Conflicts of Interest Increase as Commercial Real Estate Industry Consolidates

The commercial real estate industry continues to undergo significant consolidation with major firms such as CBRE, JLL, Colliers, Cushman & Wakefield, and Newmark expanding their global footprints. While this growth may bring operational efficiencies, it also exacerbates inherent conflicts of interest, particularly when these firms represent both landlords and tenants in the same transactions.

The conflict of interest in commercial real estate

As these firms grow larger, their ability to provide unbiased representation diminishes. Three primary conflicts of interest arise:

1. Dual Representation of Landlords and Tenants

Many of the largest firms represent both landlords and tenants in the same transaction. This creates an unavoidable conflict, as it is impossible to advocate fully for one party while also serving the interests of the other.

2. Maintaining Landlord Relationships at the Expense of Tenants

Because these firms rely on ongoing relationships with major landlords, they may be unable or unwilling to negotiate aggressively on behalf of tenants. This dynamic places tenants at a disadvantage when negotiating lease terms, rental rates, and concessions.

3. Multiple Tenants Competing for the Same Space

Large firms frequently represent multiple tenants vying for the same property, making it difficult to prioritize one client’s interests over another’s.

The case for tenant-only representation

Unlike full-service commercial real estate firms, tenant-only advisory firms eliminate these conflicts of interest by exclusively representing tenants and end users. This model ensures that tenants receive the strongest possible advocacy in lease negotiations, free from the competing pressures of maintaining landlord relationships.

To illustrate this issue, consider the legal profession: A company would never hire a law firm to represent it in a lawsuit if that same firm was also representing the opposing party. Yet, in commercial real estate, this type of conflict is routine.

Legal and regulatory scrutiny

Some U.S. states are beginning to address these conflicts. California, for example, has reportedly explored making dual representation in real estate transactions illegal. However, further confirmation and regulatory action are necessary to protect tenant interests nationwide.

The future of corporate real estate advisory

Despite the growing awareness of these issues, large real estate firms have little choice but to continue expanding, often to the detriment of tenants seeking fair representation. The industry’s consolidation trend is unlikely to reverse, making it even more critical for corporate tenants to carefully evaluate who represents their interests in lease negotiations.

For tenants who prioritize transparency, working with independent, tenant-only firms remains the best option to ensure fair and conflict-free representation.