Negotiating Commission on rent escalations as base rent..
Are annual rent escalations typically considered part of the “base rent” when considering commissions?
[{"id": "irgaks4", "text": "Yeah for industrial I\u2019ve seen the commission set as a % of the rent (e.g. 5% of the cash flows for the TT broker and 2.5% for the owner\u2019s). For office the commissions are usually in a PSF basis", "replies": [{"id": "irgblzt", "text": "Thanks, but just to clarify, that\u2019s taking into account any yearly rent increases factored into the fee?", "replies": [{"id": "irgc4pf", "text": "Yeah", "replies": [], "depth": 3}, {"id": "irhfx5b", "text": "Fee is based of the lease value so by default yes they would be included or how else would you get a correct lease value?", "replies": [{"id": "irihqwu", "text": "Original base rent.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "irgl9w9", "text": "For our market it\u2019s 5% on contract rent for first 5 and 2.5% for anything over 5. Escalations are in the lease and therefore included.", "replies": [{"id": "irgm4us", "text": "I have a broker who\u2019s insisting on 6% across the board, no reduction after 5 years and all inclusive of escalations lol. Every market of course is different but typically I\u2019ve seen base rent as whatever the deal was negotiated at x the term.", "replies": [{"id": "irhg24z", "text": "Office guys seems to get 6% fees in the Bay Area.  Retail usually 3% for the term", "replies": [], "depth": 3}, {"id": "irhmfs8", "text": "This brokers request would be in line with standard office in TX.", "replies": [{"id": "irihlm1", "text": "and what if not office? Industrial in the energy industry.", "replies": [{"id": "irij0q0", "text": "Not as experienced in non office, but the few retail deals I have done are about the same.  6% of gross revenues for about first 10 years of term, then lowered by 1-3%. If only one rep then maybe 4-5% instead of 6.", "replies": [{"id": "irildrf", "text": "It\u2019s not retail either but it gives a pretty good idea, no one is really doing 10 year leases anymore especially in the oil / energy industry.  One rep meaning the listing agent or the office?", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "irgwzx7", "text": "Is it paid at close or annually?", "replies": [{"id": "irhfs31", "text": "Upon lease signing at once lol", "replies": [{"id": "irifp9l", "text": "Happy Cake Day! And is this true regardless of lease term? I.e. You're paying 5% at closing for the total lease amount, or is there a stopping point or reduction in commission rate? \n\nSorry for the basic questions, I never really deal in leasing and have always been curious about commission structure. Wasn't sure if it was paid throughout the lease on a annual basis or lump summed.", "replies": [{"id": "irih9jm", "text": "He wants 6% claiming that\u2019s market which is ridiculous every deal is different, no reduction after 5 years if it\u2019s a longer lease, paid upon signing at once,  this was be a hefty commission as this is a large property with high rent in the energy industry; also tried to get a listing signed for a year which is just absurd as well but agreed to 6 mos.", "replies": [{"id": "iriosqm", "text": "I mean, as you said every deal is different. 6% can definitely be market, but it's quite common to see % deductions based on deal size. If it's a very large opportunity I'd think they could concede a little. The up front commission part was what I was unclear on.. For landlords without a stockpile of cash, how are they paying commission at closing?", "replies": [{"id": "irirhfi", "text": "They won\u2019t concede so I will find another broker; exactly not everyone can pay up front but they don\u2019t care; the  other issue I have is that he works with the tenants (long story) and that would be dual agency.", "replies": [{"id": "irixhy0", "text": "I know laws vary by state. That\u2019s illegal in FL but they can act as a transaction broker.", "replies": [{"id": "iriyfsb", "text": "It\u2019s absolutely illegal in every state not to mention a conflict of interest.", "replies": [], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "irgn899", "text": "I do land, retail, industrial, and office deals in the CO market. The only asset class where I would ever not see rent escalations included is in office, where it is common to be paid an amount, per SF, per year.\n\nIn all other asset classes, the listing agreement would state it is a percentage of the base rent for the primary term of the lease. Sometimes there are discounts after a certain dollar threshold, year, or for there being only one broker. That percentage would absolutely include any escalations in my market (and in the few deals I have done in the neighboring states in the area it seems to be the same).", "replies": [{"id": "irgtszw", "text": "What about after year 5?", "replies": [], "depth": 2}], "depth": 1}, {"id": "irgo5jt", "text": "Unrealistic commission expectations are a great way for an agent to kill a deal.  Every 5+yr deal I have done, the commission rate has dropped after yr 5...and usually it was by 1/2 of what the first 5 years was. In my market, we tend to get paid on the total Base Rent for the original term of the lease. If the rent increases during the original term, that amount is factored into the total base rent that will be paid over the original term. That is what we invoice off of. We don't get paid on add-ons such as CAM or NNN.", "replies": [], "depth": 1}, {"id": "irgo5sq", "text": "In my market, escalations are included (VA).", "replies": [], "depth": 1}, {"id": "iriv805", "text": "Yes. If a landlord or leasing broker tried to not pay me on the escalations, I would unleash the gates of hell on them.", "replies": [{"id": "itjsj3a", "text": "&gt;I would unleash the gates of hell on them.\n\nWhat is that supposed to mean", "replies": [], "depth": 2}], "depth": 1}, {"id": "irjl441", "text": "What MSA?", "replies": [], "depth": 1}]