With the office market turning in the landlords favour the need for the independent property advise has never been more important. Like employing staff the cost of getting it wrong when selecting office premises can be penal. A leasing agent recently commented that they thought tenancy property consultants or colloquially know as “tenant reps” would be really struggling to demonstrate value to their clients with the reduction of leasing incentives. The inference being that the sizeable leasing incentives that have been achieved are no longer and as such the tenant reps sole reason for being is mitigated. This not the case. Attractive incentives are still being negotiated and will continue to be available. Furthermore the tenant rep responsibility to their client does not just revolve around negotiating large incentives. They also offer strategic advice, assist in the implementation of any pre-agreed premises strategy, ensure that the process proceeds in a timely manner and finally ensure the commercial terms of any agreement accord with market expectations. In addition consultants are engaged in instances where organisations do not necessarily have their own internal premises expertise or the resources to deal with their premises decisions and negotiations and thus seek independent advice.
So when appointing a tenant rep what should one look for?
Well the truth is anyone call themselves a tenant rep. You do not have to have any formal qualifications and are not subject to any specific state or national legislation with the proviso you do not hold a trust account or deal with the general public. However with the growing sophistication of the profession there are minimum standards appointees should seek when appointing a consultant. Here are five of the major criteria that should be considered. Make sure that the individual who will be acting on your behalf ticks the following boxes
A proven track record of dealing in the market concerned – request a copy of the individuals resume and details of their experience in concluding similar transactions. This applies specifically to the person allocated to the conduct of the specific appointment
The individual should be tertiary educated in property and financially literate in valuations. A background of working in a leading commercial real estate company or valuation practice is highly desirable.
Ideally appoint a chartered surveyor being a member of the RICS is the world’s leading professional body for qualifications and standards in land, property, infrastructure and construction. The Royal Institution of Chartered Surveyors (RICS) is a professional body that accredits professionals within the land, property and construction sectors worldwide. Members holding RICS qualifications may use the following letters after their name MRICS or FRICS. The RICS regulates the conduct of their members and has developed some guidance notes “Tenant Representation Process March 2016” intended to represent best practice.
2) Type of organisation
Tenant advisory services are offered by a range of organisations from the major accountancy and real estate practices to bespoke corporate advisory firms and individual sole operators.
Some will argue the major real estate agencies and accountancy practices may be potentially conflicted due to their involvement in advising landlords, major building owners and institutions. This is extremely unlikely to occur and the personnel employed in such organisations are always of the highest professional caliber and as such provide a high quality independent advice.
In such decisions it is best to focus on the experience of the individual who will be charged with actually undertaking the work rather than the nature of the organisation itself.
Obtain competitive quotations. The whole point of appointing an advisor is to achieve reduced accommodation costs, ensure acceptable commercial terms and manage the process. Unfortunately some organisations can fall foul of inappropriate excessive charging either because the fee is not clear or in the case of brokerage transactions the actual cost is sometimes not revealed.
Fees should be transparent and clearly stated up front as to how they are calculated and when payment due. Best practice is to pre agree the remuneration on a fee for service based being a fixed fee, percentage of rent negotiated, dollar amount per sqm leased or hourly rate. To ensure no nasty surprises a cap on the total fee should be documented.
Be wary of performance based or brokerage arrangements.
With performance fees a small retainer is often charged and an additional payment based on percentage of negotiated savings. The contention here being is if the appointed advisor is an expert in their field then they should know exactly where the deal sits and in the spirit of transparency advise the client accordingly at the offset. Such fees can therefore sometimes be open to unfair manipulation.
Both agents and a few tenant advisors will broker a deal for their client. In this instance the clients fee is paid to the broker/advisor by the landlord. The problem with this arrangement is the fee is often undisclosed and as such deducted ultimately from any leasing incentive that the tenant should receive. In some instances properties will not be submitted to the tenant due to an insufficient level of fee being offered by the landlord to the broker. On the basis the client is aware of the level of fee their representative will receive and the effect this will have on any incentive then this can make the process more transparent and equitable. However unless properly documented there can still be issues surrounding “duty of care” if the representatives fee is being paid by the building owner concerned.
4) Professional indemnity
Make sure the appointed party has professional indemnity insurance.
The appointed party should be foremost “professional” in their approach. However there are a range of styles from the consensus to the “bite your head off take no prisoners” advisor. It will become apparent from first meeting as to the style that will be adopted. Some clients wish their advisor to batter the landlord into the ground others are happy for a “win win” outcome. There are as they say “horses for courses” dependent the ground conditions.
It must be remembered the landlord/tenant relationship can be a long one and as such like any good marriage it is often best to start the relationship as you intend to continue.