Whether you’re a startup seeking your first office space or an established business expanding to new markets, your decisions can significantly impact your bottom line.
The Familiar Faces It’s common to know someone in commercial real estate: a kid’s little league coach, college roommate, neighbor, relative, or someone from the commute train. It’s natural to gravitate toward familiar faces when embarking on your leasing journey. However, the familiar isn’t always the best choice. The Dual Agency Dilemma Over 90% of commercial real estate brokers represent both landlords and tenants. However, this dual agency can blur fiduciary responsibility, leading to conflicts of interest. Tenants may find themselves at a disadvantage, unaware that their broker’s allegiance is divided. Imagine hiring a lawyer who represents both you and the opposing party. Yet, this scenario occurs daily in commercial real estate. Brokers who serve both landlords and tenants face conflicting loyalties, akin to a referee supporting both teams. Tenants often find themselves caught in the crossfire. Renewal vs. Relocation: Leveraging Negotiating Power Imagine being up for lease renewal, only to discover new tenants securing better terms. This discrepancy highlights the pitfalls of dual agency. Landlords and their brokers know most tenants opt for renewal, stripping away negotiating leverage. A tenant representative treats your renewal as a relocation, exploring alternative options to restore negotiation leverage. Beware of the “Scarcity Wolf” Landlord brokers may create a sense of urgency by claiming that their available spaces are in high demand, even in a market with vacancies. Tenant representatives focus on finding the best value and exploring multiple alternatives without pressuring into disadvantageous deals. The Tenant Representative Advantage
Conclusion Consider the power of exclusivity before relying on familiar faces. A tenant representative is more than a broker; they’re your strategic ally in navigating real estate decisions. In commercial real estate, having someone exclusively in your corner is essential. At CroninCRE, we exclusively represent commercial real estate tenants, focusing solely on finding value and representing clients' best interests without conflicts of interest. Imagine navigating the streets of post-pandemic San Francisco, eager to find the perfect office space that suits your needs and budget. Armed with newfound leverage as a tenant in a market rebalancing post-pandemic, you're ready to seize the opportunity and return to the office. Yet, as you delve into the market, you encounter a puzzling phenomenon – landlords and their brokers keeping the asking rent undisclosed. But why do they do this? What's the rationale behind concealing the starting point of lease rates, leaving tenants in the dark even when they hold the upper hand? If you asked a landlord’s broker why they don’t quote asking rates, most will tell you it's because they don’t know how much tenant improvements (TIs) will cost for any given tenant. That's not a very honest response because nearly all landlords have market driven TI allowances factored into rental rates. Why is it that unknown TI costs don't prevent other landlords and brokers from quoting asking rates? Traditionally, asking rates have served as essential guideposts for both tenants and landlords, offering clarity and efficiency in the leasing process. However, in today's market, where tenants wield increased bargaining power, withholding asking rates has become a strategic choice for some landlords and brokers. Withheld rents are a good way for the brokerages and the landlords to pump up the rates they get. Enter the realm of "Asking Rent: Withheld." In post-pandemic markets, where tenants hold more sway than before, this practice remains more prevalent than ever. It's a playground where tenants, despite their newfound power, are left to navigate a market with limited information. In such a landscape, seeking the guidance of a tenant representative emerges as a practical solution. Tenant representatives specialize in navigating the complexities of the real estate market, advocating for tenants' interests, and ensuring transparency throughout the leasing process. Armed with knowledge and a trusted advisor by your side, you can navigate the intricacies of the commercial real estate market with confidence. In a post-pandemic environment where transparency is paramount, leveraging professional guidance becomes essential for leveraging your newfound power as a tenant and securing the ideal space for your business. At CroninCRE we are a tenant-focused, conflict-free commercial real estate advisory that maximize your leverage in every transaction. In the world of commercial real estate, fortune favors the informed and empowered tenant. A commercial real estate broker who represents both landlords and tenants in a transaction is a “dual agent”. Some states don’t allow dual agency because they recognize that brokers can’t effectively represent the best interests of both sides of a transaction. Yet, dual agency is a common practice in California.
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