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.
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.
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 company PKB Inwest Budowa has announced that the retail chain Lidl Polska will be a tenant of the newly developed Retail Park in Garwolin. The investment will include the construction of 3 buildings with a total area of 11,045 sqm. GLA. One of
of them with an area of over 2,100 sqm will be occupied by a Lidl Polska shop.
Peek & Cloppenburg has chosen the Szczecin Galaxy shopping centre to make its debut in West Pomerania in Poland. The brand's only shop in this part of the country will be almost two thousand square metres in size.
The Enel-med clinic chain is opening two new outlets in Wrocław: 510 sqm in Sagittarius Business House and 1,374 sqm in the Infinity office building.
New appointments
Angelika Majkowska has taken up the position of HR director at Apsys Poland. Angelika, who has been with the company since 2013, will be responsible for complex HR policies in an organisation with a structure involving more than 19 teams in various locations.
Filip Krstičević is joining iO Partners in Zagreb as Regional Manager, focusing on leasing and land deals across the region. With a strong track record of acquiring land sites and developing residential and commercial properties in both Croatia and Australia, Filip is well placed to support international investors entering the Croatian market.
The Management Board of Globe Trade Centre S.A. has announced that on 18th of March, 2024 the company accepted Barbara Sikora's decision to resign from the company's authorities.
Peakside Capital Advisors has achieved two BREEAM IN-USE certifications at the "Very Good" level for over 50,000 square meters of warehouse-office space at Logistics Point Raszyn and Logistics Point Piaseczno. The attained rating results from the successful modernization of fully commercialized logistic centres near Warsaw.
Panattoni has acquired financing for the development of its latest development in Western Pomerania. The €20 million loan was granted by mBank. Panattoni Park Szczecin V will comprise 30,000 sqm of which around a third has already been leased to a client from the food and hospitality sector.
Immofinanz Group generated strong growth in rental income during the 2023 financial year. This development was based primarily on the full consolidation of S Immo, the purchase of retail properties, and solid growth in like-for-like rental income. However, due to revaluation effects, the company recorded a decline in net profit to €-229.5 million in 2023.
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.