Tenant representation is becoming an increasingly common phenomenon on the office markets of Central Europe, which is without a doubt a sign of a healthy, growing and more educated market. Their activity, however, often raises ethical questions as it’s still often unclear who pays for their services. Conflict of interest in tenant representation has been one of the key topics of two regional events: the Property Forum - RICS Prague Property Summit 2017 and the latest RICS Hungary Tea & Talk in Budapest.
The share of transactions with tenant representation has grown significantly on the office market in recent years, especially in the case of pre-leases and leases signed for larger floor spaces. Industry experts predict that the phenomenon will become even more widespread in the future which means that real estate professionals need to come up with a framework for ethical and transparent tenant representation as soon as possible.
Representatives of advisory firms, tenants and landlords all agree that leasing agents carry a huge responsibility and the key to improving ethics and transparency is education. Unfortunately many believe that even though the market is growing and expanding, advisory firms are not doing enough to educate their existing employees and train their new hires. Universities and professional bodies would be the natural partners for such training programmes, but a general lack of cooperation limits the possibilities.
Through their agents, advisory firms are responsible for the education of tenants as well. Most landlords prefer to sit down with tenants that have a grasp of how the market works and in order to ensure this they are ready to work together with advisory firms.
Landlords and tenants strongly believe that tenant representation can be really useful and add value to lease transactions, but it is important to note that it is not secondary who is representing the tenants. Generally speaking, tenant representation is completely different for those clients who get these services as a consequence of a regional or global corporate deal and for those who directly hire a firm to help them find the right office.
Property Forum - RICS Prague Property Summit 2017
Still, the biggest issue associated with tenant representation is not related to educations but rather to the fact that in most CEE countries there is no common policy in place on who should pay for the services of the agent.
If the tenant pays, they tend to focus too much on fees and less attention is given to the value added by the agent. Tenants thus often choose to be represented by the agent who charges the least instead of the agents who is willing to do the most for them.
If the landlord pays, that is without a doubt a conflict of interest and the question arises: who is actually looking out for what’s best for the tenant? Landlords admit that if they don’t feel that an agent is fighting strong enough for its client, they usually take advantage of the situation.
If the agent shows their client a building that they were assigned to lease that is, of course, a whole different level of conflict of interest.
These are really serious ethical issues that the market has failed to address to date. RICS has several materials that can provide a starting point to resolving these issues: the institution’s professional statement on Conflict of Interest or its Real Estate Agency and Brokerage Standards both should be on the radar of professionals involved in tenant representation.
RICS Hungary Tea & Talk
Many believe that a flat fee or a more standardised fee system, which is based on floor space instead of rent, could provide a solution. These practices are common overseas or in Western Europe and could easily be adapted to local markets.
A lot has been done in recent years to make Central European commercial property markets more transparent and ethical, but conflicts of interests are still often unavoidable. Experts agree that it is the responsibility of working professionals to ensure transparency and promote ethical behaviour.
The Media Expert electromarket chain has joined the ranks of tenants at the Big Łubna park. A 700 sqm outlet has opened in the shopping complex near Warsaw.
EPP-managed Power Park Kielce has strengthened its offer in the DIY and hobby segment. A multimarket of the Swedish Jula chain has opened in the facility with a total area of more than 1,700 sqm.
JLL and its company Tétris, which specialises in the design and arrangement of commercial interiors, have decided to relocate their Kraków office to the Unity Centre complex. The new office comprises 300 sqm and is located on the 16th floor of the building.
New appointments
CPI Property Group announced the appointment of Agnieszka Baczyńska, the current Head of Leasing Retail, to the newly created position of Business Excellence Director in Poland. She will be responsible for implementing the operational efficiency strategy and monitoring its progress, as well as supervising projects related to business transformation.
Marta Busłajew joined the 7R team as Head of Marketing and Communications, where she will oversee the development and execution of marketing and communication strategies aligned with 7R's growth plans.
Savills announced that Wojciech Mazur has joined the Office Agency - Landlord Representation. He will support commercial property owners in the processes of leasing.
The new development on the site of Istropolis in Bratislava on the Trnavsky Mýte by Immocap is rapidly approaching construction. The proof is not only the progress in the permitting processes, but also the confirmation of the first key tenant who will occupy one of the office buildings, reports Yimba.sk.
Investment groups SPM and SCF have become the new owners of the Prague office centre Palác Křižík. Both entities have acquired it from the previous owner, the Generali group.
Property Forum is a leading event hub in the CEE real estate industry with over 10 years of experience. We organise conferences, business breakfasts and workshops focused on real estate, in London, Vienna, Warsaw, Budapest, Bucharest, Bratislava, Prague, Zagreb and Sofia, amongst other locations.
I have read the Privacy Policy of International Property Network Inc. and I consent to International Property Network Inc. sending me newsletters and managing my personal data provided for this purpose.
