Leasing Commission

A leasing commission is the fee paid to real estate brokers for procuring a tenant and negotiating a lease, typically calculated as a percentage of the total lease value or a dollar amount per square foot. Standard commission structures vary by market but commonly run 4-6% of total lease value for new leases and 2-3% for renewals, often split between the listing broker and the tenant's broker. On a 10-year NNN lease at $20/SF on 5,000 SF, total lease value is $1,000,000, generating a $40,000-$60,000 commission. For NNN investors, leasing commissions are a significant cost during re-tenanting that must be budgeted as part of vacancy reserve planning. These commissions reduce the effective return during the first year of a new lease and should be factored into hold-period underwriting. Some lease structures include commission protection clauses that define commission obligations at renewal.

Leasing Commission is a key concept that affects property valuation, financing decisions, and investment returns in the triple net lease market. Understanding Leasing Commission helps investors make informed acquisition and management decisions.

Leasing Commission directly influences how commercial properties are valued, financed, and traded. Changes in Leasing Commission can impact cap rates, NOI calculations, and overall investment performance for net lease properties.

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