Brokerage Fees

How Do Our Brokers Get Paid?

Commercial real estate brokers are paid a commission upon the signing (“execution”) of a lease contract or a sale of a property. Most often, the Landlord is responsible to pay the brokerage commission. The broker has a fiduciary responsibility to work on behalf of the entity that is paying the commission. The following outlines two scenarios that is typical and standard in the Portland metropolitan area:

Leases:

Time of Payment: The commission is typically paid one-half (1/2) upon lease execution and the second-half (2/2) upon or retailer opening for business to the public.

Fee Calculation: The commission is calculated as a percentage of the lease value (the amount of rent the Landlord is scheduled to receive over the term of the lease) and is typically six percent (6%) for the first five years of the lease and either three percent (3%) or four percent (4%) for second five-year term.

Example: Tenant signs a 3-year lease, for 2,000 sq.ft. @ $18 per square foot

2,000 sq.ft. @ $18.00 psf = $36,000 x 3(yrs) = $108,000
6% commission equals = $6,480

Sale:

Time of Payment: The escrow company typically pays the commission full at the close of escrow to the broker. Similar to the way a commission is paid to a residential broker for a home sale.

Fee Calculation: The commission is calculated as a percentage of the sale value (the amount the Landlord receives for the sale of the property)which is typically between five percent (5%) and six percent (6%)

Example: Landlord sells property for $500,000
5% commission equals = $25,000

Commercial real estate commissions are, in most cases, calculated as a percentage of the rent or sale.

To further complicate matters, the broker typically pays 50% of the brokerage commission to a co-
operating broker if another broker is involved in the transaction.