The Rise of the Law Firm

We are witnessing the rise of the law firm as the most desired office tenant. A few years ago, building owners who wanted to reduce credit risk looked to the financial institutions and would not consider a law firm as a lead tenant. With the changing world we live in, those roles are now flipped. A building with big name law firms has a higher value than a comparable building occupied by big name financial institutions.

The change is, in fact, part of a bigger evolution. Lenders will increasingly look at the underlying credit worthiness of the tenants of a building, rather than the creditworthiness of the owner. While building value has always been tied to the credit risk of the tenants, this will become even more pronounced in the foreseeable future. In fact, an owner’s ability to obtain new financing and the interest rate for the loan will be determined in large part by the credit of the underlying tenant.

To take advantage of this “tenant credit” opportunity, it is essential to have an understanding of how commercial loans are structured.

Good credit tenants of all types will be in a strong position to dictate lease terms. However, the degree to which they can do this will depend in large part on the professionals representing them. Skilled tenant brokers who can understand the complex commercial lending process will be able to deliver much more significant savings than a typical office leasing specialist. To get to the best deal for a client, the tenant’s broker must be able to think like a building owner, a banker, and a developer.

Only a full service real estate firm can bring together the resources necessary to weave together the expertise of tenant, landlord, and credit specialists into one team. It is an example of why the recent Staubach/Jones Lang LaSalle merger brings so much value to their clients.

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