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How the Medical Office Market Can Benefit from Using Flexible Office Space

Posted on September 21, 2018 by Mike Kushner in Blog, Office Leasing, Trends No Comments

Co-working and shared office space is not a new model. Businesses, like Regus, have been providing flexible, monthly memberships for access to shared office space for years now. This rose out of a growing need for businesses to have short-term, extremely flexible work locations so that they can scale up or down rapidly. Particularly, early stage startups couldn’t afford to lock into even year-long contracts for office space, because from week-to-week their needs for workspace were constantly changing.

What shared co-working space provides is an extremely flexible option for businesses and their employees to have a professional workspace with the ability to increase or decrease their space quickly and frequently. Now other industries have taken note of the unique benefits of co-working spaces and have started to develop their own model. The healthcare industry has jumped on this bandwagon and we’re now beginning to see the idea of medical co-working spaces spread across the nation, starting in cities such as Scottsdale, Arizona.

It may be hard to envision how doctors and other medical professionals can use shared workspaces to see patients, especially given the privacy and health considerations that come with the nature of the business. However, when you dig a little deeper, you’ll see that it’s a well thought out model that stands to disrupt traditional medical offices that tend to carry a large overhead and are unable to easily adapt.

Benefits of Using a Medical Co-Working Space

Co-working spaces are usually newly remodeled and fully built-out to fit the exact needs of the industry they serve. For medical co-working spaces, these rooms will feature a clean and organized space with new furniture and all the necessary resources to see and treat patients. Medical professionals can reserve the space for only the days that it’s needed. For some, this might be just 2-3 days per week. In a traditional medical office setting, when not in use, the space must still be paid for even if it’s sitting vacant.

Additionally, the concept of medical co-working spaces allows medical professionals to “test out” a new area where they may consider opening an office in the future. By offering services in a co-working space in the new area, they can see if patients prefer to see them at this location, and about how often they can fill their schedule here.

Space That Can Change with Demand

Additionally, co-working spaces are extremely flexible. Most businesses offering this amenity require only a 12 week commitment, then charge month-to-month. This is a big difference from a traditional office lease which is at least one year, usually multiple years.

In the medical industry, providers typically experience one of two problems as it pertains to medical office space. Either their practice is growing, and they don’t have enough rooms to accommodate their patients, thus delays in appointments or appointments that must be made weeks in advance. Or, the practice is shrinking and they’re losing even more money paying for space that is not being used. In both scenarios, medical professionals could benefit from the flexibility of office space that can change with demand.

With flexible office space, like co-working spaces, the need for space can change week-to-week and month-to-month. This affords medical professionals extreme flexibility. The end result is more convenient options for patients and less overhead for doctors.

Privacy and Health Considerations

It’s important to take into consideration that the highest standard of privacy and cleanliness is always expected by patients. If medical professionals should choose to see patients in a co-working setting, they should be prepared to reinforce to patients that though this is a “shared” space, the room is completely private and always properly cleaned.

As with any new trend, there may be some initial hesitations to overcome from both the providers and the patients. It’s a new model and something that will take some getting used to. However, because there are so many pros to outweigh the cons, as more and more people experience medical care from a co-working space, soon it will feel as comfortable as a traditional office environment – if not more so!

A Trend on the Rise

The reality is the co-working model is exploding, taking real estate empires, like New York City by storm. The 1.7 million square feet that co-working providers, like WeWork, leased in the first half of 2018 accounts for 10 percent of all new leasing activity in New York City this year. In fact, WeWork is about one lease away from becoming the biggest private office tenant in Manhattan – beating out JP Morgan Chase! How this relates back to the medical office market is that a trend that so quickly proved its value and dominance in a place like New York City in just eight years, will next begin to expand into smaller markets and new industries. This is not some overnight trend that will be a flash in the pan. Rather, it’s the future of office real estate that traditional real estate owners and investors need to embrace if they want to keep and attract new tenants.

The Bottom Line

Major healthcare trends are sweeping the nation and they stand to greatly change the way healthcare-related businesses view and use commercial real estate. The concept of co-working spaces that doctors and medical professionals can use to see patients is just one of these trends, and potentially a very disruptive one.

The benefits are clear. Being able to add or lose space on short notice and without penalty will allow medical professionals to save a ton of cost on overhead while having access to adequate space, if their practice grows. The most critical piece that will make this trend a success is that patients “buy into” the idea that they will be receiving care in a space that could be shared by other medical professionals on different days. So long as privacy and sanitary conditions are maintained, this trend has a lot of potential to benefit all parties.

What are some other benefits or drawbacks you see as the result of using medical co-working space? Share your thoughts and ideas by leaving a comment below!

[Online Resources] Real Estate, co-working, Commercial Real Estate, coworking, doctor's office, flexible office space, healthcare, hospital, industry, lease, medical office, Mike Kushner, office, Office Space, Omni Realty Group, patient, trends

How to Prepare For a Commercial Business Relocation

Posted on June 25, 2018 by Mike Kushner in Blog, Commercial Real Estate No Comments

For any business who has navigated the challenges of moving into new office, retail or industrial space, you likely learned some valuable lessons along the way of things you would choose to do differently if you had to do it again. A commercial business relocation has a major impact on company culture, customer service and your bottom line. For this reason, it’s critical to be strategic about how you approach your move to set yourself up for a smooth and seamless transition.

To provide valuable insight on the topic of commercial business relocation, Omni Realty interviewed Dick Michaelian. Dick is a principal of Relocation Consulting & Management, Inc (RC&M) located in Mechanicsburg, Pennsylvania. Having been in the moving and storage business for over 36 years, with 26 of those with RC&M, Dick has helped local, state and federal governments, schools, colleges, healthcare, courthouses, museums and corporate businesses successful relocate to new facilities.

We asked Dick to answer five important questions regarding commercial business relocation covering everything from the biggest challenges to planning for a successful move. Take a look at Dick’s insight and advice that can be applied to any business or organization considering a relocation.

Omni: What are the biggest factors that cause businesses to relocate?

Dick Michaelian: The number one factor is change. While that sounds quite simple, it can be very difficult for an organization to change. Growing, shrinking, change of ownership or leadership are all examples of change. Other factors include the expiration of a lease or sale of a building as well as a desire to change a location because of customers or taxing entities.

Omni: For businesses considering a relocation, what are the most important details they should think through?

Dick Michaelian: A business should begin with the end in mind. How do you want everything to look and operate when the move is completed? From there, you should work back to where you are now and then determine how much time, money and effort will be required to get to where you want to be. Businesses often under estimate the amount of resources required for a good, effective relocation.

Another consideration is how to maintain your level of productivity during the transition. The last thing that should ever happen during a move is for a customer to be told “we can’t be of service to you because of our move.” The entire relocation should be virtually invisible to customers!

Finally, a business should strongly consider what and how it wants to change as a result of the relocation. Change will happen whether it is desired and planned or spontaneous and intrusive.

Omni: How early should businesses begin to plan for their relocation?

Dick Michaelian: The planning should begin as soon as the decision is made that the business is going to move. I’m working with a client now whose move is planned for late 2020 and they want to get a clear picture of what is required for their budget. Planning can never begin too early. The actual implementation of the plan usually begins about four to six months prior to the relocation.

Omni: Describe your recommended planning process for corporate relocation.

Dick Michaelian: The planning process begins with leadership setting the path and goal. From there, it’s getting everyone to work together using the same data. Effective communication is critical. A ‘team’ approach works best, utilizing resources from different facets that will be playing a part in the move – large or small: IT, procurement, facilities, operations, administration and leadership. It’s essential to have a “big picture” perspective of the project while assigning expectations and due-dates to the players.

Once the plan is agreed upon and set, any changes should be well considered. You never want to change a plan in the middle of the move. That rarely proves successful in the end, as often the goal changes as well.

Omni: In your experience, what factors most commonly impact the success of a business’s relocation?

Dick Michaelian: The single most important factor are people moving. The reliability of the planning team members and their dedication to the success of the project is critical. No one person can be responsible for a fantastic move – it’s a team effort. However, one person can really make it hard for everybody else if they don’t want to move or change. Management has to set the tone. Getting the different elements to buy into the change that needs to occur is difficult; but, with the right vision and passion, good leaders will help their organizations through the necessary transition. I always enjoy observing this process with successful businesses.

Moving can be very difficult. Good leaders who recognize that they are in the “people business” have the most impact on the success of a relocation.

Another factor is timing. You never want to move until the new space is ready. And yet, most relocations occur without a new, completed space. Construction delays, last minute changes and contractors not performing are the major causes of this situation.

You can create a great new working environment for your business; but, if the move goes poorly, that’s what everyone will remember. Don’t underestimate the vital importance of a well-planned, smoothly executed relocation from beginning to end!

Is your business considering a relocation to new retail, office or industrial space? What piece of advice did you find most helpful? Join in the conversation, or ask a question by leaving a comment below!

[Online Resources] Real Estate, advice, business, central pennsylvania, commercial, Commercial Real Estate, company, industrial, Mike Kushner, move, moving, office, Office Space, Omni Realty Group, organization, relocate, relocation, retail, tips

How to Identify the Best Commercial Tenant Agent (Guest Post by William Gary)

Posted on June 18, 2018 by Mike Kushner in Blog, Commercial Real Estate, Guest Blogger, Tenant Representative/Buyer Agent No Comments

Note: This article was originally published by William Gary, MBA, MIM on MacLaurin Williams, LLC. Permission to republish has been granted. Click here to read the original version.

How to Identify the Best Commercial Tenant Agent

Commercial Tenants and Buyers often complain that “their” supposed Real Estate Broker seems more interested in depositing a commission check than in helping them to find the right workspace at the best price. Sadly, they are quite correct. Far worse, do Occupiers understand what’s wrong when Brokers try to “double-end” their deals and pocket commission checks on both sides of the table? In commercial real estate parlance, this is aptly known as “double-dipping” and it’s not good for Tenants and Owner-Occupants.

Even Landlords and Sellers may feel pressured by their Listing Brokers, Landlords’ Agents or Sellers’ Agents to make price reductions or to accept offers that are less than what they wanted. On the other side of the table, Tenants and Buyers can feel their arms painfully twisted by “their” Brokers to pay more than they had budgeted to lease space or purchase a building.

So whose Broker is whose and what’s really going on? And why does it matter so much?

DIRTY SECRET NO ONE WANTS TO TALK ABOUT

Shockingly, in many transactions in the US, Commercial Real Estate Brokers have no (zero) legal obligation to look out for the best interests of the Tenants or Buyers they work with. However, many Tenants and Buyers are woefully unaware of this troubling fact.

Laws in at least 25 US states now allow a Commercial Broker to work with a Tenant or Buyer as a Transaction Broker, Facilitator, Intermediary, Dual Agent or Subagent. All but the last of these are pure middlemen. None of them have any legal fiduciary duties of loyalty or obedience to the Tenant or Buyer they work with.

In some states, Texas as one example, the “Client” legally is not even a Client of an Intermediary, Transaction Broker or Facilitator; he or she is merely a “Customer.”

Such Brokers might work “with” you as their Customer, but certainly not “for” you as your advocate. That’s a critical distinction. They’re definitely not your Tenant Representative, 100% Tenant Rep, Tenant’s Agent or Buyer’s Agent.

All fifty (50) states provide avenues for Commercial Brokers to double-end deals, i.e. work with both the Landlord and Tenant or both the Buyer and Seller in the very same transaction and, thereby, avoid any obligation to split or share commissions with an outside “Cooperating Broker“. A Broker (or his or her Brokerage House/Company) is legally allowed to keep the commissions on both sides of a transaction; hence the term “double-dipping“.

In such instances, detractors, including Consumer Advocates, maintain that neither a Tenant nor an Owner-Occupant is actually represented. That’s accurate because neither has an advocate nor champion truly sitting on his or her side of the table.

A Consumer, in this case a Tenant or Owner-Occupant, should not assume that his or her Broker is obligated to represent his or her best interests, and his or her best interests alone, until one has first seen a formal, written disclosure describing the agency relationship under which real estate services are being provided. Tenants and Owner-Occupants should see this disclosure upfront, too, not at the closing table as some Tenants report Big Brokerage Houses are doing. By then, it’s usually way too late to hire a 100% Tenant Rep as an advocate and start over.

Even Landlords and Sellers looking to negotiate the best commission rates, to obtain the highest levels of service and to protect their legal rights in the event of a dispute, should start the process by making certain that they fully understand the form of representation that a Broker is offering to provide them.

Is it a “Single Agency” relationship, which is the optimum and best relationship for the Consumer? That is The Gold Standard of Representation, especially for Tenants and Owner-Occupants.

Or is it a legal relationship that leaves the door open for a Broker or his or her company to double-end the deal and double-dip on commissions?

TYPES OF AGENCY RELATIONSHIPS

Agency relationships are created when one person or party agrees to act on another’s behalf, or to represent them in dealings with a third party.

Once an agency relationship is established, Brokers (as Agents) owe their Clients “fiduciary duties of loyalty and obedience.” In a Single Agency relationship, Agents are typically required to place their Clients’ interests above and ahead of their own. They do so by providing advocacy services with honesty and good faith, while carefully avoiding conflicts of interest or “self-dealing.”

There is confusion, though, because rules governing agency relationships between Consumers and Real Estate Brokers vary from state to state, and all have been rewritten in the last 25 years. Depending on the laws of the state in which they are licensed, Brokers provide services through one of six (6) relationships:

#1) Single Agency: A Broker represents only the interests of the Landlord or the Tenant (or the Seller or Buyer) in a transaction, either as the “Listing Agent” for the property or as a “Tenant’s Agent” or a “Buyer’s Agent” for the Occupier. Consumer Advocates maintain that Single Agency is the optimum form of representation. This is The Gold Standard of Representation, especially for Tenants and Owner-Occupants.

#2) Designated Agency: This occurs when a conflict of interest arises within a Brokerage Company and one Broker is in a position to represent both parties on opposite sides of a transaction; for example, the Landlord and the Tenant on lease. To seemingly remove the conflict of interest, the Employing, Sponsoring or Managing Broker of the Brokerage Company separately designates two (2) of his In-house Brokers, one to represent the Landlord and the other to represent the Tenant.

When states require that Employing, Sponsoring or Managing Brokers implement safeguards to protect a Client’s confidential information, academics and Consumer Advocates say that Designated Agency is the next best alternative to Single Agency. But we maintain that there’s a giant drop off between #1 Single Agency Representation versus #2 Designated Agency. That is particularly true for the Tenant, which only needs one lease at a time as compared to a Landlord that requires assistance from its Listing Broker or Landlord’s Agent with multiple leases in a single building or maybe even in multiple buildings in a portfolio.

Colorado offers Designated Agency. In reality, it was creative wiggling by the Big Brokerage Houses and traditional Commercial Brokers to get the Colorado Legislature to exempt them with a pen from having hundreds of troubling, very inconvenient conflicts of interest. You see, when the Big Brokerage Houses and traditional Brokers were previously seeking to represent Tenants, every single one of their property listings was an actual or potential conflict of interest. So the Colorado Legislature gave them just the legal loophole they wanted. In my opinion, you can expect to see this occur in many other states, too.’

#3) Disclosed Dual Agency: This is when a single Broker or two (2) Brokers working for the same Company provide services simultaneously to both the Landlord and Tenant (or the Seller and Buyer) in a limited, reduced agency relationship, which they must disclose to the to Principal Parties to the transaction. However, part of the disclosure is that neither Broker is legally allowed or obligated to represent the best interests of either the Landlord or the Tenant (or the Seller or Buyer).

In states with no provisions for Designated Agency, the single broker or two (2) Brokers affiliated with the same Company may be considered Dual Agent(s). It’s rather like “double agents” in the world of espionage and it’s not a good situation for Landlords and Tenants or Sellers and Buyers because Dual Agents are required to be impartial and cannot act as an advocate for either side of the transaction.

Although controversial even among Real Estate Brokers and Agents, Disclosed Dual Agency does present an opportunity for experienced Landlords and Sellers to negotiate discounted or “variable rate” commissions in advance, primarily because the Landlord or Seller would have to settle for a lesser standard of representation than in a Single Agency relationship.

But for Tenants and Buyers in the US, who don’t pay the commission to their Brokers or Agents, since it’s paid by Landlords or Sellers, what Tenants and Buyers unfortunately receive in Dual Agency situations are lower standards of representation, including zero advocacy.

#4) Transaction Brokers, Facilitators & Intermediaries: Transaction Brokerage occurs when one (1) Broker or two (2) Brokers at the same Brokerage House/Company work with a Landlord or Tenant or a Seller or Buyer in a non-agency, non-advocacy relationship. It may or may not be declared in writing but a Transaction Broker owes no fiduciary duties of loyalty and obedience to a Landlord, Tenant, Seller or Buyer.

A Broker that performs Transaction Brokerage is called, as one might expect, a “Transaction Broker” in some states but a “Facilitator” or “Intermediary” in other states. In Colorado, it’s called a Transaction Broker and in Texas it’s called an Intermediary.

Transaction Brokers, Facilitators and Intermediaries share the same disadvantages as Dual Agents because neither the Landlord nor Tenant (nor the Seller or Buyer) can expect a Broker to represent its best interests during any negotiations. As a result, a Tenant or Buyer working with a Transaction Broker, Facilitator or Intermediary has little latitude to file a claim for professional negligence or ommission by any such Broker.

Another little dirty secret is that some Brokers intentionally dodge having the higher standards and duties owed to a Tenant or Owner-Occupant under a Single Agency relationship and prefer to work as Transaction Brokers, Facilitators or Intermediaries. Why? Because it affords them much more “wiggle room” and greater margin for error, plus it leaves the door wide open for a potential double-dipping down the road.

#5) Providing Ministerial Services to Unrepresented “Customers”: In real estate law, the unrepresented Tenant or Buyer is often called a “Customer.” A Listing Broker for a property may avoid splitting a commission with an outside Cooperating Broker by providing limited administrative services to an unrepresented Tenant or Buyer, i.e. to a Customer. Why? Again, it’s so the Broker can bank a commission on both sides of a transaction.

#6) Subagency: It’s pretty clear that the Listing Broker for a property represents the Landlord or Seller in a declared, usually written agency relationship, called a Listing Agreement.

But in some states, like Texas, without a written or declared agreement, all Brokers and Salespeople who work with Tenants or Buyers are actually legally “Subagents” of the Landlord or Seller’s Listing Broker/Agent for the property.

That’s right.

It means that all of the Brokers involved in a Subagency state like Texas legally owe 100% of their allegiance, loyalty and expertise to the Landlord or Seller. The Tenant or Buyer has no legal representation whatsoever.

In effect, in a Subagency state all of the Brokers can legally gang up against a Tenant or Buyer, if the Tenant or Buyer does not elect to sign up a Tenant or Buyer’s Agent to act as its advocate and to protect and advance its best interests.

Although Subagency was previously a national real estate industry practice in the US until the 1990s, this form of representation has largely fallen out of favor due to lack of protection for The Public/Consumers and the legal liability risks for Brokers, Landlords and Sellers. Nevertheless, Subagency remains the default or beginning legal relationship in a few states where nothing is in writing between a Tenant or Buyer and a Commercial Broker.

Colorado does not allow Subagency but in Texas it’s the default relationship. Unfortunately, Subagency can turn into a bad dream for unrepresented Tenants, Buyers and Owner-Occupants. To be frank, I can’t even believe that Texas and a few other states still allow Subagents.

CONCLUSIONS

Every state in the US provides avenues for Commercial Brokers to double-end deals and double-dip on fees, which is usually the worst-case scenario for Tenants, Buyers and Owner-Occupants.

Of the eight (8) states that ban Dual Agency altogether, four (4) states still allow Designated Agency (Alaska, Colorado, Maryland and Texas); five (5) states allow Transaction Brokerage, Facilitators or Intermediaries (Florida, Colorado, Texas, Kansas and Oklahoma); and three (3) states allow both Transaction Brokerage and Designated Agency (Alaska, Colorado and Texas).

Designated Agents, Subagents, Transaction Brokers, Facilitators and Intermediaries, effectively, are all just Dual Agents and double-dipping under different legal names. Certain states’ outlawing of Dual Agency is pretty much an illusion and window dressing to assuage the legitimate concerns of Consumers/The Public.

Designated Agency, in particular, is artful window dressing that quite pleases Big Brokerage Houses and traditional Commercial Brokers, all of which seek to obfuscate and camouflage their numerous Conflicts of Interest. It still allows them to legally double-end deals as an excuse to double-dip on commissions. Dual Agents, Subagents, Designated Agents, Transaction Brokers, Facilitators and Intermediaries do little good for Tenants, Buyers and Owner-Occupants, since none of them are true advocates.

To argue otherwise is disingenuous but traditional, regular Commercial Brokers go out there and do it every day.

This troubling issue for Tenants and Owner-Occupants is critical enough for the Office of General Counsel in the New York Department of State to post a notice to The Public. The warning is titled “Be Wary of Dual Agency” and you can read it for yourself at this link.

Honestly, the more I think about it, it’s obvious that Big Brokerage Houses and traditional Commercial Real Estate Brokers believe that Tenants and Owner-Occupants are naive. And that Occupiers still won’t recognize Conflicts of Interest or do anything about them. At best, the whole thing is confusing, even to licensed Brokers.

Some traditional Brokers still argue adamantly, as long as they disclose double-ending and double-dipping to the Landlord and Tenant or to the Seller and Buyer, then it’s perfectly OK based on the “Everyone Knows About It Theory.”

Here’s a link to a stunning article titled Major US Tenant Files Suit Alleging Multi-state Real Estate Fraud & Bribery Scheme. It’s about what goes wrong when a major Tenant doesn’t take Conflicts of Interest seriously enough and engages a Big Brokerage House accustomed to serving two masters in the same transaction. Letting the fox count the chickens doesn’t usually end well and this story doesn’t.

For Tenants, Buyers and Owner-Occupants, what is the point of working with a Broker, even a friend or acquaintance, if they are not a true advocate sitting on your side of the table? It costs more or less the same to have your own advocate as it does to have a Broker whose loyalty is either totally to the other side or whose hands are severely limited and tied halfway behind his or her back.

This is why true Tenant/Buyer Representatives (“Tenant Reps”), Tenant Brokers, Tenant Rep Brokers, Tenant’s Agents and Buyer’s Agents, like MacLaurin Williams and our colleagues at MacLaurin Williams Worldwide, practice only Single Agency Representation. That is The Gold Standard of Representation. We never consider representing two (2) masters in the same transaction. Just because the law allows (less principled) Commercial Brokers to double-end deals and double-dip on commissions, we strongly believe that it’s highly unethical and we won’t do it.

But, for most Commercial Brokers in the US, double-ending and double-dipping are business as usual.

Author of this article, William Gary, MBA, MIM works at MacLaurin Williams Worldwide and can be reached by +1 303-901-1108 or at wgary@MacLW.com.

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Does Your Commercial Real Estate Property Qualify for Section 110 Construction Allowances?

Posted on June 11, 2018 by Mike Kushner in Blog, Commercial Real Estate No Comments

Section 110 of the current Internal Revenue Code (IRC) provides an interesting opportunity for commercial tenants and landlords alike. Essentially Section 110, in certain instances, allows commercial tenants to make improvements to their leased workspace with the benefit of not having to recognize income for any cash payments or rent reductions that are expressly identified in the lease as qualified Section 110 allowances. Additionally, under a qualified Section 110 provision, the landlord will be treated as the owner of the constructed improvements and entitled to depreciation deductions as nonresidential real estate.

The purpose of this tax provision is to provide a set of rules for certain construction allowances, in which the tax reporting and treatment will be consistent between the lessor and lessee. It’s important to understand the nuances of Section 110 that determine whether such improvements qualify. Qualified property is nonresidential real estate which is part of, or present at, “retail space,” which property reverts to the lessor at the termination of the lease. The term of the lease must be 15 years or less, applying certain rules.

For most commercial landlords and their tenants, it can be overwhelming to understand how and when it’s appropriate to take advantage of Section 110. If you find that you’re uncertain as to whether your situation qualifies, don’t let this be the reason you forfeit this potential tax break altogether. When used properly, Section 110 can offer a huge benefit to both parties, allowing tenants to enjoy an upgraded, functional workspace, and allowing landlords the ability to improve their commercial property.

Take a moment to answer these questions to determine if your property might qualify under Section 110. To help us answer, we’ve enlisted the expertise of Jim Holland, Certified Public Accountant (CPA) to offer insight into qualifying for this tax deduction. *It’s important to keep in mind that these are simplified questions and answers. More details may be necessary to fully assess your situation.

Is my space considered “retail?”

If you leased, occupied or use space in your trade of selling tangible personal property (i.e. products or goods) or services to the general public, this is considered retail space. You qualify!

Am I in a short-term lease?

If your lease, with extensions, is not greater than 15 years in length this is considered a short-term lease. You qualify!

Am I constructing qualified long-term real property for use in my trade or business?

If you construct nonresidential improvements (sec 1250 property vs. sec 1245 property) which revert to the lessor (i.e. landlord or person leasing you the space) at termination of the lease, the answer to this question is yes. You qualify! A note of caution: if the lessor chooses to use a cost-segregation study to reallocate the costs, a different language must be used in the lease agreement.

Who will ultimately own the improvements to the property?

To adhere to the requirements under Section 110, your lease must specifically indicate that the lessor retains ownership of all improvements to the property. In this case…you qualify!

Do I have an official agreement between the tenant and landlord?

If you have obtained a signed agreement, before payment or before the reduction in rent begins, from the lessor to lessee…you qualify!

Will the allowance be expended in the tax year it is received?

If the full amount of your construction allowance is expended within 8 and 1/2 months after the close of the tax year…you qualify!

Will both the landlord and the tenant disclose this information with their tax returns?

In order to fulfill this requirement, you must disclose both the landlord and tenants names, addresses, employer IDs, location, and amount reported on both lessee and lessor tax returns. In doing so…you qualify!

Does the Safe-Harbor Exclusion apply?

If you have met all of the above requirements, the safe-harbor exclusion applies to your situation. You qualify!

As you can see, Section 110 provides a valuable opportunity for commercial tenants and landlords to improve their spaces while each receiving a benefit for doing so. If you meet the requirements, and it makes sense for your situation, taking advantage of the Section 110 tax breaks could open up new possibilities to create the commercial space you’ve dream about having! The most important thing to keep in mind is that you must be aware of the requirements to qualify under Section 110 in order to receive the maximum benefit. Speak to a professional advisor before entering any contract or commitment.

*General Disclaimer: These are simplified answers and your situation may be more complicated. This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

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How Omni Realty Uses Research, Skill and Experience to Benefit Our Commercial Real Estate Clients

Posted on June 4, 2018 by Mike Kushner in About Us, Blog, CCIM No Comments

When in search of a service or product, you’re likely to start with a Google search. These results will lead you to visiting some potential businesses’ websites and possibly their social media pages. You may feel like you’ve gathered enough information based on the quality of their online presence, reviews and word of mouth recommendations to choose the right business to fit your needs.

But how often do you consider a business’s mission statement in this decision making process? If you don’t, you should!

A business’s mission statement (or lack thereof) will tell you a lot about their focus, approach and how they treat their customers. A nice website, active social media and high ranking reviews only paint part of the picture of the quality of the company – and what they stand for.

For the benefit of our clients, whether they be past, present or future, we hope to give you deeper insight into our own mission so you can understand what we value and our commitment to serving you!

At Omni Realty, our mission is to secure the most effective space at the most favorable terms for our clients. We use research, skill and experience to offer unmatched, highly personalized service while carefully determining our clients’ needs and analyzing all possible solutions.

But our mission statement is more than just words on paper. The values it represents are closely woven into our daily client interactions as well as our long-term visioning. Here is how Omni Realty strives to live out our mission with everything we do.

Current and Consistent Research

We are strategic about maintaining access to the industry’s most comprehensive database of commercial real estate through our partnership with CoStar. Even though we specifically serve the Central Pennsylvania market, we have access to a combination of reliable tools, resources, and expert analysis on over 5 million commercial real estate properties in today’s market. This allows us to pull and compare market reports, keep a pulse on emerging trends and give our clients valuable advice even if it’s outside of our market.

Additionally, we have access to the most technologically advanced industry tools including:

Esri ArcGIS and Business Analyst – demographics and mapping
DataVu – business list data
Riskmeter Flood Maps – assess flood hazards and generate reports
RealNex MarketEdge – financial analysis

High-Level Skill

Mike Kushner is a graduate of University of Pennsylvania (Penn) with his degree in economics. This education is combined with Mike’s CCIM Designation, making him a uniquely qualified commercial real estate broker, developer and investor. CCIM stands for Certified Commercial Investment Member and requires advanced coursework in financial and market analysis. The CCIM designation demonstrates extensive experience in the commercial real estate industry. Furthermore, CCIM designees are recognized as leading experts in commercial investment real estate.

As part of Omni Realty’s mission, developing this high-level of skill is essential to offering our clients unmatched expertise backed by confidence. Just a few of our uncommon, but highly valuable skill areas include:

Property Management
Raw Land Development
Historic Rehab Property Development
Chairman of Local Zoning Hearing Board
Expert Witness Testimony

Diverse Experience

Skill can only be grown when it is applied. Over the last 25 years of being a licensed real estate broker, Omni Realty has grown a diverse portfolio of experience. We have served over 500 clients, brokered 1,250 commercial real estate deals and have helped businesses of all sizes and industries find the most effective space at the most favorable terms. Our diverse experience also includes extensive property management, both residential and commercial.

We love sharing our experience and applying it toward delivering favorable outcomes for our clients. Experience gives us negotiation power on behalf of our clients, a leg-up on emerging market trends and a vast network of contacts that we call upon to help our clients overcome any number of challenges, both inside and outside the scope of commercial real estate.

Unique Value Proposition

We understand that other businesses may tout that they are “different” and it can be confusing to cut through the clutter and determine which commercial real estate business truly offers a unique model. First, when we say we work with businesses of all sizes, we truly mean it. From a one-person startup looking for co-working space, to a Fortune 1,000 organization looking to develop a growing campus, we are excited to work at both ends of the spectrum because we are excited to see our locally-based businesses thrive.

Second, our skill and expertise comes at no cost to our clients. As an exclusive tenant representative/buyers agent, Omni Realty is compensated by the landlord or seller, not by our client. This also means we come to the table to represent only you and your interests. There is no conflict of interest like there might be if a single agent represented both the tenant and landlord in a commercial real estate transaction. Finally, our service is highly personalized and highly hands-on. You work with only the principals in our firm; and we are responsive and proactive in our communications.

With a better understanding of our mission, and the various pieces involved in bringing our mission to life, we hope you can see why Omni Realty is in a unique position to serve our commercial real estate tenants and buyers. And remember, a business’s mission should not be taken lightly. When looking to work with a commercial real estate broker in Central Pennsylvania, be sure to assess their mission and compare it to your own. The most successful partnerships come from businesses and clients who work together over a shared mission!

Have a comment or question? Join in the conversation by leaving a comment below.

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How Commercial Real Estate Owners and Investors Can Capitalize on the Co-Working Movement

Posted on May 9, 2018 by Mike Kushner in Blog, Local Market, Office Leasing, Trends No Comments

To younger generations who are making up more and more of our work force every day, work is no longer a physical space, but rather an activity that, for better or worse, can be taken nearly everywhere we go. For this reason, the movement toward co-working spaces has emerged in virtually every city that has a business industry. Co-working is present here in Central Pennsylvania with spaces like the Park and St@rtUp in Harrisburg, the Candy Factory in Lancaster and the Techcelerator in Carlisle, to name just a few.

Even though co-working spaces are present in Central Pennsylvania, the majority of our workplaces are still modeled after the “old” economy assembly line, where workflow was linear and corporate structures were hierarchical. For commercial real estate owners and investors who want to capitalize on the growing demand for co-working spaces, here’s what you need to know.

Understand how the modern day “office” has changed

Foremost, we must take a step back to understand how the modern day “office” has vastly changed from what was desired decades ago. Simply put, stop thinking like a baby boomer! Nearly 10,000 baby boomers retire every year. It’s estimated that millennials will comprise the largest segment of our work force (75 percent to be precise) within the next decade.

If you’re a commercial real estate landlord or investor, you know the importance of understanding your clients’ wants and needs. So let’s examine what millennials want out of an office. First, the word “office” isn’t really appropriate anymore. What’s desired is a workspace that in one instance can provide quiet and solitude for “head-down” work, and the very next moment, provide an energizing and collaborative group work environment. Should it come as a surprise that millennials want it all without having to commit to one style of space? This brings us to the next important point, which is design.

Design spaces that quickly adapt to changing needs

Co-working spaces are high on function and that means being able to quickly adapt to a variety of work situations. In a single day, a business and its employees may need quiet, private work stations where people can work independently; open, collaborative space where people can work in groups; and traditional meeting space where people can meet with clients. Over time, growing businesses also desire the ability to easily accommodate more employees without having to uproot and find a bigger office every few months.

With traditional office space, businesses usually have to settle for dysfunctional work spaces that don’t quite fit the number of employees or their work styles. As a result, employees are less efficient, communication is disjointed and company culture suffers. For those who own or invest in commercial real estate, the focus needs to be on redesigning traditional office space to function more like a co-working space. This means large, open work areas where employees can interact and collaborate. Also, look for furniture that can be easily reconfigured as often as needed to provide more work spaces and private offices for independent work and meetings. These features will be huge selling points for businesses who want an office that will meet their immediate needs as well as grow with them.

Offer shared amenities to attract and retain tenants

The good news about co-working spaces is that people get used to sharing amenities. Multiple businesses working in the same building could all benefit from a shared conference room, snack bar, lounge or gym. While this would be far too much for any one of these businesses to individually afford in their own office, a building that provides all tenants with access to such amenities has quite a leg up over the competition.

Look at how Google and Apple have designed “campuses” for their employees. You can create the same effect out of your office building. Give businesses a place to interact with other businesses. Now you not only offer work space, you offer networking and business development opportunities for all!

Deliver a seamless experience – even if it comes at a premium

By adding luxury amenities to your office building, like mentioned above, you give businesses a seamless experience. Their employees will have incentive to do more at the office, even if that is relaxing, eating or exercising. Best of all, this higher level of employee engagement comes at a premium. Businesses will pay more for office spaces that keep employees happy, healthy and invested in their jobs. When you invest in adding luxury amenities to you work spaces, you will stand out among the competition and be able to charge more for your space.

Focus on building your own brand!

If you want to engage the growing millennial workforce, you need to pay attention to your brand. This demographic is used to polished and prominent branding. If you want to attract them to your office space, you need to present them with a brand worth buying into. Many co-working spaces brand themselves with a trendy name and logo. They have professional websites and a strong social media presence. How does your “brand” compare? Any effort put into properly branding your properties will bring exponential benefits as time goes on.

Which of these tips do you believe is most valuable to commercial real estate owners and investors capitalizing on the growing trend of co-working spaces?

Join in the conversation by leaving a comment below!

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Search Available Commercial Real Estate in Central Pennsylvania

Posted on April 5, 2018 by Mike Kushner in Blog, Commercial Real Estate No Comments

The American culture is heavily reliant upon the internet to provide us with information. If we have a question, we are quick to turn to our cell phones or computers to deliver the answer.

The search for real estate is no exception. According to a report by the National Association of Realtors, as many as 51% of buyers found the home they ultimately purchased through an internet search. This statistic demonstrates the power of having an online presence when marketing your real estate properties.

Looking specifically at commercial real estate, tenants or buyers wanting to rent or buy retail, office or industrial space often take to the internet to begin their search. And why not? You can do this from the comfort of your home or office and view details of hundreds, if not thousands of different properties with the click of a button.

We recognized this very real need for people to quickly and easily search Central Pennsylvania for commercial real estate. As a result, we are excited to announce the launch of Omni Realty Group’s property search feature. While there are many available websites and platforms that allow for commercial property search, we’d like to explain a little more about what makes ours unique and advantageous to you, the tenant or buyer.

How Do I Search for Commercial Real Estate in Central Pennsylvania?

This is a question we hear often. “How do I search for commercial real estate in Central Pennsylvania?” Many businesses looking for commercial office, retail or industrial space will begin with a Google search. While this will yield many results, it can be difficult to sort the results by your property “wish list.” The top search results have the strongest SEO, but may not have the features you desire.

When using the Omni Realty Group commercial property search to look for commercial real estate, you are able to use a variety of filters to fully customize your search results to yield properties that most closely match what you’re looking for. Filters such as: Lease or Purchase; Use (e.g. Retail, Office, Industrial) and Size (SF) will help you save time scrolling through results that aren’t relevant to what you need. In addition, the “draw” feature allows you to create geographical boundaries so that search results are located only within the areas you wish to consider.

Most importantly, the Omni Search feature allows you to view all the properties that are available in the market not just those your agent wants you to see. Omni is committed to securing the most effective space at the most favorable terms for our clients.

Benefits of Omni Realty Group’s Commercial Property Search

Benefit of Saving Time: You can save an immense amount of time by not actually visiting the place and instead going online. You clearly deduct the time of travelling and you don’t need to deal with the traffic and weather problems. You can do it anytime you want to regardless of other factors.

Benefit of Comparison: When you check online you can compare prices of different landlords or sellers for the same area. All these gives you clear idea of pricing and gives you the power of bargain as an online platform is more competitive as well as transparent. In addition, you can get multiple properties at different locations in the same screen. You can see the actual difference between two sites and have data which is better and why.

Benefit of Convenience: There are many mediums when it comes to the actual ground visit of a property. When you search online you are master of your own will. You can do the initial research at your convenience. You can use your leisure time while commuting or even late night.

Benefit of Representation: Once you find properties you wish to tour, you have the dedicated and exclusive representation of Omni Realty Group to guide and advise you through every step of the process. Literally any property you find on our search, we can show you and represent you as your tenant representative or buyer’s agent. It’s easy to fall victim to a dual agency saying only they can show you a property, but that’s simply not true. When you begin your search with Omni Realty Group, you eliminate the chance that you will be without proper representation to negotiate favorable terms and pricing in your lease agreement.

How a Tenant Rep/Buyer Agent Adds Value

As an exclusive tenant representative and buyer agent, Omni Realty Group adds value and peace of mind to your commercial real estate property search. First, this means you receive exclusive representation without conflict of interest between the two parties. Second, you have an experienced commercial real estate professional on your side to advise you of current market pricing and negotiate on your behalf for fair and reasonable terms.

What most people don’t know about working with a tenant rep or buyer’s agent is that it almost never comes as a direct cost to you. Our fee is commonly paid for by the landlord or seller. At Omni Realty Group, we pride ourselves on building strong working relationships with other real estate businesses in the area. The result is a mutual respect that allows us to work effectively on behalf of our clients to expedite the leasing process and get them into their new space on the best possible terms!

Now that you have a better understanding of how the Omni Realty Group commercial property search feature works, you have all the tools you need to find your new office, retail or industrial space to take your business to the next level. Check it out now to see how fast and easy it is to find the best available commercial properties in Central Pennsylvania!

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Central Pennsylvania Office Real Estate Made Few Gains in 2017

Posted on February 19, 2018 by Mike Kushner in Blog, Local Market, Office Leasing No Comments

Vacancy rates in the local office market remained mostly stagnant moving into the New Year.

If the saying “no news is good news” can be applied to Central Pennsylvania’s office real estate market, then 2017 was a good year indeed! We closed out 2017 with few noticeable gains and mostly stagnant vacancy and rental rates. On a positive note this means there were no lasting drops to cause volatility to the market; however, if “stagnant” remains an ongoing theme for our local office real estate market in 2018, we may have some cause for concern.

Let’s take a look at some key data for our three local submarket clusters: Harrisburg/Carlisle, Lancaster and York/Hanover. You will see that each experienced its own ebb and flow with some submarket clusters faring better than others at the close of fourth quarter 2017. The most important question to consider when looking at this data is: “What submarket is poised to perform the best in 2018 and what does that mean for commercial real estate and our local economy?”

Harrisburg/Carlisle Submarket Cluster

Vacancy – The office vacancy rate for the Harrisburg/Carlisle Submarket Cluster increased to 6.3% at the end of the fourth quarter 2017. The vacancy rate was 5.8% at the end of the third quarter 2017, 5.9% at the end of the second quarter 2017, and 6.5% at the end of the first quarter 2017, placing it just shy of where we began the year.

Absorption – Net absorption for the Harrisburg/Carlisle Submarket Cluster was a negative (135,877) square feet in the fourth quarter 2017. That compares to positive 25,603 square feet in the third quarter 2017, negative (6,036) square feet in the second quarter 2017, and positive 22,829 square feet in the first quarter 2017.

Largest Lease Signing – The largest lease signing occurring in 2017 was the 57,764 square foot lease signed by Pennsylvania Health and Wellness, Inc. at 300 Corporate Center Drive located in Camp Hill.

Rental Rates – The average quoted asking rental rate for available office space, all classes, was $18.12 per square foot per year at the end of the fourth quarter 2017 in the Harrisburg/Carlisle Submarket Cluster. This represented a .89% increase in quoted rates from the end of the third quarter 2017, when rents were reported at $17.96 per square foot.

Inventory – Throughout 2017, a total of two new office buildings were delivered to the market with a combined total of 73,000 square feet. At the close of the fourth quarter, two additional buildings remained under construction with a combined total of 70,000 square feet of inventory yet to be delivered.

Lancaster Submarket Cluster

Vacancy – The vacancy rates for the Lancaster Submarket Cluster in 2017 held steady for the first three quarters at 6.0%. Only in fourth quarter 2017 did we see the slightest movement in vacancy to 6.1%. Since its dip to 5.3% in third quarter 2016, the vacancy rate has returned to its recent historical average where it continues to remain stable.

Absorption – In the fourth quarter of 2017, net absorption dropped into the negatives for the first time all year, ending 2017 at negative (13,391) square feet. Net absorption was 2,462 square feet in third quarter 2017, 101,013 square feet in second quarter 2017 and 16,187 square feet in first quarter 2017.

Rental Rates – Even with a drop in net absorption and only a slight increase in vacancy rates, the quoted asking rental rate for available office space, all classes, in the Lancaster Submarket Cluster continued to increase throughout 2017. In the first quarter the quoted rental rate was $16.63, $17.13 in the second quarter, $17.20 in the third quarter and $17.46 in the fourth quarter. This is the highest quoted rental the Lancaster Submarket Cluster has experienced since prior to 2014.

Inventory – Two new office buildings were delivered to the Lancaster Submarket Cluster in 2017. Both delivered in the second quarter and combined they added a total of 113,000 square feet of new office space.

York/Hanover Submarket Cluster

Vacancy – The fourth quarter office vacancy rate for the York/Hanover Submarket Cluster held steady at 5.9%, the same as it was in the third quarter. This is slightly higher than the 5.6% vacancy rate in the second quarter and the 5.8% vacancy rate in the first quarter.

Absorption – The fourth quarter ended with a net absorption of 1,400 square feet. This is an increase from the third quarter’s negative (29,853) square feet that was a significant drop from the second quarter’s 15,646 square feet the first quarter 2017’s 31,636 square feet. This is the only increase in net absorption the market experienced in 2017.

Rental Rates – 2017 started off with a fairly steady quoted asking rental rate for available office space, all classes, of $17.40 per square foot. It increased by $0.01 in the second quarter to $17.41 and spiked in the third quarter at $18.05. Though still higher than the first two quarters, 2017 finished with a slight dip in quoted rental rates as it fell to $17.74.

Inventory – No new office buildings were delivered in the York/Hanover Submarket Cluster in 2017. There is one building under construction with a total RBA of 840 square feet.

Looking at the comparison of the three Central Pennsylvania submarket clusters, which do you feel is in the best position to start making some moves in 2018? Share your ideas by leaving a comment below.

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Impact of the New Tax Law on Commercial Real Estate

Posted on February 12, 2018 by Mike Kushner in Blog, Commercial Real Estate No Comments

The federal tax overhaul, which was enacted into law on December 22, 2017, was the most drastic tax law changes that the United States has seen in 30 years. While it will take some time to fully understand how much tax savings the changes could generate for commercial real estate investors, there are several significant impacts that are quite apparent.

New tax climate favors commercial real estate investors

Legal and tax experts agree that the new tax law bestows several benefits that make it more appealing for commercial real estate investors to buy properties. Many of the changes will put more money back into the pocket of investors in terms of tax savings. Some of the changes, particularly the tax treatment of capital expenditures, will shield a tremendous amount of income for property owners that are making capital investments and improvements to their properties. And let’s not overlook the ripple effect the new tax bill may create, such as fueling economic and job growth that will drive demand for commercial real estate. All things considered, real estate has become just about the most accessible way for high net-worth investors to profit from the tax law.

A shift in capital should increase demand for commercial properties

The tax new law creates an incentive for investors to shift capital from equities to pass-through businesses. Essentially, the law enables a taxpayer to factor 2.5 percent of the original purchase price of a property into the calculation of the 20 percent deduction for pass-through income. This allows a real estate investor the ability to reduce real estate investments to an effective 29.6 percent tax rate, which is 10 points lower than it was in 2017. Without the predicted shift in capital based on the tax new law, commercial real estate prices likely would have stalled in 2018, due to increasing interest rates and decreasing cap rates. It’s important to note that the deduction is set to expire in December 2025.

Expansion of Section 179 allows commercial property owners to direct expense improvements

Another positive for commercial real estate investors is the expansion of the Section 179 deduction for depreciation. Under the Section 179 revision, the new tax law lets commercial property owners count the cost of improvements (i.e. roofs, HVAC systems and security systems) as direct expenses in the year these items were installed. Under the previous tax law, improvements had to be capitalized with a small piece being expensed each year until the full cost was exhausted. Additionally, the Section 179 change is retroactive to the 2017 tax year, which is unlike other parts of the new law.

Tax-free 1031 swaps for real estate were retained

Another piece of the tax law that should have commercial real estate investors excited is the retention of tax-free 1031 swaps for real estate. The real victory here is that lawmakers did not yank 1031-exchanges for real estate, as they did for aircraft and other types of personal property. In fact, under the new law 1031 trades are now restricted exclusively to real estate.

Insights from a tax adviser

The new tax law creates some gray areas and leaves many questions unanswered, particularly as it relates to commercial real estate. As a commercial real estate investor, the best thing you can do is consult a tax adviser before making any drastic changes to your real estate investment strategies. At Omni Realty Group, we had a few questions of our own so we asked Jim Holland, accountant and owner of Jim Holland CPA to weigh in with his insight. Here is what he shared.

“There is no doubt the biggest winner in the real estate arena was for commercial real estate investors; however, it is wise to proceed with caution. I would recommend to any commercial real estate investor that they tread lightly until more is known about calculating the 20% reduction of business income, including from flow through entities. The calculation can be complicated and burdensome.”

That’s not to say there are some immediate actions CRE investors might consider taking in 2018 to put themselves in the best possible position to maximize the benefits of the new tax law. Clifton Guise, Tax Attorney and Partner at Halbruner, Hatch & Guise, LLP shares the following.

“Because most real estate investors own and operate their real estate activities through pass-through entities (LLCs, LPs, and S-Corps) or sole proprietorships, it is important to determine if the investor qualifies for the Qualified Business Income (“QBI”) Deduction. The QBI Deduction is an individual level deduction that can reduce the tax rate on income from pass-through entities. An investor may need to restructure their entity or in some cases restructure their leases in order to qualify for the QBI Deduction.”

Taking the time to fully understand the new tax law, and identifying how you may need to restructure your leases or business model to maximize your benefits under this law is a worthy investment of your time. If you are a commercial real estate investor, make it a goal to seek advice on the new tax law and how it stands to impact your business going forward.

Share your opinion! What do you think is the most important impact the new tax law will have on commercial real estate?

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Who Really Represents You in a Commercial Lease Negotiation?

Posted on January 24, 2018 by Mike Kushner in Blog, Tenant Representative/Buyer Agent No Comments

Who Really Represents You in a Commercial Lease Negotiation?

When it comes to leasing commercial workspace, too many tenants mistakenly believe that the landlord’s leasing agent/broker will somehow represent them in negotiations. Unfortunately, this is never the case.

The important question that this article answers is, “Who really represents who in a commercial lease negotiation?”

As a tenant, your wants and interests are usually different than the landlord’s, at times even diametrically opposed. It’s impossible for one broker to represent both sides of your deal faithfully and fairly. There will always be conflicts of interest and the broker most often favors your landlord, not you as the tenant.

Too often, a commercial tenant begins the process of leasing office space without hiring a tenant representative to 100% exclusively represent them. Usually they do not realize that a tenant rep is not at the cost of the tenant, since the tenant rep will normally co-broke a commission with the listing agent.

At some point, tenants then find themselves too far down the road to fully benefit from the expertise, advocacy and unbiased representation of a true tenant rep. This can result in a number of troubling issues and frustrations for the tenant. These include losing the upper hand in negotiations, being subject to unfair pricing and unsatisfactory terms and too late realizing that things could have gone far better if they had a professional dedicated solely to representing their best interests.

It’s important for every commercial tenant to understand the vast difference between a tenant representative and a traditional commercial real estate broker.

Helping us answer this critical question and more is William Gary, Principal at MacLaurin Williams, LLC and founder of The Tenant Rep Channel. Gary’s firm is committed to exclusively representing commercial tenants and owner-occupants and creating valuable resources that help to educate the public on the value of exclusive, 100% tenant representation.

Differences Between Tenant Representatives and Traditional Real Estate Brokers

A real 100% tenant rep should be able to meet all the criteria needed to take the exclusive tenant rep pledge. A landlord’s agent or traditional broker simply cannot make this pledge to tenants and owner-occupants. A real tenant rep never puts him or herself in position to double-end an occupier’s transaction and double-dip on fees/commissions. That’s what traditional CRE brokers frequently attempt to do. It’s their highest goal.

Furthermore, a 100% tenant rep acts as a true fiduciary, advocate and loyal, obedient agent for an occupier. On the other side of the table, the opposing landlord’s agent does this for the landlord. A true 100% tenant rep also conscientiously avoids and turns away from conflicts of interest. Traditional brokers create and run towards them to try and double their fees in your transaction.

Vision and Mission of the Tenant Rep Channel

After resigning from the ITRA Global Organization, MacLaurin Williams, LLC still wanted to have a 100% tenant rep network to serve multi-market clients. Gary explains, “We wanted to compete harder and more effectively against large tenant rep chains and traditional brokerage houses that all perform tenant representation.”

Initially, The Tenant Rep Channel was intended to be an informal 100% tenant rep network just for MacLaurin Williams’ own use. But it escalated when Gary asked two other 100% tenant reps, Chris Carmen (Indianapolis) and Craig Melby (West Palm Beach/Asheville) if they might find a use for it, too. They were immediately interested – and so it grew from there!

Unlike traditional CRE broker networks, The Tenant Rep Channel is an informal, virtual model that doesn’t have any initiation fees, dues, required conferences, travel expenses for airfares and hotels, by-laws or contracts. The mission: Just keep it simple and base it around a shared Google map + list of major markets that every participating 100% tenant rep firm must prominently display on its own website.

Amazingly, the bigger independent, 100% tenant rep firms were just as interested in The Tenant Rep Channel’s marketing tool as the smaller firms. They still felt like they needed a big coverage footprint to compete head-to-head more successfully against the big brokerage houses, such as CBRE, JLL, C&W, Colliers, Newmark, etc., as well as Savills Studley and Cresa as tenant rep chains.

The Tenant Rep Channel’s growing success comes from its ability to provide a big coverage footprint for independent, 100% tenant rep firms. It’s an instant and very real 100% tenant rep network, with most TRC principals having 20 and 30 years of CRE experience. It’s a super heavyweight group in terms of experience, talent and skills.

Omni Realty Group is proud to be a part of The Tenant Rep Channel’s growing network.

How Awareness of the Traditional Broker Conflict Will Reshape Commercial Real Estate

With more education and awareness of the inherent conflicts of interest in the traditional CRE broker model, combined with new resources like The Tenant Rep Channel, you might anticipate that a major shift would take place in the Commercial Real Estate Industry where tenants and buyers would flock to and favor 100% tenant reps over traditional brokers.

However, Gary notes, “Too many occupiers still believe that CRE brokers are pretty much all the same, other than some work for big firms and some for smaller shops.” He goes on to add, “Occupiers often know some CRE brokers as friends or family and they’re comfortable hiring them without understanding the complexity of local agency laws.”

As 100% Tenant Reps, we’ve not done a good enough job of making it clear that the CRE Industry is terribly plagued by conflicts of interest and that these conflicts of interest frequently do serious damage to the best interests of occupiers. Most people can grasp that their attorneys should not have any conflicts of interest in their legal matters; it’s more of a Win vs. Lose situation. But occupiers don’t make the same leap when it comes to hiring CRE Brokers to handle their CRE transactions.

The bottom line is that in order to reshape the Commercial Real Estate Industry, it’s incumbent upon 100% tenant reps to better explain “why” conflicts of interest are so damaging for occupiers. We need to educate tenants and buyers on what can go wrong. Simply saying, “We don’t have conflicts of interest,“ doesn’t resonate with occupiers. It’s not nearly enough.

Occupiers need to learn why conflicts are harmful for them; how they can waste tons of valuable time and spend significantly more money; money that is their valuable net profits.

Gary concludes with these final thoughts, “One thing that we initially hoped would occur on The Tenant Rep Channel is happening. By being connected through this network, creative ideas are getting shared worldwide and some really innovative things are blossoming organically.

The 42Floors Elite Site Widget, which is a full market, commercial property search module for our own websites, is one example. I urge every 100% tenant rep to check it out and really assess the value it could have for your business. We all need to get serious about educating occupiers on the stark differences between 100% tenant representatives and traditional CRE brokers!”

Do you have another question related to the differences between tenant representatives and real estate agents? We welcome you to join in the discussion by leaving a comment below!

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