The Symmetry Problem

Markets reward those who possess superior information. In commercial real estate, landlords, lenders, brokers, contractors, and vendors operate with deep knowledge advantages that most tenants simply do not have. When companies lease office space, they enter an opaque market where bad information, incomplete information, or misunderstood information can cost millions of dollars. The companies that achieve the best outcomes are not necessarily the biggest or most sophisticated. They are the ones that close the information gap.

The first breakdown usually occurs in the hiring of a real estate advisor. When companies do not fully understand the leasing process, or the actual role of a tenant advisor, they evaluate brokers using the wrong criteria. They mistake access for strategy. They assume tenant representation begins and ends with showing available space. As a result, they often work with multiple brokers simultaneously, or worse, rely directly on the landlord’s broker to guide them through the process.

This creates immediate disadvantage.

Many companies believe more brokers means more options and therefore a better outcome. What they fail to understand is that finding “space” is easy. Finding the right space, aligned with business objectives, culture, growth plans, labor strategy, economics, operational efficiency, and negotiating leverage, is extraordinarily difficult.

Without a high-level tenant advisor, companies skip the most important part of the process: defining the optimal solution before entering the market. They begin touring space before they understand what they are actually trying to accomplish. Search becomes chaotic because the strategy never existed in the first place.

Compounding the problem is the compensation structure itself. Brokers are typically paid when transactions close, and in most cases, the fee is funded by the landlord. Many tenants never even ask how much their broker is being paid. They view the commission as a side arrangement between landlord and broker, something akin to a referral fee.

It is not.

The tenant pays for the fee through the rent stream. Every dollar originates from the economics of the lease. The moment companies begin thinking about brokerage compensation as though they are writing the check directly themselves, expectations change dramatically. They begin asking the right questions:

What strategic value is this advisor actually providing? What expertise are they bringing to the table?  How do the services correspond to the fee?  

Tenants suffer from asymmetrical information. Hiring the best tenant advisor is the single most important step a company can take to mitigate this issue.