How do broker's commissions work on NNN spaces? Reasoning behind the convention...
Why are brokers paid commission off of gross rent instead of base rent on a NNN space? The landlord is never going to see that CAM money. What's the reasoning behind this?
[{"id": "hpm2o6w", "text": "It's paid on the base rent. \n\nNNN is recompense for actual expenses.\n\nThe commission if off of income...not expenditures.", "replies": [], "depth": 1}, {"id": "hpmet06", "text": "Like the previous answer.....Brokers are paid on the Base Rent, not CAM or NNN reimbursement. We DO have a different % we charge clients based on whether or not the lease is a gross lease or a NNN lease.", "replies": [], "depth": 1}, {"id": "hpmo0hb", "text": "That\u2019s not the case.", "replies": [{"id": "hppduq5", "text": "Ok, good to know. It seems my new company has been taken advantage of for years.", "replies": [{"id": "hr5ah54", "text": "OP, I\u2019m a broker from the Midwest\u2026In the past I\u2019ve been paid on nnn reimbursements in some instances, and not paid for it in others. Every situation is different.\n\nAs an example, If a broker is being compensated on a gross-structured lease (i.e.: no pass through expenses to tenant), then aren\u2019t they in-a-way getting compensated on cash flow you use a portion of to cover operating expenses?\n\nIn another example, if a broker procured you a tenant who agreed to occupy a tough-to-fill space, and they agreed only to cover 100% of the operating expenses of your property for 3 years, would you believe your broker added value to you and was due compensation? \n\nAgain, this is all very situation and you can probably negotiate this with the firm representing you\u2026I\u2019m only trying to demonstrate that there isn\u2019t just a \u201cone-size-fits all\u201d answer for these scenarios.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hpmz2g4", "text": "Because it's a negotiation... Brokers and owners are negotiating the total fee. On the NNN feels more intuitive, but ultimately it's what the parties agree to. The difference between 3 of the nets and 4 of the nets is also arbitrary (and generally market based) If market is on the gross then it may be between 2% of gross and 4% of gross (or whatever) General rule, tend to see on the NNN for newer builds and on the gross for older product. Varies by type and geography for sure!", "replies": [{"id": "hpo29l1", "text": "Here in CA, the NNN can be substantial......20,000 SF building with 1.25/SF NNN on a 5 year deal is $1.5MM in pass through's that, in most cases, Broker's are not compensated on. The NNN rates I come across vary from .45/SF on the low end to $1.50/SF on the high end.", "replies": [{"id": "hr58nqv", "text": "This is not correct. $1.25 x 20,000 sf = $25k / Year. 5 years = $125,000 in NNN charges\u2026.not $1.5mm)", "replies": [{"id": "hr5dkwo", "text": "In California, we use \"monthly\" calcs, not annual as in many other markets. With that in mind, the calcs I used are correct as some retail buildings do have NNN expenses of $1.25/NNN per MONTH. If you can find me some buildings in CA where the annual NNN fees are only $1.25/SF ($.11/SF per month), I have plenty of buyers...\n\n$1.25 x 20,000 = $25,000/mo times 60 months = $1.5MM", "replies": [{"id": "hr5eyle", "text": "Wow. Those are insanely high net charges\u2026my bad. Only sector that measures per month in the Midwest is Multifam. \n\nWhat\u2019s the primary driver for nets that high? Prop-tax?", "replies": [{"id": "hr6allj", "text": "Property tax is a big influencer on new purchases as its \\~ 1.2% of the purchase price....and then increases at about 2% per year. But many add an admin fee on top of management, insurance and maintenance. MOST of what I see right now is in the .65-.80/SF/Mo range for NNN.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]