There is a budget that is created for each space within a building. This allows the landlord to set goals for the building and will ultimately determine how much they ask for in rent and give in leasing concessions. Simply broken down, landlords budget for leasing rates, tenant improvement allowance which is relative to the present condition of the space, build out period, free rent, broker commissions.
A question I get all the time is, “If I don’t use a broker I will be able to receive the money that would have been used for commissions towards some aspect of my rental structure, correct?” This cannot be farther from the truth. If you were a landlord and you were trying to maximize your profits would you just hand out money? Don’t forget most landlords have their own broker handling the negotiations and moving the lease along to signing the contract. He/She is still paying commissions and most of the time if you have your own broker they will simply split the commission that would have been paid to the landlord’s broker anyways.
The question now becomes do I want to go against the landlord and his broker, who represents the landlord’s best interest or hire my own broker to negotiate on my behalf? Should I try to negotiate with someone that negotiates real estate for a living and learn the real estate business on the fly or should I hire my own broker who has a legal fiduciary duty towards my best interests?
FYI: When you hire a broker to represent you as the tenant, you do not pay them. In commercial real estate, landlords pay the commissions to your representation.