Flavius Aetius thanks for following me on Twitter! https://t.co/mmo6ft1gxu

Flavius Aetius thanks for following me on Twitter! https://t.co/mmo6ft1gxu

— Nathan K Smith (@AustinTenantAdv) July 29, 2019

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How Do Commercial Real Estate Agents Get Paid?

Commercial real estate agents are paid commissions only after commercial real estate properties and spaces are leased or sold.

Commercial real estate commissions get paid in almost all transactions. Investors and landlords who don’t want to be involved in the minutiae of searching for property for sale, listing space for lease or sale, fielding phone calls, finding tenants, touring spaces, negotiating deals, etc are going to hire commercial real estate agents for assistance. 

Who Gets Paid Commissions?

In the majority of commercial property transactions commissions are paid to at least 1 or 2 commercial real estate agents.

1. Commercial Listing Agent – This is the commercial real estate agent that represents the best interests of a property owner, landlord or seller in leasing and selling their properties. They market the properties and field all the inquiries.
2. Tenant Representative / Buyers Agent – This is the commercial realtor that represents the best interest of tenants and buyers (e.g. investors or owner occupiers) in locating and renting or buying commercial real estate space. 

Who Pays Commission in a Commercial Real Estate Transaction?

In most cases commercial real estate commissions are paid by the property owner (seller) and/or landlord (Lessor).

• Investors hire agents to find, acquire, and sell investment properties.
• Landlords and property owners need help to lease up the commercial space they own and/or manage.

Commercial Real Estate Sales Commission Rates

Typical commercial sales commission rates are based on market conditions in your area and/or are negotiated by the listing agent and the seller, however in most cases rates will fall somewhere between 3% and 6%. Property owners are typically responsible for paying all commissions upon closing.

If the buyer was procured only by the listing agent and there was not any other agent involved the commission rate might be 3-4% depending on the agreement that was made between seller and listing agent. In many cases the seller pays 6% regardless.

If the buyer was procured by the buyer agent the commission rate will most likely be 6% of the final sales price where the listing agent and buyers agent split 50/50.  

Commercial Real Estate Lease Commission Rates

The typical commercial real estate lease commission depends on market conditions in your city and also negotiated between the listing agent and property owner and/or landlord, however in most cases the commission rate will range from 4% to 6% of the total lease amount.

If a tenant representative helped the Tenant find commercial space for rent and introduced them to the property the commission rate would be 6% of the total lease amount over the lease term where the commercial real estate commission split would be 4% for the tenant representative and 2% for the landlord agent. 

If the tenant was procured only by the listing agent and no other broker was involved their commission rate might be 2% to 4% depending on what they negotiated with the property owner. In many cases they get paid the full 6% regardless if another agent was involved or not.

How Much Do Commercial Real Estate Agents Make?

It depends.

According to the National Association of Realtors random survey the median gross income is about $85,000 to $100,000 per year. 

However if they are worth one’s salt there are those that average $200,000 to over $500,000 per year.

Commercial Real Estate Commission Calculator

To make it easier to calculate total commission and commission splits we have created a commercial real estate commission calculator.

 

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Cynthia Wilson thanks for following me on Twitter! https://t.co/g9bqzxToUx

— Nathan K Smith (@AustinTenantAdv) July 18, 2019

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Why Should You Hire & Use a Commercial Real Estate Broker?

Are you searching for commercial real estate space for your business? You could search Google for the term “commercial space for rent Austin Tx” while you are driving down the road or sitting in your office.

However doing so would yield about 20 million results which can be overwhelming to sift through. You will find multiple sites that have commercial listings however the data is often outdated, inaccurate, incomplete, or generic in nature used only to generate leads. Some sites such as loopnet and 42floors have paywalls and only show a portion of spaces. 

You could also spent countless hours driving around calling on for lease signs only to have listing agents not return your phone calls.

Wouldn’t it be easier to just have a commercial real estate broker with the tools, experience, knowledge, and access to all the market data help you find space for lease or sale?

Using a Commercial Estate Broker Does Not Cost You Anything

One of the top reasons businesses avoid using commercial real estate brokers is because they want to avoid paying commissions, however companies rarely have to pay commissions out of pocket. Commissions get paid by landlords and sellers.

Landlord’s and building owners hire listing agents to market their properties and pay them commissions of 4% to 6% of the sales price or total lease amount upon completion of a lease or sale. If you have a commercial broker (aka tenant or buyers agent) represent you the commission is often split 50/50 or 60/40.

The commissions are included in the lease or purchase rates quoted to you. You will not get a lower rate because you don’t have your own agent. Commissions are being paid regardless if you have representation or not so you might as well put some of that to work for you.

What a Commercial Real Estate Agent Can Do For You

Represent Your Best Interests

Commercial listing agents are legally bound to represent the best interests of the landlord/owner at all times. Of course they will be nice and professional however their goal is to lease up their buildings & negotiate on behalf of the owner to get them the most money. They are typically experienced agents who have negotiated many deals 

Having a commercial real estate broker represent you levels the playing field. They got your back.

• They tell you things that the landlord agent cannot.
• Negotiate to help you get the lowest rates and best terms possible
• Mitigate risks

Search For and Identify the Best Properties

Landlord agents are motivated to lease or sell you the properties they represent. 

Your own agent is unbiased. They take into account your current and future business needs and can show you any property available for lease or purchase that can accommodate those needs. They keep a pulse on local market conditions and can help you find the best spots. Based on your business and needs they can quickly tell you which locations are best, which have restrictions on zoning or use, and which spaces are available.

They have the connections and pay thousands for the best data bases for market data, rates, demographics, and trends. If there is a space available to meet your needs they will find it. You won’t find all spaces on the internet as some of the best won’t be available for 6-12 months. Full time brokers keep a pulse on the market and are able to present you every option that is available now……or that will be 6-12 months from now.

Top commercial real estate brokers will take the time to understand your company’s needs and focus on properties that can accommodate your budget, timing, layout, and location. They won’t waste your time showing you ones that don’t.

Save You Time

If you run or manage a business you probably wear many hats and have enough on your plate.

If you are not familiar with a market or only do one lease transaction every 3-5 years searching for and finding the right commercial space will be very time consuming

• Do you want to spend weeks and months searching the internet and driving around calling “for lease” signs?
• Calling a bunch of listing agents and waiting for them to never call you back?
• Spend countless hours on the phone trying to determine if  landlords/properties are open to doing 1-2 year leases, open to your “use”, or if a space can be built out within a certain time frame?

There are millions of SF of commercial real estate listings. How do you know where to start looking? Do you know what rates are like in the Northeast side of town vs. Southwest vs. downtown? Not knowing the market you could waste a ton of time searching in areas that are way out of your budget. In addition if you are restricted to a short term lease (1-2 years) not every landlord will accommodate.

A knowledgeable commercial broker will know which landlords and properties will be open to shorter terms, open to your use, or if a space could accommodate your move in timing. It could potentially take you months to figure all this out on your own. A good commercial real estate won’t waste your time looking at properties that won’t work for your business. They will weed out all the properties that don’t meet your needs and ONLY present you the ones that do.

Provide Resources

When leasing or buying commercial property you have to do some due diligence to ensure that a space will meet your budget, size, layout, timing, and growth needs.

To get the answers you need you will often need to engage

• Space planner or architects
• Contractors
• Building inspectors
• Attorneys
• Loan officers
• Engineers
• Title company
• Movers
• Furniture vendors
• etc.

A detailed broker will have experience in all these areas and be able to connect you with one or more vendors.

Negotiate on Your Behalf

Negotiating commercial leases or purchases can be complex, confusing, intimidating and stressful if you don’t know what you are doing. If any of those relate to how you feel then consider hiring a commercial real estate broker that represents your best interests.

Commercial listing agents negotiate only FOR the owner or landlord. They want to maximize their profits. Most are experienced and have years of experience negotiating office, warehouse, and retail leases and purchases.

A commercial tenant or buyer representative negotiates FOR YOU. They leverage their tools, experience, resources, and market knowledge to ensure you get the lowest rate and best commercial real estate terms possible. They will have as much (if not more) experience and can use that to level the playing field. They will be able to spot and avoid terms that could be harmful and have a negative impact on your business so you will have peace of mind knowing that they got your back. They will also be able to spot negotiation items that could save you hundreds to thousands of dollars.

Your commercial agent will typically draft letters of intent (LOI’s) or Requests for Propossals (RFP’s) to multiple buildings. Having multiple offers out gives you more leverage in negotiations if landlords know you have “options”. If one landlord can’t accommodate your needs then you can walk away.

Your agent will advise you on what are acceptable terms in a given market and which ones you should negotiate further or walk away from. They will collaborate with your legal team. They are your advocate, and will use whatever resources are available to get you the best deal and ensure that no mistakes are made.

Be Your Ongoing In-House Commercial Real Estate Department

After your lease or purchase is signed a good commercial real estate advisors services do not stop there. They will stay involved throughout the entire process (signing of the contract, construction process, move in, etc..). They will act as a liaison between you, the landlord, the contractor, and the construction manager. 

After you move in they will keep in touch and reach out to ensure your tenancy or ownership is running smoothly. If you ever need market advice they are there for you. When it comes time to renegotiate a commercial lease renewal they will make sure you are proactive, create leverage, and have alternative options in the event needed.

 

System 2 Thinking thanks for following me on Twitter! https://t.co/1ipQ9KXVCT

System 2 Thinking thanks for following me on Twitter! https://t.co/1ipQ9KXVCT

— Nathan K Smith (@AustinTenantAdv) July 18, 2019

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Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

— Nathan K Smith (@AustinTenantAdv) July 16, 2019

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Taylor Swift thanks for following me on Twitter! https://t.co/PGmxtibzhI

— Nathan K Smith (@AustinTenantAdv) July 11, 2019

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— Nathan K Smith (@AustinTenantAdv) July 8, 2019

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Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

— Nathan K Smith (@AustinTenantAdv) July 5, 2019

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Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

— Nathan K Smith (@AustinTenantAdv) July 3, 2019

from Twitter https://twitter.com/AustinTenantAdv

Flavius Aetius thanks for following me on Twitter! https://t.co/mmo6ft1gxu

Flavius Aetius thanks for following me on Twitter! https://t.co/mmo6ft1gxu

— Nathan K Smith (@AustinTenantAdv) July 2, 2019

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Steve Gye 💧 Gander Search Engine and News Network thanks for following me on Twitter! https://t.co/20IMgHcz9X

— Nathan K Smith (@AustinTenantAdv) July 1, 2019

from Twitter https://twitter.com/AustinTenantAdv