66 Tidewind Suite 200 Irvine, CA 92603
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jerryn@inhousecorp.com

CA DRE #01026305

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949.442.0922

Who Benefits From the Deal? Is it You, the Landlord, or the Broker?

 

Any deal appears to have winners and losers. True statement? Reality? Not if your next real estate transaction has been carefully planned and thought through. There should be no losers—only winners—you remember from "Negotiations 101," the win-win scenario.

 

Who Should Win? Who Should Benefit? As a tenant, your main concern should be your company's well being. In order to achieve that, you may have to take your ego and put it away. Yes, you just might have to compromise part of your wish list and accept the fact that the landlord needs to win too. The last person that should be considered is your broker—did we just shoot ourselves in the foot?

 

We don’t think so. Remember that your broker is working for you. You did sign that contract with him, didn't you?

 

Whose best interest does your broker represent? Remember those three brokers we spoke about in another chapter? You know, the guy who lists buildings—he actually works for the landlord. You can recognize him by the beautiful sign he places in front of his client's building. Then he dazzles you with all this great info about how he can get a great deal for you because he knows the building better than anyone else does.

 

Then, of course, there's the tenant representative. He comes in several forms. Often, he will truly represent your interests (don't forget that contract—boy do we sound like a broken record). Be aware that you could have a fox in sheep's clothing. Often, a listing broker who has exhausted his possibilities of leasing you space in one of his buildings will attempt to “show you the market." After all, he knows the market better than anyone does—get ready, and away we go.

 

Finally, if you've been doing your homework (or at lease reading our little primer), you have signed that contract with a broker who only represents tenants and understands your business. You’ve spent at least eighteen months looking at your business plan and figuring out what your present and future facility needs are and how you are going to pay for them. In an ever-changing real estate market, you had better look at your business, financial, and marketing plan before you make any real estate decisions.

 

Here’s a broker horror story for you. Without a contract, the only hold a broker may have on you is guilt—you know, the gift that never stops giving. A while back, a broker for a large firm was representing a tenant. After showing him about half the buildings in the area that might have remotely worked for his client, he went back to the office to research the other half of the potential inventory. In the mean time, one of the client's VP's was out driving and saw a sign in front of a pretty building—same firm the boss was working with, but not the same broker. The VP thought he was doing a good deed and called the listing broker on that building to set up a tour.

 

Low and behold, that building was 20,000 SF less than the 30,000 SF required, but the hustling broker knew he had a "live one." The broker convinced the VP that his firm would be better off working with him because he specialized in that geographic area and that since he and the initial broker worked for the same firm, it didn't matter which one he worked with.

 

The VP and Pres. went along with the deal until the initial broker found out. Picture the two brokers standing in front of a building with the tenant and fighting over who represents whom. How about a broker who specializes in the client? What a concept. Were the brokers looking out for the interest of the tenant? The landlord? Or were they more concerned about their new cars?

 

Choose your broker carefully, as they are your guides through the incredibly complex maze of commercial real estate. Don’t choose someone because they convince you that they know the market better than anyone else does or because they’ve done “more deals than anyone this side of the Hudson River.” Let your needs dictate the market rather than letting the market dictate what you have to settle for.

 

You need to know whose interests a broker is serving. Never let the landlord's broker, in-house marketing representative, or property manager represent you in initial leases, renegotiations, extensions, or expansions.