next 2 years and you are in Plano, Frisco, Richardson, Addison or Dallas, don't delay. Contact me today for a complimentary lease review.
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