Occupier Services

In this current age of innovation and technology many tenants faced with locating space for their first or next office or renewing their lease default to DIY because they feel hiring a broker would mean having to pay an unnecessary real estate fee. Based on the transaction train wrecks?I have witnessed in my career?I know there is truth to the adage, “If you think using an expert is expensive try doing it yourself.” I have 30+ years of experience but am still surprised on a regular basis by the number of tenants who?are unfamiliar with Occupier Services and the value they deliver.? The following?are some of the comments?we have?heard from tenants who are unfamiliar with the commercial real estate industry and Occupier Services in particular:

1. It is Too?Early To?Discuss

A common initial hurdle encountered from tenants is that they do not yet have any interest in tackling the project.?However, leaving real estate decisions until the moment at which they can no longer be avoided often results in?tenants boxing themselves into a negotiating corner because there is not enough time to consider?all appropriate options.?The result is they often?pay an unnecessary and expensive premium for not being proactive.?Tenants looking for space are often surprised?at the time?it takes to get working drawings completed (2-6+ wks) building permits (3-16+ wks) and leasehold improvements?built?(4-26+ wks) let alone the time necessary to order?phone lines, internet services and furniture.?It is seldom too early to discuss a real estate strategy...?

2. I Just Want To Renew

Tenants often believe the primary goal of a real estate negotiation (renewing in particular)?is to prevent a significant increase in rent.??When the proper time and effort is dedicated to planning and executing an effective real estate strategy a?proactive negotiation often uncovers hidden opportunities for significant cost reductions.?How this is accomplished is by a tenant convincing?a landlord the chance of them choosing?to go to another building is high.?No one sharpens their pencil in a negotiation if they are the only party at the table and landlords will not commit to spending money in a?negotiation unless they are convinced doing so is absolutely necessary.?What it comes down to is having a great Plan B in place as leverage improves the odds of achieving a preferred Plan A and it is the role of an Occupier Services sales representative to generate leverage by creating an excellent Plan B.

3. The Landlord Has Already Approached Us

The?landlord of?one of our?clients?approached?them 19 months prior to their lease expiry and tabled a renewal proposal that included an immediate 20% reduction in net rent for their remaining term and throughout a 5-year renewal.?Thankfully?the tenant suspected the proposed?expiry date would?likely place their expiry firmly in a future landlord’s market so they retained our team to represent them.?Our Occupier Services process?brought the full force of market conditions to bear on their renewal negotiation and the result was the tenant renewed for 10 years and achieved not only a 27% reduction in net rent they were provided an additional leasehold improvement allowance to spruce up their premises and obtained an option to terminate during the new renewal term at a reasonable penalty.?Costs were significantly reduced and flexibility within their lease term was increased at no additional cost.?The landlord had approached the tenant in the hope of securing a renewal at much less favourable terms than the tenant eventually obtained by doing their homework and employing market leverage in their negotiation.

4. We Have a Good Relationship With Our Landlord

Years ago?our?team was asked to represent a client who had a unique dilemma.?He knew into what building?he wanted to relocate his company?because?the building?was owned by a personal friend but he recognized he could not push for a market-driven transaction to the degree he normally might without jeopardizing his relationship.?He retained?our services to generate market leverage and after?the broader financial details were?nailed down through our Occupier process he invited his soon-to-be-landlord to join him at the cottage where they finalized the negotiation over dinner.?Hiring our team as a?3rd party to represent his company’s interests in the negotiation allowed?our client to obtain market-leading rental rates and leasing incentives but doing so also preserved one of his most important personal relationships.

5.?The Listing Agent Is Handling It

The fiduciary obligation of an Occupier Services broker is to work exclusively in the interests of the tenant and the fiduciary obligation of a listing agent is to work exclusively in the best interests of the landlord.?If a?listing agent?is representing both parties a dual representation scenario is created where the listing agent?owes equal allegiance to both parties.?If a tenant does not recognize they are (more than) likely paying a?premium rent dictated by the landlord that tenant deserves to be charged every dollar they sign up for.??

6. We Know The Market

Many tenants who do their own market research come to the conclusion they?do not need?a real estate broker to provide them market data they already have.?However, knowing posted rental rates of competing buildings is as valuable in a real estate negotiation with a landlord as knowing?the address of a?good garage?when?you?need to buy pants.?The most important market knowledge is not what landlords suggest their bottom line is in a negotiation but rather what that bottom line actually is.?Posted rental rates do not reflect actual market inducements which are the real basis for a negotiation.

7. I Am a Good Negotiator

Negotiating skills aside, the best leverage in any negotiation is provided by current, detailed information and tenants do not know what they do not know unless they are in the real estate market on a daily basis.?Lease expiries in a tenant’s building and the?performance of a Landlord’s portfolio have a direct impact on negotiating leverage and soliciting bids from competing landlords who are often more than anxious to land a tenant’s business adds considerably more weight to a?negotiating position with a landlord than guesswork and a poker-face.?

8. I Don't Want to Pay a Brokerage Fee

A tenant who retains Occupier Services for a negotiation with a professional landlord does not increase their costs because real estate fees are?typically included?by the landlord?in the rent they are advertising just like fees for space planning, architectural drawings,?permits and?construction.??Although tenants do not pay?a real estate fee directly they will pay the fee regardless of whether?they?employ Occupier Services or not because?any fees not?spent by the landlord do not result?in a refund to the tenant -?they are?pocketed as profit in the deal by the landlord.??A reputable?Office Occupier?program is completely transparent so?the tenant is informed on exactly what fees are being paid and why.

9. Your Fee Structure Creates a Conflict of Interest

A traditional real estate fee does indeed create a conflict of interest because it is based on a percentage of rent?paid by the tenant so?the more the tenant pays the more the realtor makes.?To avoid?this situation?an experienced Office Occupier specialist employs a fee?structure based?on a per square foot per year leased?scenario. Remuneration in?an Office Occupier?program is?therefore static regardless of rent structure or location which?eliminates any inherent or perceived conflict of interest to the benefit of the tenant.

10.?I?Need to Better Understand?the Value of Your Services

Many real estate brokers do not fully disclose their fee in a transaction and often tell tenants, “Don’t worry, the landlord pays.”?This is said because those real estate representatives are either certain (or at the very least?not sure) the value they deliver to the tenant?is not easily?justified?by the fee they are?collecting.?The true value of?an experienced?Occupier Services specialist?is most apparent when the process is absolutely transparent and the?math is simple: the cost of Occupier Services is typically to 2-3% of the overall cash flow of a tenant’s lease but employing the services of an experienced Occupier Services representative reduces a tenant’s?real estate?costs by a minimum of 13-17%?Beyond financial benefits an experienced Occupier Services specialist will also look?to obtain non-financial incentives that are often equally if not more important to a tenant such as options to expand, contract, and/or terminate. Ultimately, for every dollar earned by an Occupier Services specialist the tenant reduces their costs by $6-8 and this is why?Jim Wilson and his?team at Lennard Commercial Realty?know using an experienced Occupier Services specialist makes cents...

[About me: I am an Occupier Services specialist who helps tenants generate more value per square foot from fewer square feet. Reach me via [email protected]]