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Dual Agency – New Court Ruling

Post By : admin 17 March 2017 Leave a comment

If you know me, you know that I am always talking about conflicts of interest and how the commercial real estate (CRE) industry is unfairly slanted in favor of the landlord. One of the big reasons for that is that companies that lease space usually only sign a lease or lease renewal once every 5 years on average while the landlords are professional CRE owners and may sign hundreds or thousands of leases in a year.

Another example of the imbalance is allowing brokerage companies to represent both the landlord and tenant in transactions. This concept, often referred to as “dual agency” or “acting as an intermediary,” muddies the negotiation process and creates less than transparent negotiations for both sides. If a CRE brokerage company represents the tenant and the building owner, for which side is it really negotiating hard. Possibly neither.

At REATA, we champion the idea that CRE service providers should represent the tenant or the landlord, but never both. You just can’t serve two masters. Sure, it makes a lot more money for the CRE firm, but where does it leave the clients – especially the tenant.

In late 2016, the courts in California finally took note and attempted to create more transparency around the issue. In the Horiike v. Coldwell Banker Residential Brokerage Co lawsuit, the state looked into the unfair practices within the industry. And now, the California State Supreme Court has upheld a ruling that dual agents have an inherent conflict of interest. This ruling has spurred the state government to take a closer look at dual agency and modify real estate laws surrounding this issue.
This is obviously a step in the right direction to protect the rights of tenants and make it more clear who CRE firms really represent. It will take some time for the impact of California’s decision to roll out across the country, but it’s good to see the balance of power shifting.

Sadly, I had lunch with an agent from one of the largest full service CRE firms in the world recently. I asked him about the California ruling and how his firm was addressing it. He didn’t seem to know anything about it although he wouldn’t admit it. He said this issue was way overblown and it was never a real problem.
It will take a very long time to pull all the heads out of the sand.

Bob Gibbons is a Real Estate Advisor & Tenant Advocate with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.

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Validation??

Post By : admin 3 March 2017 Leave a comment

I had to laugh when I read the newspaper a few days ago. Steve Brown is the real estate editor for the Dallas Morning News. He wrote an article several weeks ago which prompted me to write a blog post in response.

So when I saw his latest article entitled “D-FW tops nation in office leasing”, I just laughed. He cited a CBRE study which says that net office leasing for 2016 was 5.3 million square feet (SF). The last article he wrote cited a study from Cushman & Wakefield which said the number was only 2.9 million SF.

I pointed out in my critique that the study ignored activity from companies like State Farm which moved out of multi-tenant buildings into single-tenant buildings. This made the numbers look smaller than they should have been and that Mr. Brown should have at least mentioned this in his article. So this new article seems to validate my sentiments.

It’s also good to see further validation of how great Dallas is these days.

To read my previous blog post click here or to read Steve Brown’s latest article click here.

Bob Gibbons is a Real Estate Advisor & Tenant Advocate with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.”

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Office Utilization Far Less Than Expected

Post By : admin 12 January 2017 Leave a comment

Bisnow.com had an article on their website today which started by citing a study by the Harvard Business Review (HBR). It said that “office utilization peaks at 42% on any day, forcing an overhaul of how efficient spaces are designed.” The article goes on to talk about how this is changing the way offices and office campuses are being designed.

But what caught my attention was the 42% utilization. They don’t define what that means exactly so we are left to make our own assumptions. It makes me think that only 42% of the space is being used at any given time, or that only 42% of the people the office was built to accommodate are actually there. I’m not really sure, but either way, it sounds like office spaces are not being used to their full capacity.

This is consistent with something I heard at a lunch presentation today by Robert Jimenez of Granite Properties. Robert told a group of commercial real estate professionals that they are building 3.7 parking space for every 1,000 square feet (SF) in their suburban office buildings. But their own study of Granite Park in Plano shows that only 2.2 parking spaces per 1,000 SF are actually occupied on average. This would seem to support the HBR findings.

The takeaway for me is that landlords can allow much greater density in their buildings than previously thought and tenants could lease much less space for the same number of people. Perhaps it would be feasible to lease only 10,000 SF for 75 people instead of the 15-18,000 SF as previously thought. Of course, this will depend on the corporate culture, how many people get private offices, and, most importantly, whether the landlord can be convinced to allow this.

For creative ways to solve office space needs, please find us at www.texastenantrep.com.

Bob Gibbons is a Real Estate Advisor & Tenant Advocate with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.

Categories: Uncategorized