I just got back from lunch with a landlord broker who proudly bought me lunch because he just renewed and expanded a tenant for 12 years. This elephant-sized transaction was done directly between the tenant and the landlord. It was sure nice of the tenant to save his landlord about $1.3 million in leasing commissions (my estimate). I’m sure the landlord shared those savings with the tenant – NOT! By the way, to give you an idea of size, this transaction will be one of the top 10 leases in Miami this year.
This tenant’s loyalty to their relationship with the landlord broker who they have known since the business began is surely commendable, but ill-conceived. At the end of the day, the landlord’s broker is just that – the representative of the landlord. He is working for the landlord and no matter how many warm, fuzzy interactions they have, the landlord broker’s fiduciary responsibility and loyalty is to the landlord – not this wonderful, loyal tenant.
Many times I have run across tenants who have wonderful relationships with their leasing agent. They golf together, lunch together and just have a wonderful rapport. The tenant doesn’t want to hurt the landlord broker’s feelings or have anyone interfere in this delightful relationship. Folks, this is business and at the end of the day, the landlord broker is a salesperson. He (or she) makes more money when there is not an outside broker. I know this – I was a landlord broker for over a decade. Yes, some of my direct deals got a fair shake from me, but guess what, many left money on the table – and didn’t even know it. I made sure they felt warm and fuzzy about the whole transaction while I got a pat on the back (and a bonus) for getting a great deal for the landlord.
I have no doubt in my mind that this loyal tenant left a bundle on the table. Especially since the landlord broker asked them to keep the transaction confidential until after the signing. Even if they didn’t want to use a tenant rep broker for full-blown representation, they could have retained a broker (even on their own dime) as a consultant to insure that their deal was a market deal. Their shareholders and investors deserve no less.
One of the benefits for any business is that when you hire a tenant rep broker, you have a quantifiable measure of how your lease transaction compares to the market. You should get a financial analysis that shows how your first choice compares to the others in your short list. When you are asked about your rental rate a couple of years later, you can pull this file and show the methodology that was used to make your decision – your informed decision. That’s what I do – I level the playing field and provide you with the information needed to make your decision. Too bad our loyal friend played the game alone because he was outnumbered from the beginning.