Appropriate commission for agent finding a small commercial-retail tenant?
Decades ago, my parents bought a small commercial-retail building (about 5000 sq/ft on a 3/4 acre near a high traffic corner) whose only tenant was a  a well-known drug store chain. They recently moved on to a much larger custom-built building, and our building is now empty.  It was a good run.

My dad passed years ago, and my mother (nor I) have much experience with real estate negotiation.  A local agent may have found a commercial tenant for the building. He is asking for 5% of the rent each month. My mother is hearing that a one-time fee of 2 months rent is appropriate.

My question: what is the industry standard commission for something like this? 

What's a good online resource?


[{"id": "cqe9pmr", "text": "First - Quality check the tenant via credit report or financials statements like Profit/Loss of last three years.  Become familiar and confident with the prospective tenant.  This process is similar to renting a house.  You do a background check on the renter, right?!\n\nSecond - Review the lease terms.  You can hire a local agent to represent your interests.  You will live with whatever lease you sign.  I doubt any dubious intentions on behalf of you or the Tenant, but clarity breeds good foundations for business relationships.  The agent you hire to represent you will ask for 3% of the total lease value (see below).\n\nThird - Spend the $250 and have an attorney review the lease.\n\nForth - Commercial real estate commissions work (in Florida) like so: Let's say you sign a 5 year lease and the tenant pays $1,000/month.  The annual value of the lease is $12,000.  The total lease value is $60,000.  The total real estate commission is typically 6% (3% to your local agent and 3% to the tenant's local agent) of the total amount ($3,600.00), half paid at lease signing and the balance due when you receive your first rent check.\n  \nFifth - Enjoy the passive income.\n\nI've simplified a lot of above for the sake of brevity.  For example, the rent the tenant pays needs to be a triple net lease and real estate commissions are based upon the net value to you.\n\nGood luck, have fun. ", "replies": [{"id": "cqev7h0", "text": "First of all, thanks for all the great replies here!  As dayflyer55 says below, my mother is an unrepped landlord who was approached out of the blue by an agent who has a potentially good tenant.  (It *is* a good location!)  But she does have a lawyer that knows the local real estate market.  ", "replies": [], "depth": 2}], "depth": 1}, {"id": "cqe9r7s", "text": "5% of the initial lease term is fairly normal where I am but I can sometimes negotiate that down a bit. I don't give them commission on the renewals until the time that they are exercised. I also make the tenant's sign a personal guarantee for the whole lease if possible. If they won't do that I definitely make them personally guarantee TI and the commission.  ", "replies": [], "depth": 1}, {"id": "cqeefu8", "text": "Like the others said it depends on the lease term.  2 months on 5 years is 3.3% which may be reasonable.  When he says rent each month what he probably means is he gets 5% at least signing (or you can probably negotiate to half at signing, half at first rent).  \n\nIs he representing only the tenant?  You may want to have someone looking after your interests too, these can get complex and you will want someone to properly underwrite the tenant and look at their ability to perform.", "replies": [{"id": "cqevdog", "text": "Yes, the agent is only representing the tenant. My mother has a good lawyer who knows the local market and will do the contracts. \n\nAs far as negotiating, if he's mentioning 5% now, how firm is that?  Is he starting high expecting it to be negotiated down to 4% or 3%?  What is commonly done?  ", "replies": [{"id": "cqevndn", "text": "Depends on the broker and if their client is under a tenant rep agreement where they are required to pay him.  Typically its not firm and you start high on someone unrepped.  If you had a broker, your agent would give him probably 3-4% depending on market.  Standard here is each agent gets half of 6% generally for small deals.  When I go to an unrepped landlord I ask for the entire 6% and see what they come back with.  I'm really happy with anything over 3% usually.  Less than that and it means making my client make up the difference.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "cqeos9t", "text": "5% of \"total consideration\" (aka- the total amount of money that the tenant will pay over their initial lease term) seems reasonable.  But feel free to try and negotiate it down!  Edit- and I've never heard of paying a broker 5% per month over the entire lease term.  But if this is an option, it would actually be way better for your and the building's financial position, as opposed to having to pay the entire thing upfront. ", "replies": [{"id": "cqevhmi", "text": "&gt; But feel free to try and negotiate it down! \nIf he's mentioning 5% as the starting \"price\" -- what is something like that commonly negotiated down too?\n\n\n&gt;Edit- and I've never heard of paying a broker 5% per month over the entire lease term.\n\nYes, apparently he did mention that after a certain period the percentage goes down.  My mother really needs to get together with her lawyer to counter these proposals!\n\n", "replies": [{"id": "cqfo6kw", "text": "He probably stated he wants to get paid a lesser percentage on any renewals or executed options.  This isn't uncommon either.  Also not mentioned-  you may want to think about bringing in a broker to represent you as well!  The two will likely split the 5% fee somehow and you make sure that you are getting a market rate deal.  ", "replies": [], "depth": 3}, {"id": "cqill7x", "text": "If you are in the lower end of a secondary market to a tertiary market your typical lease will gradually get lower the longer the term. For instance 7%,6%,5%, 5%, 4%, &gt;5 yrs 3%.\n\nIn stronger tenant markets you typically give one percentage for the total consideration. So we would start at 4% and usually wind up at 3%, depends on the property and how well the market around it is doing. Whoever has more leverage will typically get their way.\n\nIn tertiary markets it's tough to find good renters who can stay for longer than a few years so you try to get more out of the deal on the front end. \n\nIt's all relative to your market and how your building is positioned.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]