If you are not familiar with the ins and outs of commercial real estate, it is important to understand the professionals involved in the field. If you are interested in purchasing, leasing, or being involved in commercial real estate in any capacity, chances are you will interact with one or more of the individuals or entities listed below. This is not a comprehensive list, but a general guideline of the parties involved.
1. Broker- A commercial real estate broker is the entity that is licensed to engage in real estate transactions including selling and leasing properties.
2. Tenant Representative- In commercial real estate, a tenant representative is a real estate broker/agent who represents the tenant in a transaction. For example, if you are a business, you may have a tenant representative who is hired to find you a space for your company’s needs. You may hear the term “tenant rep,” which is another reference to a tenant representative. In most cases, the tenant representative is paid by the landlord of the property that the business is looking to purchase or lease. Typically, tenants do not pay for the tenant representative.
3. Listing Broker- The listing broker is the broker that represents the seller or landlord in a real estate transaction. They market the property and handle the real estate process from start to finish for a sale or leasing transaction.
4. Real Estate Agent- A real estate agent is a licensed individual who hangs their license with a broker in order to engage in the selling and leasing of properties. Typically, an agent specializes in residential or commercial real estate, but in some cases, they can engage in both. Real estate agents can represent the seller or buyer of a property, or the lessor or lessee.
5. Investor- In commercial real estate, an investor is an individual who purchases commercial property as an investment. Investors are interested in profiting from their asset purchases and will be interested in the capitalization rate (CAP rate), vacancy rate at a facility, as well as the risks and benefits of a particular property before investing in each property.
6. Landlord- The landlord is the owner of a property that other individuals or businesses can lease from. It is the investor or investor/s who bought the property. They determine what uses are allowed at the property and which lease types will be utilized at the property.
7. Tenants- The tenants are the individuals or businesses who lease a space from the landlord and pay to occupy the space for a determined agreed upon amount of time.
8. Commercial Property Management Company- In some cases, an owner of commercial property/properties will pay a company to oversee the management of their portfolio. Commercial property management companies can provide a variety of services including marketing and leasing spaces, determining rental rates, and collecting rent, ensuring bills are paid on time, performing evictions, capital improvement oversight, and facilities maintenance. The property management company can also ensure the quick and efficient transition of handing over a space of a vacated tenant to a new tenant, including making sure the space is “rent-ready” and in great condition for the next business or individual. Commercial property management companies are a great option especially if the investor/landlord does not live near the properties. The company provides updates and informs the owner of the condition of the property and any issues or suggestions for the assets.
9. Property Managers- Property managers are individuals who engage in facilities maintenance, collecting rent, and are hands-on with the activities at a property. They handle tenant inquiries and ensure a smooth transition for each tenant at each unit. They monitor the status of a property and ensure its upkeep. Property managers work with vendors to maintain a property. They also handle any emergencies that arise at a property.
10. Leasing Administrator- The leasing administrator is the individual who prepares the lease. If a broker or agent is not writing the contract for the space, a leasing administrator helps prepare the lease for both parties to sign (the landlord and the tenant). Commercial property management companies usually have a leasing administrator.
11. Lawyers/Legal Team- When involved in commercial real estate, it is always suggested to have a legal team review any contracts. They can clarify any questions you may have about jargon, terms, or inquiries about contracts or any obligations and expectations required of both parties involved in a transaction and/or legal documents.
12. Insurance Agency- Tenants and landlords are both expected to have insurance. Tenants usually have insurance for the property (improvement, fixtures, equipment and/or personal property) in the premises. They also have insurance for loss of rents to pay their rent in case of loss, as well as liability (property damage/personal injury). If a tenant sells alcohol, liquor liability or dram shop coverage may be necessary. Landlords generally have insurance for the property (such as the building, common area, etc.) and liability (property damage/personal injury). Owners also maintain insurance for loss of rents (in case a loss results in a tenant unable to pay the rent, such as a fire). It is important to discuss the terms, conditions, and requirements with the insurance agency to determine and understand your coverage.
13. Vendors- The vendors are the companies chosen by the landlord, commercial property management companies, or property managers to conduct services on the property. This can include but is not limited to the following services: cleaning, landscaping, general contracting, electric companies, internet providers, and more. Generally, the vendors will have to submit bids for projects. The individual overseeing the property will choose the best vendor for the job.
This is a general overview of the individuals and entities you will most likely encounter when you are involved in commercial real estate.
Below are additional resources about commercial real estate:
The 4 Major Types of Commercial Real Estate Properties
How to Rent a Small Warehouse (for Your Business or Personal Needs)