A Boutique Tenant Rep Agency or The Giant?

Every month, we love to share great insights about relevant topics in the commercial real estate industry. We have been emailing our customers, clients and colleagues our exclusive REATA Bizletter every month for years and recently we decided to bring a little bit of that to our new Bizletter right here on LinkedIn. While you don't get all our content, we still love to share some of our articles by our Broker and Published Author, Bob Gibbons, SIOR, CCIM.

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Now let's get down to business! With all the conversations you see on social media about CRE agencies, it raises a good question for the client and why it is important to understand all the details before choosing your exclusive agency.

Which is? Better - A Boutique Tenant Rep Agency or One of the Giants?

Spoiler alert – the answer is a boutique tenant rep brokerage, but let me now tell you why.

No one ever got fired for buying IBM. That was the saying to justify buying PC’s from IBM in the late 1980’s. The same could be said for Xerox or the Big 8 accounting firms, I’m dating myself bigly! What does this have to do with negotiating office and warehouse leases?

Back in the 80’s the joke was that an employee would never get fired if they hired one of the big time. Buying Xerox for your copier needs. Buying IBM computers. Hiring one of the Big 8 accounting firms.? But do you still think that rings true today?

What’s funny about that question is that IBM doesn’t make computers anymore and there aren’t 8 giant accounting firms either. But, yes, I absolutely think this is still true. People that work for large corporations who make decisions about what consultant to hire or product to buy for sure think about the perceived risk of hiring or buying the wrong one. If it goes bad for some reason, can they be criticized for making the wrong choice? What’s the safe decision?

Do I see this in commercial real estate?

For sure. I know a guy who quit using the independent real estate advisor for his company when it grew bigger than what he thought the little guy could handle.

Was he right?

A most emphatic NO!? I know the company he quit using and the one he hired. He thought the biggie could provide better information on comparable and that the landlord would give them a better deal because the biggie was so big. “They know all the deals done in the market and have done more deals with that landlord than any other real estate advisor.” Both assumptions are false. I’m totally convinced he would have been in better hands with the boutique. I’ve felt this way for a long time and let me tell you why.

All the big shops have excellent CRE professionals, and we do business with all of them. But there are a couple of reasons why I think a boutique firm is the better way to go.

First, boutiques aren’t full service. Lots of people talk about how they are full service as if that’s a good thing. And it is for the full service commercial real estate company. But it’s not good for the clients. Why? Because of conflicts of interest. They all have them and if they are publicly traded, their annual reports say so.

When I was an asset manager working for landlords and we listed a building for sale with one of the biggies, the details of our leases (we call it the rent roll) mysteriously ended up in the hands of the tenant rep group of the listing company. And when I was outsourcing our leasing to the asset services divisions of full-service companies, I was told that they would put a tenant rep on my account because “they know deals coming down the pike before anyone else” and I’d get a crack at them before other landlords. Clear conflicts!

Second, the experience of the person handling the assignment. Let’s say a company with 25 locations in the US hired one of the biggies. They will be assigned an account manager to be their primary contact. That person works will all the agents in the various cities to get the deal done. But the individuals in each of those cities are often junior agents. In a boutique shop, I get to choose who I want to partner with in each city and only work with highly experienced agents. I use the best agents in each market and am not required to use someone in the same company regardless of experience.

In my prior life working with landlords, we hired investment sale brokers to sell our properties. Our listing agreements were specific to the individual and said that if that individual broker moved to another company, our business went with them.? And we did that because we were hiring the experience and the relationships of that individual, not the company. Those were the things that were going to get our building sold on the best terms possible.

Most of the independent brokers I know once worked for one of the biggies. I often ask them if they miss it. The answer is always no. I also ask if there is anything that the big companies do for their clients that an independent can’t do. Every one has said no except that they have the money to make reports look better.

After 9 years on my own as an independent corporate real estate advisor, I joined a regional firm because I had always wondered about the question of whether the biggies were doing something for their clients that I wasn’t doing for mine. I quickly learned the answer was no.

So the moral of the story is to use an independent boutique brokerage company - but only if you want to know your agent has no conflicts of interest and is highly experienced.

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If you are a tenant and you are coming up on your lease or you are looking to relocate, expand, or downsize your building size, then we can help you. We are advocating for our clients on every level and maintain long-term relationships with our clients so we protect their investments. You can learn more by visiting our website, www.texastenantrep.com or visit our YouTube Channel to watch our ongoing podcast show, 'Confessions of a Recovering Landlord' featuring our broker, Bob Gibbons and our Host & President, Jan Gibbons