First, let's discuss what a Tenant Representative is.
A Tenant Representative, Tenant Rep. for short, is a commercial real estate advisor assigned to assist companies with their real estate leasing efforts.
This is not your typical real estate agent. A tenant rep. is versed in commercial real estate leases, case studies, demographics, market trends, and insight into the particular sectors they specialize in (ie. Retail, Office, Industrial).
A tenant rep. will have relationships with local, regional, and national corporations, and an understanding of which companies are moving into an area and which are moving out. They provide opportunity their clients might not be aware of.
A tenant rep. not only understands the traffic patterns and demographics within their territory, but also the psychographics of each area. This requires a deep dive into market research. This sort of fringe data is extremely useful, as successful companies not only consider locale, but how their customers think too.
Psychographics is the study of psychological criteria and is used by tenant reps. in the Retail industry more than any other use. We can thank Sigmund Freud's nephew Edward Bernays for insight as to how consumers “think and feel,” and thus relate that data to their shopping patterns.
The first phase of matching an area with a client's criteria is the basic demographics, such as population, traffic count, and income. Then the process evolves as the site selection progresses.
For example, The Outlier Group represented a national communications company (whom we still have phone service with today) that was looking for new locations to open another retail store in Florida.
This client required a space with a signalized intersection and at least 25,000 cars per day driving by, within an area of the town that has 125,000 people with an average household income of at least $35,000, all within a 5-mile radius of the space.
The new space must also be located on the side of the street that is traffic coming home from work. Using that data, we are able to filter out a myriad of locations and deliver only the locations that are a fit for the clients business model. If we were to submit sites that do not meet or exceed their criteria, we would be wasting our time and theirs.
This is why a tenant rep. fully vets and filters out every property before submitting it to their client. The retailer requires this criteria because they fully understand who their customer is, how much they spend, and how much traffic there needs to be to obtain a certain level of transactions.
With larger companies, the data has already been gathered and analyzed many times over. They hire analysts for customer research on how their customers behave, how much money they spend, and even what form of payment they prefer. Tenant reps. have access to this data and use it well.
In many cases, with “smaller” businesses, the tenant rep. will build the demographics report and help the business owner better understand where their customers are. While a few small businesses are the exception, many have not collected or researched the data enough. They use general assumptions such as “We need to be in a high income area,” or “We need high traffic counts and an older demographic.”
If it sounds right, that's because it probably is, but it's not adequate enough research to know where the best performing location would be.
Guesstimating in business costs companies millions of dollars a year and yet everyday a new business comes along who believes their guesstimation will be the exception. Unfortunately, it rarely is. This is why big companies outsource site selection to experienced tenant reps.
If you were a business owner and understood that you could hire a tenant rep. as your experienced ally who provides location analysis, site reports, lease comparables, contract review, and all at no cost - there is no question you would be setting up interviews immediately.
A simple Google search for “commercial real estate brokers” in your city will provide a few contacts, but it is a small circle. If you already have a relationship with your Residential Realtor, they should be able to refer you to a commercial specialist.
On that note, it is not recommended using one Broker for both your commercial and your residential interests. It’s the same reason you don’t go to a Dentist when you are feeling sick. Find a Commercial Broker who is a true specialist and understands their craft.
If you're looking to lease a new location for your business, we recommend finding a good tenant rep. who can handle much of the workload for you while providing valuable guidance and market knowledge. You will have an ally who has your best interest in mind for the long run.
PS. The question we most often get asked is “How does the Tenant Representative get paid if they are representing me at no cost?” The answer is simple, the commercial landlord pays. The commercial landlord’s (who own the building) pay their Broker a percentage of the total lease transaction. Their Broker then offers to split that commission with any tenant rep. who brings them a tenant.