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Nine Great Reasons To Appoint A Tenant Rep

May 30, 2022
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Commercial Real Estate

If you don't have the time or experience to navigate commercial real estate complexities, you might be wondering what a Tenant Rep is and the benefits of using one.

Tenant Reps, also known as Tenant Advocates or Tenant Representation Specialists, offer commercial tenants independent, expert, and conflict-free advice. They primarily focus on searching for site(s), lease negotiation and agreement, project and portfolio management (and more).

Here are nine reasons why using a Tenant Rep is crucial in getting you the best deal:

1. There's more to negotiate

The power has shifted across the Eastern seaboard, and tenants are in the driving seat.

In Sydney, for instance, the vacancy rate has jumped to an average of 9% in the CBD. And it now hovers between 10-11% in Melbourne, depending on submarket and location, driving rents down and incentives up. (To learn more about the latest market trends, read this article.)

Despite this positive outlook, in our experience, commercial tenants who handle their own negotiations pay circa 22% more over their lease term. So, it pays to team up with a tenant rep. 

That’s because, these days, there's more to negotiate. Many tenants don't realise that there are over 40 points of negotiation. And when seemingly irrelevant clauses are overlooked, they can become major problems down the line.

What's more, since we're in uncharted territory, anything is negotiable, and there are no benchmarks. Recently, our team has successfully negotiated tenant-friendly clauses, including make good removal, Force Majeure insertions, no annual increases and early termination. Even greater reasons to partner with a professional.

tenant rep at the negotiating table

2. Secure a market rental rate and the best possible lease terms

Most tenants don't have the time or knowledge to research current market rental rates and lease terms thoroughly.

Tenant Advocates do this for a living.‍

They also have the necessary skills to strategically negotiate a fair and competitive commercial lease that aligns with current market conditions. Tenant reps use metrics like the type of commercial property, location, landlord type, building vacancy rates, fit-out costs, incentive levels and the market outlook to secure you the best possible deal.

3. More opportunities for you to consider

A tenant advocate will have the experience, knowledge and expertise to identify and qualify suitable leasing opportunities from the entire market, including off-market options that are available but not actively marketed. 

Commercial real estate offers many options to the astute expert. And, once you’ve found a suitable space, there are many ways to optimise the way you use it. 

A tenant rep will lower your average rent per square meter without compromising your business's productivity and efficiency. They will analyse your business needs and help you identify all layout requirements suitable to your company culture and working style.

4. "Time is Money"

This old saying certainly applies when it comes to leasing new office space.

Searching for commercial space, getting to grips with market trends and negotiating leasing agreements is complicated and often take longer than expected. Such critical tasks burden your company’s time, money, and resources. 

Tenant Reps remove the hassle and time-wasting while applying expert knowledge to every critical task.‍

They do this by:

  • Providing you with up-to-date market advice
  • Preparing a list of suitable options for you to compare and consider
  • Scheduling and conducting property inspections
  • Shortlisting options and submitting proposals
  • Negotiating and reviewing leases
  • Managing improvements and relocation projects
  • Managing fit-out projects

That's how using a tenant rep will save you time, hassle and money; they always leave no stone unturned.

tenant advocate negotiating lease

5. Reduce your risk

Just as you would hire a solicitor to deal with your legal matters and an accountant to deal with your taxes, the real estate process should be handled by professionals who are on your side.

Engaging a tenant advocate who understands the ins and outs of commercial leasing agreements, trends, tenant rights, jargon (and much more) is crucial. Tenant advocates understand all the potential dangers and complexities of leasing transactions. And these pitfalls could magnify if you try to independently navigate the lease negotiation process.

A tenant representation specialist manages every detail and advises clients on the lowest risk strategy to ensure that they never face unexpected and costly surprises.

6. It probably won't cost you

There's no denying it; competition is rife. 

But there's really only one way that landlords (and their investors) measure success, and that's through occupancy. In our experience, we've found that if we can bring a great tenant, most landlords will be more than happy to pay our fee – no conflicts of interest. 

That frees you up to funnel your limited capital into what matters most: your business.

7. No conflict of interest

If you're dealing with a real estate agent or broker, remember this: They do not work for you; they work for the landlord. While these agencies may have a 'dedicated department' for tenant representation, building owners employ their firm to fill vacant space on favourable terms. 

To put it into perspective, according to PCA, in Sydney CBD alone, the top five agencies with an in-house tenant rep division are also currently leasing 350K+sqm of the total circa 500K+sqm of vacant space. And in the past, these agencies have leased 4M+ sqm of the total 7M+ sqm available. So, while they may claim to also represent tenants, it's clear that the majority of their work is done on behalf of building owners. 

A tenant advocate, on the other hand, works for you. They’ll endeavour to negotiate the best possible deal for you, provide you with impartial and honest advice and break down confusing language.

What’s more, these days, every transaction sets a new bar. And in today’s climate, anything is negotiable; the devil really is in the detail, and outcomes rely heavily on the experience you bring to the negotiating table. (Read more on why using a Tenant Rep is more valuable than ever before.)

tenant advocate part of team

8. Level the playing field

As a potential or current sitting tenant, you may think you've got the upper hand at the negotiating table, especially in a tenant's market. But most landlords go into negotiations believing themselves to have greater leverage. And they typically will if they have an agent on their side and you go it alone.

That's because agents have an information advantage. They bring expert knowledge of buildings, markets, trends, and upcoming stock and typically undertake multiple negotiations every year (often concurrently).

So, if you're unrepresented and not an expert negotiator in commercial real estate, you'll enter negotiations at a grave disadvantage.

What's more, negotiating a commercial lease takes months and involves managing multiple offers and sifting through complicated jargon and navigating seemingly small but significant clauses that can impact you down the line.

Working with a tenant rep can simplify this process for you and means you have someone on your side who is a property expert, brings a wealth of experience and is a skilled negotiator. And this levels the playing field.

9. Create competition between landlords

A tenant rep’s main objective is to extract savings and secure flexibility for their tenants. One way that they do that is to create heated competition between landlords by:

  1. Simply showing up - Having a tenant rep in your corner shows a landlord or agent that you mean business.
  2. Knowing the market inside and out - Tenant reps know which buildings to show you (whether on or off-market) and how much information to reveal to landlords to create the leverage needed to secure better lease terms and save money.

Even if you have your heart set on lease renewal, a tenant advocate will still explore market options to create competition and the impression that your landlord could lose you. That’s because landlords will go to lengths to retain sitting tenants and secure new tenants. So, if they're left thinking that you're looking at multiple properties with a tenant rep, they’ll be more willing to negotiate the asking rate, flexible lease terms, a greater incentive or tenant-centric clauses.

How We Can Help

Tenant CS is a tenant rep company that caters to companies across Australia, Singapore and the greater Asia-Pacific region. We have offices at the heart of the Sydney CBD and in Melbourne and Singapore.

Get in touch with our team today for expert advice on your next lease negotiation!

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