Commission for a small lease agreement, what's typical?
Hey all, we've been going back and forth on LOI negotiations with a private landlord and it seems like the main problem is the commission for my CREA.  The lease is 2800/mo, five-year term, 3% yearly increase in a smaller city on the outskirts of LA county.  How this all played out:

So this is what my CREA asked for:

Original request was for 4% of the first term of the 5 year lease (+2.5% on options).
= $7135 + $5169 (for just another 5 year extended term) = $12304

Then dropped to 2.5% (+1.5% on options)
= $4459 + $3101 (for just another 5 year extended term) = $7560

Now just 2.5% of the term
= $4459

_________________________________________

The landlord asked for:

Original offer was for 5% of the first year's lease 
= $1500

Then changed to 2.5% of the first two years
=$1522

Then they repeated the second offer.

What would be reasonable here?



[{"id": "d2tne93", "text": "The not smart ass answer would be that this should be more or less agreed upon before beginning LOI negotiations. I am in a different market (DC) and it is pretty much standard across the board right now - 4% new deals, 3% renewals, and 5% on subleases. \n\nThat being said, most of the deals in this area are done with large landlords, not smaller family type ones. I would stick to your guns, do your research and see actually how much this landlord NEEDS the tenant, and use that as leverage. If moving the tenant will hurt the landlords bottom line, they will be more than willing to agree on commission. ", "replies": [{"id": "d2to6lu", "text": "If I negotiated a Commission Agreement for every LOI I issued, I'd never get anything done.", "replies": [], "depth": 2}, {"id": "d2tvn0i", "text": "This space hasn't been rented for nearly 3 years due to difficulty with negotiations, which is what my CREA told me the landlord's broker told him. \n\n\nThe building is paid off, though. I don't think they're hurting for the cash. \n\n\nI think the disconnect is that my CREA usually deals with non family-owned, larger properties. . ", "replies": [{"id": "d2u76oa", "text": "I'm not even remotely surprised it's been vacant that long.\n\nI would say most Brokers are used to dealing with Brokers and not private self leased properties.\n\nI've dealt with this type of owner before, and usually it is a major headache, and negotiations go south more often than not. Private owners negotiate with their egos, and not based upon a capital return.\n\nYour agent is due a commission. Unless you want to pay it yourself, you need to back up your broker. Market standard is 3% or 3.5% of base rent over the 1st term.\n\nHonestly, the owner is just being greedy here. Private owners hate paying tenant brokers but it's part of the business.", "replies": [{"id": "d2u9kuu", "text": "Yeah, it sounds like my broker isn't asking for anything too unreasonable at 2.5% over 5 years.  Problem is the landlord's not budging.  I might have to pay some out of my own pocket.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "d2to479", "text": "I do Tenant rep and don't negotiate my commission agreements until almost Lease execution.\n\nSplitting 7% between the agent of the landlord and myself is usually typical in my markets.\n\nAnd that's 7% of base rent over the initial term, option not included.\n\nSometimes I negotiate a flat fee, or even on a PSF basis. It all depends on how much the Landlord needs the Tenant or if the Tenant will back me up or not.\n\nEdit: Is this Retail, Office or Industrial?", "replies": [{"id": "d2tvff8", "text": "Retail. \n\nSo I'm wondering if it seems like we're at an impass, I was considering calculating things out hourly. Looking up thr average salaries of CREAs and working backward to see if we're supposed to land closer to the landlord or my agents figures. ", "replies": [{"id": "d2u7fmw", "text": "Commercial RE brokers don't have any formula for average salaries. 95% are draw plus commission or commission only. You'd be better off getting comps on commissions from your market based upon the SQ FT of the vacancy you are signing on.\n\nChances are, that's going to still equal out to 3% of base.", "replies": [{"id": "d2u9j4k", "text": "From everyone's input, that seems like where it's pointing towards.  If the landlord doesn't take his 2.5% over the five year term, it looks like I'll have to pony up some cash if I want to keep this property.", "replies": [{"id": "d2uae60", "text": "Get your agent to get some comps on commissions and provide to Landlord at lease execution. Being ready to execute is your highest leverage point. Tell him to pay the full commission and you'll sign on the spot. \n\nChances are he'll budge. ", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "d2u339p", "text": "Used to work in the Los Angeles County Market. San Fernando Valley. Typically you're looking at a 6% total fee split between the procuring broker and listing broker. Office space is usually 4% going to the procuring broker, retail an even 3% split in my experience. Is there a broker representing this Landlord? Seeing that it's a retail deal and assuming the Landlord has a broker representing him, your broker should get about $5351.80 for the initial 5 year term. Why would someone get paid for putting an option in a lease agreement? Your broker should not be getting paid on your option periods before you even exercise your options....He can renew for you when/if the time comes. Let me know if you have any additional questions. ", "replies": [{"id": "d2u9mgf", "text": "Thanks.  So now I have to work with the landlord to see what we can do.  ", "replies": [], "depth": 2}], "depth": 1}, {"id": "d2uhshg", "text": "You might want to consider what sort of landlord they'll be. Based on the feedback here (and comps the agent can provide) it's reasonable to get the 2.5% for sure. Might want to ask yourself, if the landlord is this stingy towards the agent, what will he be like during the lease. You could even bring that up to the landlord. I think it's a reasonable point and consideration, you should be aware of who your landlord-partner will be for the next 5 years.", "replies": [], "depth": 1}]