Can someone justify exorbitant renewal fees?
My Uncle is in the industry, as well as one of my family friends. I have a very fundamental understanding of the business.

Anyway, my friend represents a couple of large office owners and we were talking last week about the ups and downs of his job. He told me he recently collected a $27,000 net commission (gross of $54,000 since he splits it with his company) on a renewal for a large company on multiple floors. He sort of laughed saying all he had to do was coordinate the renewal, look over the lease, and make sure the landlord was happy with the terms. My jaw dropped! 

I understand you brokers get paid on a percentage, and I'm not trying to say what you do is not challenging or insignificant, but for renewals, how can you justify that the amount of work for a small company in the building is much more than a huge tenant? Just confused here is all.
[{"id": "coruj01", "text": "&gt; how can you justify that the amount of work for a small company in the building is much more than a huge tenant?\n\nThink you mean the other way around", "replies": [], "depth": 1}, {"id": "corvi4z", "text": "**I'm not a broker, I'm an analysis guy**\n\nI think it varies market to market and product to product, but I know in a many instances a broker gets paid a lower % on a renewal than on a new deal...so it is not quite the same. ", "replies": [], "depth": 1}, {"id": "corxqwk", "text": "You aren't being paid for just the renewal, you are being paid because you brought them there in the first place.  Otherwise there would be a major incentive to do all deals as short term with a long renewal option right after the initial term in order to screw the brokers.\n\n--edit-- unless you are just talking about him repping them for a renewal with no prior history in the transaction.  Then that's a bit different.  ", "replies": [], "depth": 1}, {"id": "cos2ehr", "text": "Because for every 10 potential clients, only 1 will land your uncle a commission, but he will have to deal with the 9 others because he never knows who is going to move forward and who isn't. \n\nHe knows a lot about the industry and the people in it, and the advice he gives can save companies tens of thousands of dollars in construction, legal costs, taxes, etc. \n\nYour uncle probably doesn't draw a salary, and so high commissions make up for it. He only gets paid if everyone gets paid. If the client walks away at the last minute he makes nothing. \n\nThere are other reasons too. People talk about their success, you're definitely not hearing about the bad days as much. ", "replies": [], "depth": 1}, {"id": "cos4zrt", "text": "From an owners perspective, it's about the income stream that the lease renewal provides. Ten years of term is ten years of term to me - I don't care if it's new or renewal lease. In fact I'd prefer to keep my existing tenants at their expiration since there would be no loss of income due to downtime and likely a lower TIA.\n\nThinking about \"fairness\" or the amount of work involved is completely irrelevant to my interests: max cash flowing that space. ", "replies": [{"id": "cosfrsj", "text": "I agree- plus renewal leases are almost always a lower commission percent than a new lease. The property owner would generally prefer a renewal(no months of vacancy, little or no additional tenant improvement dollars needed), and the property owner still needs a broker to complete the renewal process, so the question is how much incentive should the broker have for a renewal vs new tenant?\n\nThe other factor is that when a new property owner is first choosing a leasing broker, they will often contractually offer and obligate to pay the cushy commission on future renewals. This keeps incentives for long term durable tenants aligned a little better.\n\nAll that said, I've seen property managers find/negotiate fees much lower than standard rates when a renewal is very likely to happen, but I believe that is rare.\n\n", "replies": [], "depth": 2}, {"id": "cosqd9z", "text": "The renewal also means that the owner probably only has to do a \"refresh\" of basic finishes (paint/carpet), without major TI changes (demo, doors, glass etc).  ", "replies": [], "depth": 2}], "depth": 1}, {"id": "couwcg9", "text": "From a Landlord's perspective, 5.0% fees for renewals can be a tough one to swallow. Each Lease Agreement and market is different. In the leases I have draft I always include language in the Broker Section that outlines that no commissions will be paid on Extensions of Original Term unless otherwise negotiated in the LOI. This works for our assets in our markets. We usually try to strike options in leases where brokers are asking for commissions on renewals and put a new lease in front of the Tenant at the end of their Term. If you want credit tenants in competitive locations expect to pay the brokers. It's just a part of the cost of doing business in CRE. \n\n", "replies": [], "depth": 1}, {"id": "cowrfqy", "text": "Some landlords don't pay renewal fees. It's infrequent, but I am in a major market and there are a few landlords in town that just don't play ball. They are definitely not viewed favorably in the brokerage community to say the least.", "replies": [], "depth": 1}]