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Do Tenants Really Need Brokers When Negotiating Lease Renewals?

To begin with, I am not going to take credit for the title or the subject of this blog post.  Andrew Zezas asked this question as a discussion in the Corporate Real Estate Group on LinkedIn and many of us have chirped in participating in the discussion, (actually, he may have posted this discussion on a number of groups.  It’s been a great discussion that ultimately will be the subject of one of my radio shows, tentatively scheduled as an open forum show in October.

Those contributing to the discussion were decidedly in favor of bringing in a broker and their comments included:

From Barry Rosensteel:

“A smart corp re guy lets the broker do his job, collect the data and throw his 2 cents worth in. It would seem that the owner would discount the rent if there is no broker but it is not typically the case (he pays the inside broker to help him because he has a contract with him and pays him more if there is no outside guy and pockets the difference) so the broker is free to the corporate guy anyway. The corporate guy can let his broker do all the heavy lifting as he would a staff member and save himself a lot of boring exercises. Won’t cost him a penny!”

Tima LaMonica wrote:

“……there’s a huge difference between a broker and in house real estate person. You cannot compare the market knowledge. I walk the streets of my market and know what every building is willing to do. How can a corporate in house person 3,000 miles away know the details of the market like i do. …….if an in house corporate person comes along without a tenant rep broker the listing broker will be very happy to take the full commission and do a better deal for the landlord. Alway, hire a tenant rep broker and ask for half of the commission. We did that at one of my in house jobs and it paid for the entire department’s overhead!”

David Marino added:

“Tenants negotiating their own renewal are inherently captive at the table–there is no leverage, and lack of leverage ends in poor results. ……About 50% of my clients over the last 22 years who wanted to renew, ultimately moved, as we found and created alternatives that they could have never imagined had they not gone through the process. Doing a renewal might look easy to a tenant, and it is, if they want to get a bad result. I have seen tenants want to make it quick and easy, and just threaten to move, and the landlords gets a premium every time for the tenant’s short sightedness. Trying to “save the commission” is all about tripping over dollars to pick up pennies. Worse yet, if the tenant thinks they can do a better job on a renewal than the best real estate advisors in their market, that’s just flat out delusional.”

To wit, I responded:

“David, I like the “that they could never have imagined” phrase. It is so true that some of us and others sometimes “don’t know what we don’t know”, And what is the cure? Experience. That’s what the broker brings to the table for the client. The real trick is somehow to convince the tenant that they don’t know what they don’t know and the broker does.”

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