State ending Jones Lang LaSalle’s exclusive contract

The state of Tennessee will not extend a controversial contract with a private real estate firm and instead will throw the deal to negotiate government office space open to bidders, reports WPLN.

The Department of General Services has posted a request for information asking commercial real estate brokers to offer their plans to manage the state’s office leases. The move comes after state officials decided not to extend their contract with Chicago-based Jones Lang LaSalle past February.

“Well, we’ve learned some things from the time when this contract was originally let,” said state spokesman David Roberson. “And so I think we’re better informed now than we were at that time.”

The state’s relationship with Jones Lang LaSalle began four years ago, when the firm wrote a study that suggested the state sell several of its buildings and instead lease office space from private landlords. Months later, the firm was given the exclusive right to represent state agencies when they negotiated with those landlords.

Critics said the arrangement smacked of backroom dealing. State officials have defended the deal.

…Jones Lang LaSalle is free to bid on the new contract. But it’s unlikely it would become the state’s sole agent. Tennessee officials are considering spreading the right to represent state government among several firms, each with expertise in a different region of the state.

The state may also bring more of its lease management in-house. Roberson says the Department of General Services has hired four people in the last year with experience negotiating office leases.

UPDATE/Note: See also the Times-Free Press. Excerpt below.

JLL continues to hold a separate, competitively bid contract to run and maintain a number of state office buildings. That won’t be affected by the leasing change, Roberson said.

Haslam, meanwhile, is actively exploring outsourcing building management and maintenance for all state-owned structures, including higher education, prisons, hospitals and more. While administration documents point to a July 1 start date, state officials insist that no decision has been made.

Among the buildings JLL recommended closing were the Chattanooga State Office Building and James R. Mapp Building, both located on McCallie Avenue. They were too expensive to repair, maintain or both, the company said.

While JLL recommended leasing some buildings elsewhere in the state, in Chattanooga’s case, however, the company said it would be cheaper in the long-run to build a new building to replace the two it recommended closing.

The Haslam administration ignored that suggestion, with officials saying they didn’t want to be bothered with constructing a new building.

JLL earns commissions of up to 4 percent on each lease, which administration officials emphasize is paid by the building owner — not the state. However, officials concede building owners are free to up their price to compensate for the charge.

According to General Services, JLL has made $3.35 million in commissions on 19 buildings across Tennessee since May 2013 to mid-May 2015.