As a tenant, you have many options when selecting a broker. As a full-service firm, we at AQUILA often get the question: What are the advantages of working with a full-service firm and are there any conflicts of interest?
Having experience working at both a full-service and a tenant-rep-only firm, I feel confident that I can answer this question honestly and thoroughly.
In this article, I’ll address:
- The difference between a tenant rep only firm and a full-service firm
- The five primary benefits of working with a full-service firm
- The “conflict of interest” myth
What Is the Difference Between a Full-Service Firm and a Tenant-Rep-Only Firm?
A tenant-rep-only firm is just as it sounds: it solely employs tenant representation brokers.
For more information on what a tenant representation broker does, read our blog post What is a Tenant Representation Broker and What Do They Do?
A full-service firm, on the other hand, offers real estate services beyond tenant representation. Some of these services might include project management, project leasing, property management or investment sales.
Benefits of Working with a Full-Service Brokerage Firm
1. Access to more lease comparables
Full-service firms have project leasing teams, which gives your brokers access to far more relevant deals and thus a larger database of lease comparables (often referred to as “comps”). Having access to a more robust set of lease comps helps your broker negotiate the best deal terms for your company.
The knowledge that can be gleaned from studying market comps can empower your broker to make a more qualified argument on what is market and what is not when negotiating with a landlord.
Additionally, access to information on terms, such as rates, TIs and concessions, of related deals (ie similar size range, building and/or submarket) allows your broker to justify the requested concessions more effectively, rather than simply asking for them.
2. Knowledge of off-market (or coming-to-market) opportunities
Full-service firms often have earlier access to off-market or coming-to-market opportunities in terms of leases, sales and subleases.
Offering memorandums are often confidential and are typically only circulated to a select group of brokers. Not only is the information in the offering memorandum valuable, but knowing that a project may be coming to market can be incredibly beneficial to a tenant.
In a highly competitive market such as Austin, this can be a competitive advantage since high-quality opportunities are often quickly taken off the market by eager tenants.
3. Ability to think (and negotiate) like an owner
Maintaining a close relationship with owners’ representatives can enable tenant rep brokers to get greater insight into how landlords are currently thinking and acting.
Understanding the bigger picture, knowing what is currently motivating a landlord, and drawing on the additional knowledge and expertise can level the playing field.
4. Get better build-out budget estimates
Working with a tenant rep broker whose firm has an in-house project management team can be incredibly beneficial when producing a test fit, estimating pricing and negotiating your TI allowance.
When determining if a space is right for your company, a tenant rep can connect you to their project management team so that you can fully understand the timing, scope and costs associated with the various prospective spaces.
The faster and more accurately the construction pricing can be completed the more leverage you can typically create.
5. Seamless transitions from site selection to build-out
By bringing the project manager in during the site selection process, it makes for a smooth transition into the build-out of your project.
Often, by the time your lease is signed, the project manager will have already helped you engage an architect to produce test fits to ensure the space will meet your needs, and the initial design phase may be well underway.
This coordinated effort can cut down on total project time and make the entire process one seamless operation.
The “Conflict of Interest” Myth
You’ll often hear from tenant representation only firms, that they are conflict-free and therefore can provide you with the best service. Many will cite the false notion that tenant reps in full-service firms may be incentivized to steer clients into projects that their colleagues lease.
The truth is, tenant representatives have no obligation or incentive to place their clients in properties leased by their firm’s landlord brokers. (Read: they don’t get any extra money for placing you in their firm’s project.)
Tenant representation brokers and project leasing brokers are two mutually exclusive groups, each of whom has a fiduciary responsibility to their clients, not each other.
Should you decide on a property that is leased by the same firm as your tenant rep, your broker will negotiate just as they would at any other property in order to obtain the best terms for you.
Often times the relationship between tenant reps and landlord reps within the same firm can ultimately benefit both of the brokers’ clients. The speed and ease of communication can allow a deal to progress faster and more efficiently than it may otherwise.
At any reputable firm (as per the law), should a broker be conflicted or have ties to both the tenant and the landlord, that broker should immediately make both clients aware and may recuse him or herself from the transaction altogether.
Ultimately, tenant rep brokers want to have a strong reputation and do well for their clients so that they can win more business. Being honest, trustworthy and a good negotiator are all crucial to maintaining a positive reputation in the industry.
As you can see, there are many benefits to hiring a full-service real estate firm.
To learn more about hiring the right broker for you, check out our article 5 Key Questions to Ask Before Hiring a Tenant Representation Broker.
Or, if you’re ready to talk to one of our tenant representation brokers, contact us today.
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