I was underwriting a pretty low-cost development for a single-tenant an indoor recreation facility today (cold-dark shell, minimal MEP needs, no off-site work), ~$5.2M total dev cost. I quasi know the broker repping the tenant so I asked him what his leasing commission was going to be.
Tenant's rent/sf was ~$15 and the broker quoted me 4% of $15/ft of GLA (~320K SF) for a 15 year term. Ended up being ~$320k. I shared the pro forma w/ one of my firm's MPs and he immediately called BS and had me cut the commission in half.
What's the deal on commissions like this? I was guessing that the brokers commis would be capped at ~$100-$150K before I talked with him. I don't know the broker well enough to trust him particularly, and the MP is an incredibly sharp guy who has been in the game for a long time.
Why would a broker give a bunk quote like this? I don't see what advantage it gives him on a deal that isn't under contract yet in which he doesn't have the lion's share of the leverage.
For starters the broker is just asking. This doesn't mean he will get it. Brokers will ask because if you don't ask, you don't get.
Otherwise, if I'm understanding what you wrote correctly, he asked for 4% of the rent as the commission. Well... Assuming $15 is the rent psf per year.. $15 PSF * 320,000 SF = $4,800,000 in rent per year. Assuming no rent increases, over 15 years, this is $72,000,000 in rent. 4% * $72,000,000 is $2,880,000.
In general though, commissions are different depending on the market. Every market has different standards for how much a commission is.
4% is the generic standard tenant rep leasing commission.
Commissions are always negotiated.
Why would the broker undercut himself on the initial request?
How do brokerage commissions get split up internally? (Originally Posted: 06/06/2014)
Assuming a top shop in a top market. $1mm commission. Couple MDs, couple VPs, couple analyst/associates on the book. What does that split look like between each team member and the mothership?
I'm sure its different everywhere, just looking for rough numbers, out of curiosity.
This question has been asked and answered on this forum before, but like it's been said again and again it REALLY depends. Who sourced the deal? Is the senior guy throwing his juniors a free bone? Who is commission based and who is on salary? Is there an agreement to bonus salaried employees? It varies firm to firm, team to team, and deals to deals.
Here's a very generic fee hierarchy on a deal:
House 50% Remaining 50% divided up amongst team members. Of the remaining 50%, a typical split probably looks like: Senior Partner-50% VP/Mid-level partner--35% Junior Partner--15% Analyst--Salaried, no commission.
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