Hidden competition – part 2

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From Matt Giffune
Vice President
Jones Lang LaSalle

This post also appears on Matt’s personal blog http://mattgiffune.wordpress.com/.

To the tenant, a landlord is the guy that comes around and asks if everything is OK, sends you tickets to the game, and offers you space when you may not need it.

To the tenant rep broker the landlord is the guy that says “Bring your tenant to my building, we love paying brokers.” Or “We treat our tenants well, they will be in good hands.”  What landlords don’t necessarily broadcast is that they will do anything in their power to keep rents competitive and deal costs low. That is their business and that is completely fair.

From the tenant rep perspective,however, this presents a serious challenge – explaining to a tenant why they need a broker. That is a topic for another Boston Blog post, but the basic argument from the tenant rep is that if a landlord offers a tenant a “market deal,” there should be a commission imputed into the rent. And because “market deals” typically involve brokers, landlords expect to pay a commission on every deal. That is how they underwrite their investments. So when a landlord does not pay a commission and the tenant gets a “market deal,” the commission is left on the table for the landlord, and the landlord wins.

It isn’t stripped out of the rent or disclosed that it exists. Therefore tenants may actually end up paying a premium when dealing directly with their landlord.



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