Imagine sitting down to negotiate a lease for office space in a new building. Beside you is the real estate agent representing your company. Across the table is the building’ s landlord, accompanied by his or her real estate agent. The catch? The two agents are colleagues — they work for the same firm.
This situation, while common in Boise, could involve a significant conflict of interest.
Commercial Real estate companies that offer representation to both tenants and building owners are called full service brokerages. Firms who work for Tenants only, are uncommon, in fact, Tenant Realty Advisors is the only firm in the Boise market dedicated exclusively to the tenants side. Other Boise firms have agents who work in tenant representation, but they’re still working in the full service business model with their in-house colleagues representing the other side.
The scope of this conflict is related to the size of the market.
In large metropolitan areas with big populations, broad business bases and high inventories of office and industrial space, the full service model works better than it does in a smaller market like Boise.
With as many as 300 brokers to choose from in Portland, for example, the odds of pusuing a property that is represented by your agent’s firm is lower. It’s rarer for colleagues to end up facing each other on opposite sides of the negotiating table.
In Boise, with only around 75 brokers working for a limited number of firms and dealing with fewer properties and even fewer owners, winding up in a negotiation with a conflict of interest is far more common and likely.
In large markets, national and regional firms can rigidly separate their tenant and landlord teams, knowing the agents will rarely cross paths. This model won’t work in a small market like Boise. Not realizing the close quarters of a small market, they bring their large market model into their Boise offices.
The partners at Tenant Realty Advisors understand Boise. They also understand the difficulties that come with trying to represent tenants at a full service brokerage in our smaller market.
Before Bill Beck founded TRA, he worked for a national firm. He focused on tenant representation, but his firm offered services to landlords as well. Over the years, the firm made it clear to him that he was expected to show the company’s listings. Even in cases where the company’s listings didn’t match the client’s needs, that expectation persisted.
That’s another problem you may encounter in working with full service brokerages in a small market: When tenant representatives are pressured to show the brokerage’s listings regardless of suitability, it wastes everyone’s time. The agent ends up in a situation where either the client or the managing broker is unhappy.
On the other hand, if you do select one of these company listings and want to make an offer, that takes you right back to where we started: Conflict of interest.
There are several points where you, the tenant, and the landlord are at odds. You want a low lease rate with generous allowances and flexible terms; your landlord wants a high lease rate with minimal allowances and rigid terms. In the scenario with both parties represented by the same firm, the final deal could be swayed by which relationship the brokerage values more. You don’t want to be on the wrong side of that tug-of-war.
Now, what if you’re represented by a full-service brokerage but manage to avoid the obvious conflict of negotiating with your agent’s own firm? You still have a problem.
Most members of Boise’s small brokerage community are Landlord oriented and only occasionally cross over to represent a tenant when given the opportunity. This creates a case of divided loyalties and priorities. These brokers have strong day-to-day business relationships with developers and property owners and yet attempt to put those aside to work for the tenant’s benefit.
How can the same person one day persuade a tenant that a landlord’s offer is favorable and generous and the next day turn around and take swings at that landlord on another tenant’s behalf? What is the parallel? “You can’t serve two masters.”
That’s why in Boise, we at TRA make ourselves the exceptions to the norm of blurring lines between tenant and landlord representation. We only represent tenants. Period.
With Tenant Realty Advisors, our interests and loyalties rest exclusively with you, the tenant. And that’s the way it should be.