Typical Commercial Real Estate Commissions

[showtime]

For commercial leases, which are way more common than actual commercial sale transactions to be honest, usually the landlord pays the commission. And there's usually no commission for renewals unless there's an issue that needs to be fixed, which requires the broker to step in.

Happy to hear other people's thoughts, but I'd say it's usually a flat percentage, or even say 2 month's rent. Sometimes brokers will be happy to take less if it's paid upfront.

[ryan_gz]

It's most important to understand that in commercial real estate, even with lease signings, commissions are very often paid out over time vs in residential real estate where everything is paid at closing.

For example, you might see 20% of the 1st year's rent on a 5 year lease paid upfront, then 4% of the second year lease, then 4% of the third year lease, then 3% of the fourth year lease and so on.

Or, you might see 1/3 of the total commission paid at signing, 1/3 paid in 6 months, and then the remaining 1/3 paid in a year's time. And if there is a free rent period for the tenant, perhaps the broker won't get any commission during that free period.

Another example, you get paid a quarter at closing, then portions of the rest paid with every monthly rent payment from the tenant. If there's an escalation clause for automatic rent increases in the lease agreement, some landlords might not pay based on the escalate amount.

Essentially, it can be much more negotiable and varied vs residential real estate commissions.

[aslan]

To my understanding, commissions in commercial real estate can go down to 2%, or even 1% for commercial sales. It's a sliding scale dependent on deal size, and is quite flexible. Remember that much of commercial inventory is not public, and there aren't really any REBNY rules on listings.

A lot of buyers/tenants think that if a property is listed on a site, it's honestly probably already picked over and overpriced. A good commercial broker will do a lot of vetting and qualifying on a client's behalf before the client sees a place.