The logic we hear most frequently here is that the listing broker will work with a tenant on lowering their lease terms because they want to get the double commission. So, even though the lease terms are lower, the listing broker will get more of the overall pie, making it a win-win for both the broker and the tenant.
This may work for relatively small spaces (less than 1,000 SF) or short-term leases. However, all listing brokers work first and foremost for their landlords and don’t want to upset them by bringing below-market deals to the table. Landlords are also pretty savvy and would likely see right through that. What’s most likely to happen is that you get an average deal going this route. Most people don’t have an incentive to upset their bosses, and this scenario is no different.
Though the promises offered by listing agents and landlords may be tempting, prospective tenants have to be educated about the motivations behind these offers. Because the landlord is responsible for paying a tenant rep broker’s commission, tenants are surrendering access to a service that they were entitled to in this scenario. Tenant representatives can provide peace of mind on a variety of leasing issues, especially when multiple properties are being considered. This is why offers by the listing agent to eschew the services of a tenant rep have to be carefully considered, and tenants have to be aware of all of their available options.
In many cases, using a tenant rep can actually save money. Tenants that have a professional advocate, as the landlords do, can have more negotiating power. Tenant rep brokers have a fiduciary responsibility to show their clients all relevant properties and work to get them the best deal. These representatives can also assist throughout the lease renewal process.
In residential real estate deals, the buyer has a part in the broker fee negotiation process. In commercial deals, however, there’s typically an agreement between the owner and the leasing agent, put in place before the property hits the market. This means that in some cases, the leasing agent’s commission will already be fixed and their ability to negotiate with the tenant is limited. Their goal is to get the highest price possible for their client, the landlord.
If you are already sure of a location and are close with the landlord and their agent, it’s possible that mutually beneficial deals can be made without a tenant rep broker. If, on the other hand, you’re open to exploring different locations, a tenant rep broker can provide helpful market knowledge as well as local networking opportunities. This is why prospective tenants should not give away their access to a tenant rep for free—they have a bargaining chip in this situation.