Killing The "Vendors" Who Serve You
Dan Mihalovich
In the current economy, there’s pressure all around. Pressure to cut costs, pressure to squeeze “vendors” and figure out how to do a lot more with a lot less. And why not? What downside is there?
Streamlining the process vs. skipping steps: At the inception of every tenant–rep project, we help our clients to organize them, to assist with the selection of a Team to handle all aspects of their project, and to begin creating a strategy and budget to reflect that strategy. To this point, we’ve probably taken our client further than where 99% of tenant-rep brokers go. Tenants are oftentimes too fixated on the execution and outcome of the leasing process and, to the detriment of the transaction, take advice from inexperienced or maligned brokers all too happy to skip to the commission payment.
Your Team professionals vs. “vendors”: Tenants, you need to grasp this concept right away: Trust runs in both directions and once we’re beholden to one another, you’ll understand and appreciate why we must get inside your organization to most effectively advocate for your interests. A “vendor” is someone who sells. Your office leasing Team, on the contrary, should be comprised of a broker, an architect, a general contractor, an IT specialist, a furniture specialist, a real estate lawyer…and, occasionally, others, but NONE who sell. In all cases, your Team members are professionals who must collaborate—and collaborate well—to produce the most optimal results for you. All should be advocates, with the proper skill set, time commitment to you and your project and share the unconflicted mission to serve you. Nothing about your Team should smell of “sell”. Don’t be swayed by salespeople, as compelling as they are.
Establish fair fees for services you need vs. bidding wars: Here’s the tragedy, tenants: If you don’t resist the temptation to take advantage of service providers, you’ll wind up cutting some of the most necessary menu items from your architect and contractor—to spite yourself. If you bid architects against once another; GCs against one another; even real estate lawyers against one another…what result should you expect? Architects will have to forego job supervision—a highly recommended task to ensure the quality of design and construction you deserve. Architects will plug fewer hours on design. Their finished design drawings may not be as complete as usual, leading to misinterpretation by your contractor—producing erroneous pricing.
General contractors, in our view, should rarely be competitively bid. (We favor selecting a GC after interviewing and establishing a fair fee; all of the subcontractors will be competitively bid thereafter.) But in this environment, tenants believing themselves to be clever will send their job out to bid to 4–5 GCs. And with what result? Although the GCs’ bids may look attractive on their face, the lowest bid won’t necessarily be the most complete…nor qualified. Tenants should be particularly alarmed when you see wide ranges of estimates.
The Tenant-Team from the start vs. the usual hack-jobs and money left on the table: What do you do, tenants, when everything goes RIGHT?! The right combination of professional team members makes ALL the difference in the outcome of your project. Try this, when interviewing: After you’ve asked a broker about the deals they’ve negotiated, ask them to refer you to the other team members (architect, contractor, real estate lawyer…). Do they even know each other? Did they spend much time in the room together during the entire process? You’ll be shocked to learn how little coordination took place. But don’t be shocked to learn that massive sums of money were left on the negotiating table.
Negotiating for the extras vs. cutting from your budget: Here’s the point: Rather than compromising your ethics and your budget for office space related professional services and tenant improvements, count on your leasing broker to negotiate more substantial concessions from the landlord to make it all work for you. That’s what we do for a living! ALL of your Team members will have your budget at heart, but you’ll make a difficult time for yourself by cutting your “vendors” off at the ankles to try to save a few bucks. Let your broker earn their fee. And get what you want!
Think about it.
Cheers,
MIHALOVICH PARTNERS
655 Montgomery Street, Suite 1490
San Francisco, CA 94111
T: 415-434-2820
C: 415-999-9244
T: @MihalovichCRE
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About the Author
Mihalovich Partners, a San Francisco based commercial tenant-representation firm, was formed in 1998 by Dan Mihalovich, then a 16-year Industry veteran and Director of Office Leasing at Cushman & Wakefield. Mihalovich brings to the firm 35 years of business experience, focusing on Market Analysis, Negotiation Skills and Project Management expertise. He has managed over 200 office-leasing and project management assignments for many of San Francisco's most prestigious tenants. His career, and the focus of Mihalovich Partners, is solely driven to advocate the interests of San Francisco tenants in leasing negotiations of all types—renewals, relocations, renegotiations, and terminations. Mihalovich Partners never represents landlords, avoiding conflicts of interest, unlike most firms in the leasing brokerage business.
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