Who Is Your Broker Really Working For? Conflict-Free Tenant Representation in the Midwest
Conflict-free tenant representation means hiring a broker whose firm never represents landlords: no listings, no agency fees, no lease-up mandates. Every dollar the firm earns comes from occupiers. Most corporate tenants never ask whether their advisor meets that standard. In Midwest markets, where a handful of full-service firms control much of the listed inventory, the answer directly affects what you pay.
This week, Mohr Partners Chairman & CEO Robert Shibuya published The Case for Conflict-Free Tenant Representation. His argument is simple and, in my view, difficult to rebut: a firm that earns fees from both sides of the lease has a structural conflict, and disclosure doesn’t remove it. Below I summarize the key points and explain why they matter more for occupiers in Ohio, Michigan, Indiana, Kentucky and Western Pennsylvania.
What is the conflict in full-service brokerage?
The largest brokerages run two businesses under one roof. Their agency teams are paid by building owners to fill space at the highest rent with the fewest concessions. Their tenant-rep teams are hired to do the opposite. The two teams share landlord relationships, market intelligence and often a bonus pool.
Firms respond that individual brokers owe a fiduciary duty to the client on each deal, and that “ethical walls” separate the two sides. Robert’s paper explains why that falls short. A firm that pushes too hard against landlords puts its future listing assignments at risk. Internal referral credits reward keeping business in-house. And when the best building for a tenant is one the firm’s own agency team is trying to lease, the institutional pressure points the wrong way. None of this assumes bad intent from any individual broker. The bias is built into the structure.
Why does this matter more in Midwest markets?
The paper notes that same-building, same-deal conflicts are most common in smaller and mid-sized markets. That describes much of our region. In Columbus, Cincinnati, Cleveland, Indianapolis, Detroit, Louisville and Pittsburgh, a few full-service firms hold a large share of the class A office and modern industrial listings. If you are a 75,000-square-foot distribution user or a 40,000-square-foot headquarters, the building at the top of your shortlist is likely represented by your broker’s own firm.
That narrows your competitive set without anyone telling you. A conflicted advisor may show you only “suitable” buildings and still leave you negotiating against fewer real alternatives than the market offers. Tenant leverage comes from competition among landlords. An advisor with no listings to protect has every reason to put every qualifying building in play.
What does a conflicted broker cost you when the landlord is under pressure?
This is where the conflict costs the most, and the white paper leaves it mostly unexplored.
Many Midwest office owners face loan maturities over the next 24 months at debt costs well above what they underwrote. For those owners, a signed lease does more than produce rent. It is the evidence they bring to the lender to support a refinance or an extension. That gives a creditworthy tenant its strongest leverage in the entire cycle: the landlord needs the deal more than the tenant does.
An exclusive tenant advisor will dig into that capital stack and press on it: free rent, TI allowances, termination rights, and caps on operating expenses. A full-service firm that holds the building’s listing, or hopes to win its sale or recapitalization assignment, has an obvious reason to close quickly and keep things friendly. You will never see the concessions you didn’t get.
The same reasoning applies to total occupancy cost. CAM caps, audit rights, restoration obligations and pass-through definitions are slow, unglamorous negotiations that annoy landlords. A conflict-free advisor has no reason to avoid them, and over a ten-year term they often matter more than the headline rent.
What should you ask before signing a brokerage engagement?
Robert’s paper closes with due-diligence questions that every CFO, general counsel and real estate director should ask. Condensed:
- Does the firm represent landlords anywhere, in any market?
- How are its brokers paid relative to landlord relationships, including referral credits and bonus pools tied to listings?
- Will it commit in writing to no dual agency on any building you consider?
- Will it canvass the full market, whoever the listing broker is?
- Will it ever represent the landlord of the building you choose, now or at renewal?
Apply the same conflict check you would apply to your auditors or outside counsel. For most companies, real estate is the largest recurring cost after payroll.