Do corporate tenant real estate advisors go too far? Some landlords think that those real estate professionals who advise corporate tenants, often over-negotiate lease transactions on behalf of their tenants.
Is this just sour grapes? Is it because landlords don’t like negotiating with tenant advisors who understand the commercial real estate game and put money back into the pockets of their corporate tenant clients? Is this because landlords don’t like the idea of paying commissions to tenant advisors who negotiate against them? Or, is there truth to this…that corporate tenant real estate advisors really do go too far when negotiating leases for their clients?
What is going too far, really? Is it too far when a tenant seeks more than a landlord would prefer to give…more free rent, rent discounts, construction allowances, flexibility, options and rights, favorable terms, or otherwise? Is it too far when a tenant directs its advisor to negotiate certain terms the landlord may not like? Is it too far when a tenant advisor does all he / she can to achieve the best terms for his / her client?
When landlords feel that tenant advisors go too far, could this really be more a matter of market conditions? If a landlord’s competitors will not support the terms a tenant seeks, can that tenant realistically expect to achieve such goals? Not likely.
I’ve heard some landlords complain that tenant advisors unfairly fill the heads of executives with the idea that corporate tenants are entitled to all kinds of goodies when negotiating leases. They often say that this practice is unreasonable, as it makes negotiations difficult for landlords.
Note to commercial landlords: The role of tenant advisors is not to make transactions easy for landlords…nor, is it to make transactions difficult for landlords. In fact, the tenant advisor’s role is to enhance and protect the interests of its corporate tenant clients by understanding their business objectives and to recommend transaction strategies and structures that would support them. The tenant advisor’s role is also to negotiate aggressively to secure as much for the tenant as possible. Seasoned tenant advisors understand the limits after which they might put their transactional opponent landlords in danger or even jeopardize a transaction.
Just like how the role of landlord advisors is to work to benefit landlords, the job of the tenant advisor is clearly defined. When a tenant advisor makes demands that a landlord finds too great, perhaps it simply means that the particular transaction just isn’t right for that landlord.
At times when supply is low and demand is high…in markets that are favorable to landlords, do tenant advisors still go too far? In those markets, I rarely hear such complaints. When the odds are stacked in favor of landlords, how far would be too far for “landlord” brokers to go?
Do some corporate tenant advisors go too far? I’ll answer that question this way: Is this really an indictment of all tenant advisors? Do some landlords and landlord brokers go too far?
About CFO Studio
CFO Studio spotlights New Jersey area senior finance executives, providing them with the opportunity to share their knowledge and communicate their perspectives on current economic, financial, operational, and business issues. Visit www.CFOstudio.com.
Funding for CFO Studio is provided by Real Estate Strategies Corporation, providing corporate real estate advisory and transaction services to CFOs, Management, and corporate Boards in New Jersey and around the United States. Andrew Zezas, CEO of Real Estate Strategies Corporation, is the host and moderator of CFO Studio.
Join us every Friday morning at 10:30 AM EST to watch a new CFO Studio Video Interview!
www.CFOstudio.com
www.RealStrat.com
www.TheCFOsGuide.com
Copyright Real Estate Strategies Corporation 2011. All Rights Reserved.
###