In the office leasing arena, it is typical that the broker(s) both the Landlord’s and the Tenant’s representative are paid a fee after the lease is executed between the Landlord and the Tenant. The fact is most costs associated with the lease transaction including the leasing commissions are rolled into the final negotiated terms and paid back to the landlord in the form of rent over the term of the lease, including both the Tenant and Landlord agent’s commission. Building owners typically budget real estate commissions into their pro-forma and any commission that is not paid rarely finds it’s way back into the tenant’s pocket.

Leasing commissions are not set and are negotiable, but generally speaking in the Los Angeles office market, the tenant representative will request a four percent (4%) fee of the gross lease value paid by the Landlord the Tenant contracts with. Also, in most cases the Landlord’s agent will receive two percent (2%) of the gross lease value, paid also by the Landlord for leasing his property. Some cities have slightly different percentages or payment arrangements that are typical for that market, but for the most part, this is the general cost of the services provided.

The tenant is not only paying for his broker’s services but also the Landlord’s agent’s services, which only reinforces the fact; that tenants should have professional representation. In most leasing arrangements brokers have with building owners, if the leasing agent completes a transaction directly with a tenant who does not have representation, they get a bigger fee (4%). So under this scenario, the net cost of the tenant representative is 2% of the gross lease value. A good tenant representative’s services will save you five times this amount in occupancy cost over the term of your lease if not much more, in many cases.

Tackling this process without the benefit of an experienced tenant representative to guide you the process and structure a transaction that best serves your operational needs and financial objectives only increases the chances of making the wrong move.

It is typically the smaller organizations who tend to take the do-it-yourself approach, probably because they either (1) don’t understand the value of the service; or (2) have a misconception that by eliminating the tenant representative’s fee, they will get a better deal.

Analyze your space needs: The tenant rep can assist you in determining your space needs ranging from the optimal amount of space required as well as evaluating various layout options. This will prevent you from spending time evaluating buildings or negotiating for space that doesn’t best serve your needs, as well as prevent you from leasing too much space. The building owner or his agent is not in the business of economizing your office space.

Identify and investigate all property options: This involves more than getting on-line and scanning listing services for availabilities. A tenant rep can identify a property that is not an obvious choice to meet your needs resulting in lower costs. A tenant rep will know the market inventory, where deals are being signed and under what leasing terms. They can also provide insight as to how various building owners operate their properties and the various features of a particular property.

Create leverage in the negotiation process: Even in a tight market, competition for your tenancy is the great equalizer in negotiations. A tenant rep will implement an effective negotiation strategy designed to win the concessions that meet your actual needs and structure the best leasing terms attainable in the marketplace. The mere presence of a respected tenant rep sends a message to Landlords that you will see all opportunities in the marketplace and you have someone in charge that understands all the nuances of the process.

Protect your interest in lease negotiations: The tenant rep knows ins and outs of the real estate transaction including all the provisions contained in a lease agreement. A real estate lease is complex legal document with provisions that contain significant financial implications beyond the rental terms. How operating expenses are handled, interruption of basic services, sublease provisions, the list goes on and on.

Provide a buffer between you and the Landlord: Lease negotiations can be difficult as each party is attempting to extract concessions (dollars) from each other. The tenant rep can handle the difficult and sometimes tough conversations that arise in the negotiation process and keep emotions out of the dynamic. After all, you have to live with the Landlord for years to come after the deal is done.

Manage and coordinate all the participants in the process: The leasing process involves many participants beyond the Landlord and Tenant to include the building owner’s agent, architect / space planners, interior designers, engineers, contractors, construction managers, property managers, office furniture vendors and lawyers. A single point of contact who understands the process and the role of the various participants in the process best serve the tenant.

A professional tenant rep will help you achieve better results in a process the business owner only does every 3 to 10 years.