How do CRE professionals ("agents") get paid? Is the commission often calculated as a percentage of the lease value and usually ranges between four and six percent? For example, if a tenant signs a 3-year lease for 2,000 square feet at $20 per SF per year, a 5% commission equals $6,000 (3 yrs x 2,000 SF x $20 x 5%). Is this right?

www.hoprealestate.com

Commercial leases with commission rates are negotiable. 2,000 sq ft is a very small space to lease.

Typically the larger the leased space the less of a percentage in commission.The reason is they are making so much off the volume of the lease.

Thank you for the input.

Yes, the commissions are often based on a % of the total lease value. Is the scenario you describe for an office or a retail transaction? If it's retail, is it in a shopping center or is it a storefront/street retail locaion.

The reason I as is the following:

1. If this is a shopping center location, the landlord typically has the ability to accomodate and is familiar with a "payout commission" whereby the landlord will typically pay 1/2 the commission at lease execution and 1/2 at opening (or rent commencement). I also see scenarios where the LL wants to pay 100% at opening or rent commencement. Payout commissions are based on the Net Present Value of the traditional "as collected " (will explain later) commission of 6%. The payout commmission is typically 6-5-4-3% (averages out to roughly 4.2%) for each year of the lease payout upfront as described before.

2. If this is a storefront retail location, the owner may want to pay in one of two fashions - either as an "as collected" commission - whereby the LL pays a commission check each month when the rent is collected. The agent receives a check monthly, as long as the tenant is in good standing. The second scenario that I see sometimes in my area for small storefront retail is the owner only wants to pay a commission equal to one month's rent. Typically, this only makes sense for the agent, if the tenant is leasing for one year. These deals aren't really worth the time.

3. If this is an office transaction, you will typically be paid as a payout commission as previously described. One important point to note, in my market, office commissions are paid on the gross rent number and on options, extentions and renewals. In retail leasing, the commission is most often paid on the net rent (base rent not including cam, tax, insurance) number and is usually only paid on the base term.

If you have any follow up questions let me know.