Tactix: The Tenant Broker

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5 Common
Broker Myths

Five Common Broker Myths

You Don't Need A Broker If You Are Just Renewing Your Lease.

Many people think a broker's only value is finding space. Thus, if a tenant is happy with its existing space, it may believe there is no need to hire a broker and it will just negotiate a renewal deal with its landlord.

65-70% of tenants nationwide renew their leases when they expire rather than move. It's the path of least resistance and landlords not only know it, they depend on it. In fact, landlords make almost all of their profits on lease renewals. You may be surprised to know that landlords can often make 50% more profit on your renewal deal than on the replacement lease deal if you move.

We think our clients are entitled to their fair share of these renewal profits. Because we create real competition for your requirement, your landlord has no choice but to be fair with you. At Tactix, we do more than find space-- we are committed to helping you minimize your real estate costs regardless of the ultimate deal structure.

Hiring A Broker Will Add Costs To Your Deal And, Therefore, Increase Your Rent.

Almost every lease deal has a commission pool built into it which is ultimately funded by the rental dollars. If the tenant does not hire a broker, the landlord's broker (or the landlord's in-house leasing arm) takes the full commission. If the tenant is represented, the landlord's agent is forced to share this commission pool with the tenant's agent.

By convincing a tenant to go unrepresented, the landlord's agent not only collects a bigger commission, but the landlord also ensures that it will not have to compete with other landlords for the tenant's requirement thereby allowing it to secure a higher rent.

Creating true competition for its requirement can never hurt a tenant's bargaining position.

A Brokerage Firm That Represents Both Landlords and Tenants Can Effectively Deal With The Inherent Conflict Of Interest Simply By Creating A Chinese Wall or Otherwise Managing The Flow Of Information Among The Parties.

If a brokerage firm represents both a landlord and a tenant in a lease transaction (which it may legally do), it often tells the tenant not to worry about the conflict because the individual broker working for the landlord is different from the broker working with the tenant. The firm also promises that its brokers will not speak to each other about the confidential information each shares with its respective client.

The problem is that, given human nature, it is difficult to truly advocate for one client's position and take full advantage of its negotiating leverage when a larger, more profitable client is on the other side of the table. Landlords typically represent not only larger sources of revenue to the brokerage firm but also recurring sources, whereas the tenant may only have a deal every five to 10 years.

Chinese walls don't eliminate human nature or the realities of business. At Tactix, we don't think you should ever have to wonder whether we are 100% committed to getting you the best deal possible.

A Broker's Job Is To Negotiate Until He Gets You To The Established “Market” Rental Rate For Your Building Or Submarket.

There is no such thing as a single market rate. “Market rates” are thrown around by landlords and brokers to anchor expectations and, in some cases, to establish goals or end points for lease negotiations.

The fact of the matter is that every building is different and every tenant requirement is different. Some landlords have strong rent rolls, low vacancies and plenty of capital to attract and retain tenants. Other landlords are more vulnerable. Likewise, some tenants have strong credit, a marquee name and can commit to a long term deal. Other tenants have problems that make them less desirable to a landlord.

Pegging expectations for your lease deal based on the most recent deals done in a building by other tenants can often be a disservice to you and deny you the unique leverage of your situation. Market “comparables” may anchor landlord expectations and, therefore, present hurdles that need to be overcome; however they should not establish a floor for your rental rate.

What any building is worth to you should be determined on the basis of your specific alternatives, not what the last tenants did. At Tactix we believe every tenant should vet all of its alternatives and utilize its unique leverage to achieve the best deal possible.

If You Have Offices in Multiple Markets, You Need To Use A Brokerage Firm That Has Offices In Each Of Those Markets.

It would be a remarkable coincidence if the best brokers in every market all just happened to work for the same company. The fact is that unlike national accounting firms, law firms and consulting firms, most national brokerage firms do not have uniform hiring standards or training programs. As a result, quality can vary significantly from office to office and broker to broker.

Because many national firms require that local deals be handled by local brokers, your matter may be handed off to brokers who not only have no history or relationship with you, but also their respective share of the commission can be so diluted that your matter may be of little value to them personally.

We think our clients are entitled to our full attention on every matter. We spend a lot of time getting to know our clients and their business as well as the issues and provisions that are of concern to them. We then apply this knowledge on other transactions so our clients don't need to endure a learning curve with a new broker on every matter. Further, when local knowledge is needed on a transaction, we seek out the best brokers in that market to assist us, taking into account the individual's expertise, experience and possible conflicts of interest.