What is tenant representation and what role does it play in finding the right location for your business?
This is the performance of pre-transaction, transaction and post-transaction services that are part of a stay-versus-move analysis. In the case of being a new business, the stay-versus-move analysis is more appropriately coined the Move Analysis, taking into account the first-time costs and benefits with opening a new operation.
The full array of tenant representation services can be divided into four phases, each with numerous tasks: pre-transaction, site selection, lease negotiation and post-transaction.
Pre-transaction services include your tenant representative gaining a comprehensive understanding of your company and its future space requirement.
This includes review of lease, physical inspection and a space utilization analysis. If it is a start-up company, the relevance of these three steps are not as applicable, and therefore the initial meeting will be a thorough question-and-answer session. These questions should include how important location, quality and feasibility are to your company’s operation, image and brand.
For example, Mike and Stacey Crawford, owners of Full Pedal, chose Monte Vista Village on McCarran and 4th Street in Reno, based on convenient daytime workforce accessibility and proximity to residential households.
The Full Pedal concept is new to Reno, and incorporates performance-tracking technology, state-of-the-art indoor cycling bikes, weight bars, motivational instruction and empowering music resulting in a low impact, fun, full-body workout for all fitness levels.
“The location at Monte Vista Village provided the visibility, space needs and synergies amongst project tenants to make it the ideal location,” said Stacey Crawford. “Our workouts are not only for cyclists — one of our unique benefits is that indoor cycling is adaptable to all fitness levels and ability.
“Through critical demographic analysis, we were able to survey the community to pinpoint where would be best location in bringing to Reno an entirely new health and fitness concept.”
The importance of location is depicted in the site selection process. While completing the clients space need analysis, the tenant representative would prepare a site selection survey summarizing all available opportunities.
These opportunities are prioritized by proximity to customer/employee base, access to transit, timing, expansion flexibility, site condition and rental costs.
After conducting a property tour, a short list of preferred properties will be prepared and serve as a basis for those landlords who shall receive a tenant request for proposal.
The landlord, after careful evaluation of the RFP, will typically respond via a financial and feasibility analysis. At this critical point, your tenant representative will guide you in selecting the location that best meets all of your requirements and commence lease negotiation.
“The acute examination of occupancy costs — to include not only rent, but utilities, insurance, common area maintenance fees and additional triple net lease charges — was critical to creating the model workout facility,” said Stacey Crawford. “Without going through this process, building a successful business model is impossible.”
For a tenant representative, lease negotiation is a process that demands careful thought and consideration as the management of this step is where the true savings are gained in time and money for the tenant.
A side-by-side financial analysis will be prepared for the multiple lease proposals to compare variables such as: rental rates and increases, initial term of lease, terms of option renewal periods, renewal period rent, expansion opportunities, tenant improvements, signage rights and concessions such as free rent and moving allowances.
The tenant representative will act as liaison between the landlord, tenant, architect and contractor to articulate and fine-tune each of these deal points while ensuring all variables are carefully considered. The process of lease negotiations may also incorporate a legal adviser, whom your tenant representative will interface with.
The representative’s goal is to create a win-win situation for all parties, while making sure the tenant’s goals and objectives are primary within the agreement.
The last phase, post transaction services, requires an immense amount of attention to detail and project management expertise. Once the lease is signed, the responsibilities of the tenant representative are not complete. The real estate agent manages critical coordination between tenant, space planners, architects, contractors, moving companies, Internet/phone service providers, furniture and equipment companies and the building owner. Depending upon the scope of the tenant, improvements and the responsibility of the construction between tenant and building owner, this process can take as little to 30 days and upwards of 120 days.
The benefit of hiring a commercial estate professional to represent you in the performance of these four phases is to streamline the process of real estate negotiation to ensure a successful opening of your business. This translates to saving you the time, money and resources that should be applied to running an effective business regardless of industry type.
Dominic Brunettii and Joel Fountain are brokers with the Dickson Commercial Group.
