Towards the end of the current 9-year period, the momentum has arrived for many tenants to dust off their lease. The question 'should we stay here or look for an alternative location' is imminent. The average tenant calls the first real estate agent that comes to mind. Maybe his sign has been stuck to the façade of the business park where the tenant has been residing for 9 years. A logical approach so it seems .. were it not that this still entails significant risks for the tenant ...

Brokers only propose the properties for which they have a mandate. In other words, you look through a keyhole at the total offer and you only get to see what the broker wants to show you. The solution seems simple, you contact three brokers, convinced that you have seen the entire market through these three 'keyholes'.

But... you'll notice that some buildings will be offered several times, sometimes even other floors or other areas in the same building depending on the real estate agent. Getting and maintaining an overview is therefore very difficult for a layman like a tenant who only evaluates his lease once every 9 years. In addition, you do'nt know what you have not seen! After all, real estate agents have their own reasons for pushing certain properties...

The normal fee for a broker who introduces a tenant (also paid by the owners!) consists of 15% of the annual rent. But deviations can amount to 30% or even 45% of the annual rent, and these have been more the rule than the exception in recent years because of the high vacancy. This means that brokers can double or even triple their fee for the same effort (namely, finding a tenant for the owner). These increased incentives aim to ensure that the agents push the relevant property from the owner to potential tenants such as you. A building that does not necessarily meet all your needs....

You probably think that you are "old and wise enough to make the right choice yourself"... but you will only be able to choose from what was shown to you! Less interesting properties (read: with less commission) for the broker are initially withheld. The ambiguity even means that the buildings with the lowest commission are often (spatially, technically, financially, ...) the better ones and rent themselves out more easily. The buildings with high commissions are often troublesome and difficult to let!

You should never forget that the broker is paid by the landlord. Even a broker willing to compensate you for his so-called 'tenant representation' assignment has greater recurring financial interests with your counterparty than with someone whose lease is only questioned every 9 years. The broker will therefore not be too harsh on the owner since a lot of money is at stake (eg rental mandates of other buildings, valuations, management mandates, ...). You are an occasional passerby every 9 years, whereas with the same owners they close monthly deals and there are major financial interests. Moreover, their commission arrangement is contrary to your interests. The higher the rent (or the more m² rented out), the higher their fee. In other words, there is no pressure on their part to negotiate the best conditions for you.

Even in a tenant representation assignment, the owner will reward the 'soft' broker with additional mandates. If 'your' broker has proposed three properties he also knows your 'leverage options' since he has all necessary information. Bluffing is no longer an option because your negotiating position no longer holds any secrets with the respective preference owner of the broker.

The combination of the above-mentioned factors means that brokers have a huge "CONFLICT OF INTEREST", even with so-called "tenant representation" assignments. The consequence for you as a tenant is that you may not get the best solution at the best conditions.

TIPS & TRICKS

We wouldn't be Freestone Transact if we wouldn't give you some tips:

  1. Engage a party exclusively for tenants, who knows the ins-and-outs of the market mechanism and the current market situation.
  2. Consider all possibilities in a timely manner. In order to maintain a strong negotiating position, you must take into account the necessary time to possibly relocate. Even if you prefer to stay in your current building, your current owner must remain under the impression that you can still move.
  3. Explore the market and request quotes for alternative buildings, even if you prefer to stay. It's a small world and your current owner will certainly check with brokers whether a market demand has been raised. If this is not the case, he's confident that you are not considering a move as a realistic option ... which will clearly undermine your negotiating position.
  4. Choose a party that conducts a complete and thorough analysis of the alternatives. Gross m² are difficult to compare. After all, you only use the net meters but you pay for the gross meters.
  5. Choose a party whose fee model is fully tailored to your interests!
Bellen

These tips are our reason for being, Freestone Transact services as a real estate advisory firm ONLY TENANTS through a NO CURE NO PAY SUCCESS FEE based on the savings achieved. We analyze 'all' alternatives from a spatial, technical, financial and contractual perspective to obtain the best solution at the best possible conditions.