The listing agent has the “listing” on the property and represents the interests of the building owner or landlord. A tenant representation broker represents the interest of the tenant in a lease transaction. Some agents work exclusively on listings, others will take on tenant representation engagements only, while others will work on both.
Regardless, it’s important to understand that all representatives are paid as a percentage of the value of your lease and by the landlord. The more a tenant spends, whether that’s from the lease rate, the lease term, or both, the larger the commission pool.
Listing agents, also known as landlord representatives, work to secure the highest price possible for the seller. They rely on market experience and local expertise to advocate for the most seller-friendly contract possible. Listing agents can provide valuable guidance and advice to both sides of the transaction, but it’s important to consider which side the agent or broker is representing.
Tenant reps, on the other hand, work to get the tenant the lowest price they can. They serve the interests of business owners and companies looking for commercial real estate space by providing prospective tenants with appropriate listings and comparables. This service is provided at no cost to the tenant, as the landlord covers the fee. Because of this, it’s in the best interests of businesses looking to lease a commercial space to utilize a tenant representation broker.
The commission fee that is provided to a tenant broker is negotiated between the listing agent and the landlord before the property hits the market. The fee is usually effective whether or not a tenant rep is used—if a tenant rep isn’t used, more commission goes to the listing agent. It’s possible that a landlord or leasing agent may advise against hiring a tenant representative for this reason. This is why it’s important for tenants to understand the value of a tenant agent and that it’s in their best interest to have one present throughout the leasing process.
There may be other benefits to tenants who include a tenant rep in the leasing process. Working with a leasing agent alone means that only the property that the leasing agent is representing will be considered. Tenant representatives can find and present multiple sites that meet the needs of their clients. This gives those looking for spaces to rent a greater awareness of the leasing market as a whole.
When prospective tenants have an understanding of the differences between listing agents and tenant representative brokers and the interests that they serve, they can be better equipped to make a more informed office move.