As a tenant thinking about leasing new premises, you have an important decision to make. Do you:
- Manage the process in-house?
- Use a leasing broker?
- Appoint an independent adviser/tenant representative
Managing the process in-house can often be tempting as it avoids engaging and paying for advisers. Many clients no doubt think 'How hard can it be?'. However, as pointed out in our eGuide on Leasing Premises, there are a number of elements that make up a successful solution. Getting each one right will impact on the commercial deal you get (now and in the future) and how well the new premises support your business moving forward. To understand each element in more detail, download a copy of our eGuide on Leasing Premises. And remember, in-house resourcing also comes at a cost as staff have their core roles to perform as well!
Using a broker
An alternative or hybrid option is to manage it in-house, but use a Leasing Broker to search for options. Again, this is often seen as a cost-effective option as the leasing broker is paid by the landlord, not the tenant. However, be aware of the 'wolf in sheep's clothing'!
All of the major real estate services firms have leasing brokers who specialise in the commercial leasing market – office, retail or industrial space. These brokers tread a very fine line in our view. By night, they are developing relationships with the building owners and developers, obtaining exclusive or general agency listings. Understanding what's new or what's planned to be new from the supply side of the market.
However, by day they are fostering relationships with tenants and offering to help them find the right solution – working on the demand side. Because of their market knowledge and network, they are well informed and appear very useful and informative from a tenant perspective.
But remember who is paying them. It is difficult, in our view, for the leasing broker to provide independent and objective advice. On one hand, they have a responsibility to their client (the landlord) who is paying them. They have a duty to maximise the commercial transaction – the more space they lease, the higher the rental they obtain and the longer the lease term – results not only in a better deal for the landlord, but generally a higher fee for the broker who is typically paid on a commission scale of fees.
With this duty in mind, how can they equally provide objective advice to the tenant – minimise the space you need by adopting new work practices, negotiate a lower rental by creating a competitive process and create tenure flexibility and tenant-friendly lease terms through the negotiation process?
We believe these competing agendas create a conflict of interest and potentially undermine the tenant's ability to get the best deal.
The alternative approach to managing in-house or using a leasing broker is appointing an independent property adviser or tenant representative. These practices are generally boutique firms that specialise in acting for tenants only and therefore have no potential for a conflict of interest. An independent property adviser is paid by the tenant for professional advice in much the same way you pay for advice from a solicitor or accountant, for example. The independent adviser can advocate on your behalf and provide objective advice on the best solution/option for your business. In many cases, the best solution may involve staying in your current premises or sharing space with someone else. Regardless of the best option, an independent adviser can provide free and frank advice without relying on a leasing transaction to occur to get paid.
Equally, an independent adviser will generally provide a wider suite of services that will help inform the tenant about how to best use the premises once leased. For information on maximising the opportunity new premises provides, download our eGuide on Workplace Planning.
If you want the best deal and to maximise the opportunity new premises provide, then the answer is simple. Appoint an independent tenant-only adviser. Let them work with you to fully understand your business and how you can create the best solution together. And leave the leasing brokers to advocate for the landlord while your staff get on with their day job!