It is a little-known fact among tenants in the commercial real estate market that large, multi-service brokers consistently exhibit a bias that benefits landlords.
The business plans of almost all multi-service real estate brokerage companies make it highly improbable that their brokers are motivated by zealously advocating for their tenants. In fact, a multi-service firm has a financial interest in pleasing their landlord clients. For most of these firms, the majority of their incomes are from serving their landlords.
A tenant rep broker has only one master: the tenant.
People choosing a tenant rep broker need not look for fancy offices, business cards or advertisements; in fact, the best calling card for a tenant rep broker is repeat business. For example, as a tenant rep broker, we had the good fortune to represent a law firm throughout its entire life cycle – from the beginning, with three employees, to the peak of thirty employees. Our relationship spanned 25 years.
The perception by tenants that they can get a better deal by working with a broker that also represents landlords is misguided. Tenants believe that the landlord broker will give them “insider” information. The reality is that the tenant who hires its own broker that’s experienced in leveraging market forces will inevitably get a much better deal, because landlords are competing for the same potential tenant.
Here are two quick examples that come to mind:
When I was a landlord agent, we were negotiating a lease with a large public company for about 50,000 square feet. The local manager, with whom I was very friendly, agreed on lease terms. A lease was drawn, and we were scheduled to sign it. However, in the interim period, the tenant hired a broker to represent them, and they re-negotiated our deal.
Needless to say, the rent went way down and the tenant concessions went way up. Why? Because the tenant rep broker found another space that the tenant was willing to move to, and they threatened to leave our building unless we changed the terms of the deal. Therefore, we agreed to their terms.
A similar situation happened to us while we were representing a tenant in Times Square. The tenant had already negotiated a lease and brought us in to evaluate the terms. I determined that the terms on their face were “reasonable,” but there was more to be obtained from the landlord.
While investigating the tenant’s situation and the renovations the owner was making to the building, we realized that it was essential for the landlord to move this tenant to a new space in the building. With this new information, we realized that the tenant was “in the way of progress,” which in New York is a very valuable place to be.
With this new-found leverage, I was able to reduce their costs by 15% which was hundreds of thousands of dollars. The tenant thought he had a great relationship with the landlord, but the landlord’s agent was doing his job: being nice, friendly and ingratiating the tenant, but his real agenda was to do the landlord’s bidding. Thankfully, this tenant got wise.
Another factor for business owners to consider is whether the brokerage is privately held or publicly traded. A publicly traded, multi-service operation not only has to answer to its landlords, but also to shareholders. This makes their landlord relationships much more critical to their bottom line. Most tenant rep firms are privately held.
At Mohr Partners we have a passion for finding the best deals for our clients. With word of mouth as our primary means of advertising, we literally live by the deals we make – and unless we make good deals for our clients, we won’t get their repeat business. That is how we earned our reputation, and that is why we are growing. To find out more, call (646) 312-6800 or email firstname.lastname@example.org.
George E. Grace
Mohr Partners, Inc.
232 Madison Avenue
New York, NY 10016