Your Landlord Doesn’t Mind If You Hire A CRE Broker

by | 02 October 2015

Often, tenants want to renegotiate office leases with their landlord directly. Many regard their landlord as a friend, and they don’t want to upset the friendship dynamic. It’s also common for tenants to think of themselves as informed about the local CRE market. Taken together, these commonly-held beliefs lead tenants to think that they can negotiate a better deal with their landlord without a broker.

Here’s the truth: You might have a cordial working relationship with your landlord, but it is still just a working relationship. Your landlord doesn’t mind if you hire a broker.

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If you’re renting from a well-established landlord, there’s a good chance they already have relationships with local brokers. Most likely, they have their own in-house leasing agent or have hired an outside broker for representation. Further, when your landlord was in the process of buying the building, they put together a pro forma which included a line for real estate commissions. In other words, you’re paying for a commission whether or not you hire a broker. Your best bet is to hire a professional to advise you.

Here’s a real-life example: I had been cold-calling Company X for almost a year before I finally got their decision-maker on the phone. She politely told me she had commenced negotiations with her landlord’s broker to renew her lease and felt comfortable that she was doing a good job. I asked to meet with her, and thankfully she said yes. Once we sat down and reviewed the numbers, it became clear that the deal on the table was NOT a good one.

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The landlord was offering them a $19 PSF rental rate and 2 months of free rent, all to be paid on 11,374 SF. However, Company X was currently paying on 10,500 PSF. When the landlord purchased the building, he found additional square footage that wasn’t previously accounted for. So he increased Company X’s square footage without actually giving them more space. (This is not uncommon and in theory is fine, provided the landlord can have an architect verify the square footage).

This is where I came into the picture. I was able to get the rent knocked down to $18.25 PSF, 3 months of free rent and no additional square footage, keeping the existing 10,500 SF. That equates to savings of $117,861.50 over a four-year lease. Also, the initial proposal from the landlord was for a new five-year lease; I was able to get that down to four. That fifth year of rent would’ve been $230,232.50 based on 11,374 SF, which brings the total savings to $348,185.

I don’t mean to toot my own horn, but the only reason this tenant saved all that money is because they hired me, a broker, to negotiate on their behalf rather than doing it themselves. When Company X commenced negotiations with their landlord, the landlord only had one commission to pay—to his own broker. Once I jumped into the deal, the landlord had an additional fee to pay. And guess what? The landlord wasn’t upset with me or with Company X. The two kept a good relationship for the entirety of the lease.

Subsequently, I’ve negotiated five deals for Company X, have saved them millions of dollars in rent and have strategically worked with them in their real estate planning. In fact, I’m now the leasing agent for the whole building! Don’t let a fear of antagonizing your landlord stop you from building a great relationship with a trusted advisor.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

Based in Princeton, N.J., Vinny specializes in tenant and landlord representation for Colliers International, working directly with his clients in the acquisition and disposition of office space. For more commercial real estate insight and trends, follow Vinny on Twitter.