How much do tenant rep brokers make on the east cost?
I have a 15,000SF retail property for lease in NJ. I put it out on Loopnet/Costar myself. It's a prime hard corner near all the nationals, 50k cars per day. I personally reached out to all the national tenant broker reps, and found received two LOIs. Commission-wise, one broker is asking for 4% of 15 year initial lease term, and another broker is asking for 5% of 10 year initial lease term. It equates to 150k to 200k commission. I had to reach out to them. Are these normal commission structures in NJ? I feel like they would be getting a smaller split if I had hired a landlord broker - from my understanding, it's usually 5% split 50/50 between two brokers. With these commissions, are most of these tenant rep brokers making 7 figures a year?
I somewhat struggle to believe this scenario is real, but in the case it is, it sounds like a great situation for you to be in. Pay the damn brokers! Especially if a deal can come sooner and easier for you.
To answer your question, the fees sound reasonable albeit a bit inflated on latter half of the deal. A typical/logical tenant rep fee schedule should be descending over the term rather than flat ex. 5%, 5%, 4%, 4%, 3%, 3%, 3%, 2%, 2%, 2% = 3.3% over a 10 yr deal rather than flat 4%. Expect to pay up to 50% more if you engaged a landlord broker on your behalf. Maybe you'd get a better LOI with an LL broker, but maybe you wouldn't. If you can make a deal without one and are comfortable with that then all the power to you.
Yes, active national tenant rep's are making 7 figs a year and over. Extremely profitable niche to be in and paying one their fair fee is worth every cent.
I don't think it's that hard to believe the scenario. I make a list of national tenants that would be a good fit for my building that isn't already nearby. I then find the real estate director/manager for each of these companies. Then the real estate manager either responds or gives me the contact for their tenant rep broker.
In your experience, this descending fee schedule (5,5,4,4,3,3,2...) is applicable in which market? do tenant rep brokers often demand for more commission just because they know I'm not repped by a landlord broker?
I would argue that legitimately good tenant rep guys (there’s a lot of mediocre ones) are probably the most valuable and useful people in all of brokerage.
Yes they can crush it but IIRC splits are worse than IS and D/E at big shops. Someone can correct me on that.
Top guys def pulling down mid 7 figures. Also not the hardest business to go out on your own in if you’re established.
Sounds like a good strategy you have in place, similar to what a quality LL broker would do on your behalf.
The schedule I shared is typical of NYC/tri-state t-rep fees so it should be applicable in your case. It might actually be a bit below the norm as secondary markets and more specialized assets (like a 15K SF retail space) often offer a higher fee as an incentive. It really comes down to what competing properties are offering, although any t-rep who let's a fee influence their client's decision is unscrupulous and likely to lose that client. It does happen though! And you'd be a fool to think a t-rep will bring you a deal for half a standard fee or, god forbid, no fee.
In any case, I think an avg 3.3% over 10yr is reasonable and I wouldn't start much lower. Typically if a LL broker and T-rep are involved the fee will be 150% (an override) and split 50/50 in retail (75% of a full fee each) and if one or the other are the sole brokers they earn the full fee (100%). My best advice would be to consult a local CRE attorney to draw up the commission agreement rather than using the brokers.
Re: a descending % fee schedule, I believe this is typical nationwide, although I'm aware that a variable $/SF fee structure is used in Boston. There might be other markets, I'd be curious to hear of them. The descending fee schedule logically accounts for increasing uncertainty of rent over the term.
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