Connecting Fees to Services: Identifying the Best Tenant Advisor

The tenant advisory business was built on the premise that the advisor holds essential knowledge about where your office should be located and how to negotiate market-favorable lease terms.  Yet much of the details surrounding what the advisor knows, how they know it and why they advocate a specific strategy are unknown to the client.  Importantly, in the US, the advisor’s compensation is often misunderstood by the client since the advisor is paid by the landlord (the tenant actually pays the fee through rent).  In fact, with tenant advisory fees being “at risk”, meaning they are earned only if a transaction is completed, there is ample incentive for tenant advisors to hold a strong bias toward transacting quickly, even when it may not be in the client’s best interest.  Further, when the service offering is mostly opaque, the provider can increase the value of fees by limiting the amount of service required for their acquisition.  This is not a cynical view of the sector.  It is a reality based discussion of the structural challenges that make hiring the best advisor difficult.    
 
Understanding this structural market risk, occupiers can begin to align advisor compensation with services.  At this point, key differences will emerge between advisors.  Best in class advisors will embrace the dialogue.  They want transparency because they know they’ve built a service model that creates more value for the client and stands in stark contrast to advisory services centered on space finding.  As occupiers become more skilled at connecting fee to service, the competitive pressure will improve the overall marketplace.  This is particularly important now, as occupiers embark on a new normal in terms of how they think about office space (vehicles to promote employee engagement), one that requires more from their advisory partners.