In continuing with our retail-focused commercial real estate comprehensive guides, such as: triple net lease and net lease development, we are covering retail tenant representation and the many facets that form a part of this CRE service.
Real estate professionals know all-too-well how easy it is to get confused about different terminology, so this article goes over the most common questions and answers about retail tenant representation: 1) what a retail tenant representative does, and 2) why they’re so vital to commercial real estate deals.
It goes without saying that there are several critical distinctions between the commercial real estate industry and residential real estate. After all, each one serves completely different markets and clientele; however, it is somewhat of a common misconception to assume that they’re essentially the same.
Having said that, here’s what investors need to know before proceeding with a purchase.
What is retail tenant representation?
Retail tenant representation is one of the sectors of commercial real estate business where a broker represents tenants in locating and negotiating a commercial real estate space for their business. Retail tenant representatives serve the tenant’s best interests, and not necessarily the property owner’s interests.
Most people assume that real estate brokers serve the same function in both residential real estate and commercial real estate, yet in reality that’s not the case. For many cases in a residential real estate deal, the agent represents the seller and the buyer.
What is a tenant adviser?
Essentially, a tenant adviser is the same thing as a retail tenant rep. The only difference is in job title, but they perform the same fundamental tasks and responsibilities on behalf of a commercial real estate tenant.
The only difference could be that someone working as an adviser may have a more in-depth knowledge of the specific real estate market, offering recommendations and mitigating clients from making “bad” deals / decisions when it comes to selecting a retail space for their business.
Why is the consumer price index important to commercial clients?
When it comes to commercial real estate deals, the consumer price index is crucial to establishing the cost of the rent.
Every year, the U.S Bureau of Labor Statistics publishes data on how much the cost of specific goods and services changes over a given period. So, with respect to commercial real estate, the consumer price index gives investors an idea of how much rent they can charge tenants.
As the price index changes, rent costs can either rise or fall depending on the property’s location. Also, the consumer price index can tell investors how much they’ll lose on a property if the market takes a sudden, unexpected downturn.
Without the price index, businesses wouldn’t have a reliable way to compare prices for comparable goods and services across the country.
What is multi-tenant retail?
Multi-tenant retail buildings are among the most common type of commercial structures sold across the country. They’re often used in urban master planning to attract a variety of businesses to an area.
These types of structures can house many companies, and the property owner can set up leasing arrangements with each company individually.
The colloquial nickname of these properties is strip centers, but the individual tenants don’t necessarily have to be connected. A multi-tenant retail property may also include several distinct structures on the same piece of land.
Why are multi-tenant properties attractive to investors?
At their core, investing in multi-tenant properties is a prime opportunity to diversify income, and they typically have a lower cost of ownership over time.
Since leasing is the primary source of revenue, managing multi-tenant properties is pretty straightforward. The leases themselves are shorter than usual, encompassing terms as short as three years. Furthermore, another reason to invest in multi-tenant retail property is that they fair very well when the real estate market is robust.
Click to learn more about our retail tenant representation services, and how our retail tenant reps can help locate the best multi-tenant retail properties.