Transparency = Value

Most tenants don’t really understand how office tenant advisors work. Brokers are often hired for their personality, connections, or confidence, not because tenants clearly see the value of their services or how fees are structured.

While tenants understand brokers don’t work for free, they often pay less attention to compensation because the landlord pays the fee when the lease is signed. Yes, the landlord cuts the check, but it’s the tenant who ultimately pays the fee through rent.  This arrangement makes commissions easy to overlook and often opaque without clear disclosure.

Fee structures vary by market. In some cities, commissions are tied to rent - so the higher your rent, the higher the broker’s fee. That’s an obvious conflict. In San Francisco, the model is different: advisors earn about $3 per square foot per year of lease term, capped at $30. A 10,000 SF, 10-year lease = $300,000 fee. The conflict in San Francisco centers on the amount of space leased and the length of term.  When your broker is pushing you to lease more for longer term it’s a red flag.

What’s a tenant really getting for $300,000? The best advisors bring more than building tours and charm. They provide strategy, analysis, negotiation leverage, and end-to-end services that create measurable value. But many tenants never ask the question.

When brokers are paid also creates misalignment of interests.  Brokers only get paid if a lease closes, at the end of a months’ long process. They risk providing extensive services without compensation.  This can present conflicts when a broker chooses not to provided vital analysis because it might result in no deal.  The best advisors always put the client first, no shortcuts, no hidden agendas.

How can tenants break through this opacity to select the best advisor? The solution is simple: force transparency. Ask prospective brokers to explain:

• How they’re compensated

• How their services relate to that fee

• What value they’ll create for you

The best advisors will answer directly. The others won’t. And that’s the easiest way to tell them apart.