Buy Services, Not Fear

Fear sells.  But that doesn’t mean you should buy it.  So called “tenant only” firms sell the idea that they, alone, offer tenants conflict-free advisory.  To be clear, the potential for conflict does exist in commercial real estate advisory (more on that later).  Yes, as a consumer of such services, it’s important to be aware of how conflict can manifest.  However, the conflict narrative being peddled by the tenant only firms is more myth than reality.  It’s a clever sleight of hand, designed to distract the consumer from realizing the big gaps in knowledge that limit the tenant only firm’s ability to properly advise, while simultaneously suggesting great risk in hiring a full-service competitor.

Allow me to unpack this.  Their version of conflict would have occupiers believe brokers who practice tenant advisory and work at full-service firms stop short of accessing full value for the tenant client because they’re beholden to the firm’s landlord clients.  This is utter nonsense.  I’ve been a commercial real estate advisor for over 30 years.  I’ve worked inside large institutional landlord organizations, I’ve advised landlords as a 3rd party broker, and for the past 15+ years I’ve focused primarily on advising tenants.  I’ve held management positions and worked at a variety of firms, including at the best tenant only firm, The Staubach Company, and at global full-service firms like JLL and Cushman & Wakefield.  Why have most of the best tenant only firms disappeared over the last 2 decades?  Simple.  The practitioners and owners at these firms realized they could no longer compete effectively lacking vital data.  They were fully aware the conflict narrative they sold was smoke and mirrors, not real.  At the same time, their lack of critical knowledge was real, something that limited their practice.  Over my entire career, I’ve never seen a single instance in which a tenant advisor at a full-service firm (of which I was a part) compromised her fiduciary obligation to the tenant client in favor a landlord.  In contrast, we regularly see the effects of the tenant only firms’ limited capabilities in the transactions they negotiate, which are often considerably less valuable than comparable transactions negotiated by advisors working at full-service firms.  This is directly attributable to a lack of basic yet important knowledge.

The biggest potential conflict in commercial the commercial real estate services market (domestic) lies in the fact tenant advisors are paid by the landlord counterparty.  This creates opacity and tends to cause the tenant client to draw a less direct line between compensation and services.  At its worst, an unsophisticated tenant believes the fee is being paid by the landlord.  Yes, the landlord cuts the check, but the fee is baked into the lease, paid by the tenant through rent.  When engaging a tenant advisor, consider brokers based on the services they provide in the context of the fee they stand to earn.  This will level the playing field, enabling a true comparison based on the issues that matter; namely, the efficacy of the services.  Which firm offers the most services?  How do they understand the market?  What knowledge and resources do they draw from in advising tenants?  Don’t buy fear, buy great services to ensure an optimal solution.