A tenant representative is a commercial property specialist who acts on behalf of businesses or individuals looking for a property to rent or buy.
Like a residential property buyer’s agent, a tenant rep will seek to understand a buyer or lessee’s commercial property requirements and work to find a suitable site and negotiate terms of the sale or lease agreement.
The benefit of using a tenant rep to source a commercial property is that a good one will have deep insights into the property market in which you wish to trade or invest and can provide invaluable advice on the trading history of a property, helping you understand whether it may be suitable for your business.
A good tenant rep will also know what constitutes a good price, ensuring you don’t pay more than you should. They will know what a specific property – and surrounding properties – last sold or leased for and whether nearby businesses are trading well.
This knowledge means a tenant rep will be aware of potential off-market opportunities. In fact, the Managing Director of Manly-based Stenton Retail Property Services, Robert Hartman said nearly all of their 200-plus 2019 transactions were off market.
“We spend about 80 per cent of our time doing research so we make sure we know what the comparable rents are and which shops are not trading well.”
“Then, when we get a new client, we do a portfolio review and talk to property agents and the heads of leasing at all the major centres and tell them what we are looking for.”
Once a suitable property is found, they begin negotiations.
“We focus on de-risking the deal and push heavily on getting capital or fit-out contributions. We also employ techniques like capped rent so you can’t have a rent that is more than say 12 per cent of your turnover,” Hartman said, adding that they usually will negotiate on three suitable properties to secure a deal.
Choosing a Tenant Rep: Retail, Commercial or Industrial
While there may be some crossover, a tenant rep will generally specialise in either retail, commercial or industrial property, according to Hartman.
His business specialises in retail, where he said there are currently good opportunities.
“Right now the market is in the favour of the tenant. Businesses have been bedding down their online presence which has lowered demand a little.”
This market shift has seen an increasing number of service-based businesses entering traditional retail properties, a trend Hartman has seen in strip shops like Manly Corso and the big shopping centres.
However the location is critical and he cautions that not all tenant reps will have retail knowledge, contacts or experience to determine what is a suitable location.
“A lot of them don’t have the data or relationships with landlords and property agents. If a tenant rep doesn’t know what the comparable rents are in the area, or which businesses might be in trouble, then be cautious about engaging them,” he said.
How much does a tenant rep cost?
Hartman said some tenant reps will charge one to two months of the first year’s rent as a fee, while others will charge a monthly retainer and then work on a smaller success fee.
He describes the latter as being better for the client as there is less rush to do a deal, meaning the tenant rep will take their time to find the right property with more attractive financials.
“It can take six to 12 months to do a deal, but this is not something you want to rush.”
If you are a retail, commercial or industrial tenant or landlord looking for advice, please feel free to reach out to Pine Property or Stenton Retail Property Services.