If you are a tenant and plan to renew your lease and remain in your current space, there are many benefits to engaging a tenant rep broker. Many happy tenants believe there is no need to hire a broker and just negotiate a renewal deal directly with their landlord.
1) Your Tenant Representation won’t cost you anything.
WHY? Almost every lease deal has a paid commission built into it which is ultimately funded by the rental dollars. If the tenant does not hire a broker, the landlord’s broker/in-house leasing team takes the full commission. If the tenant is represented, the landlord’s agent is forced to share this commission with the tenant’s agent.
2) New tenants mean new tenant improvement dollars, new legal reviews, new issues that cost time and money.
Landlords want to minimizes expenses and don’t want to deal with new tenants. They want to keep you.
3) Renewals are the most profitable transaction in commercial real estate for a Landlord.
When the landlord budgets the cost of renewing and/or releasing leasing out a space, they always take into consideration tenant improvements and leasing commissions. When you fail to engage your own broker, the landlord pockets this extra money as profit.
3) Your landlord can’t afford to have you move.
Loan covenants and refinancings are all impacted by the net operating income of a building. Subtle variations in net income can impact borrowing costs and valuations.
4) If the landlord needs to find a new tenant, they must pay a full tenant rep commission to an outside broker.
Plus the building may not be immediately released.
5) Lease renewals are a chance to reset your lease schedule backwards.
Most tenants do not have the time or data to access to comparable lease comps and availabilities.
6) When a tenant is unrepresented, a landlord can almost always charge a higher rent.
By convincing a tenant to renew without their own broker, the landlord’s agent not only collects a bigger commission, but the landlord also ensures that it will not have to compete with other landlords for the tenant’s requirement thereby allowing it to secure a higher rent.
7) Tenants fail to benchmark their operating expenses.
Very few tenants even think to ask this question.
For a free lease diagnostic to see if you can save money on your lease renewal, please contact McGowan Corporate Real Estate Advisors.