How does a commercial real estate broker get paid?
Commercial real estate brokers get paid primarily through commissions, typically structured as a percentage of the lease value or property sale price. Here’s how it works:
1. Commission on Lease Transactions
For commercial leases, brokers earn a commission based on the total lease value.
- Standard Commission Rate: Usually 3% to 6% of the total lease value.
- Split Between Brokers: If both the landlord and tenant have brokers, the commission is often split 50/50 between them.
- Who Pays?: The landlord typically pays the commission, as an incentive for brokers to bring tenants.
Example: Lease Commission in Colorado
- A tenant signs a 5-year lease at $5,000/month = $300,000 total lease value.
- If the commission is 5%, that’s $15,000 total (split if two brokers are involved).
2. Commission on Sales Transactions
For commercial property sales, commissions are based on a percentage of the sale price.
- Typical Range: 4% to 6% of the sale price.
- Split Between Brokers: Usually 50/50 between the seller’s and buyer’s brokers.
- Higher-Value Deals: May use a tiered structure (e.g., 6% on the first $1M, 4% on the rest).
Example: Sales Commission in Colorado
- A commercial building sells for $2,500,000 at a 5% commission = $125,000 total commission, split $62,500 each for the buyer’s and seller’s brokers.
3. Alternative Payment Structures
Some brokers in Colorado may also earn through:
- Retainer Fees – Upfront payments for market research or consulting.
- Flat Fees – A set fee instead of a percentage commission, often used for smaller deals.
- Hourly Consulting Fees – For advisory services beyond traditional brokerage.
Would you like insights on negotiating broker commissions in Colorado?
