A commercial leasing broker is a real estate professional who helps advise tenants and/or landlords during the leasing process.
Commercial leasing brokers (or agents) often specialize in representing either tenants or landlords, though many represent both sides.
Particularly in larger markets, commercial brokers often specialize further into a specific property type (e.g. retail, industrial, or office), or even a subtype like restaurants, distribution centers, or medical offices.
Landlord Representative Brokers
Landlord representation brokers are real estate professionals who represent the landlord in a lease transaction and market the property on their behalf.
Landlord rep brokers, aka listing brokers or listing agents, typically create and distribute professional marketing materials, search for prospective tenants, and negotiate with tenants or tenant rep brokers on the owner’s behalf.
Tenant Representative Brokers
Tenant representation brokers are real estate professionals who represent the tenant in a lease transaction. They’re the equivalent of a buyer’s broker in a sale.
The tenant rep broker helps their client (the tenant) determine their real estate needs, arrange property tours, understand and negotiate the lease, and generally navigate the leasing process.
They serve as an expert in the tenant’s corner looking out for their best interests as they make the important business decision of finding a space and signing a lease.
How do leasing brokers get paid?
Both the landlord rep and tenant rep commissions are almost always paid by the landlord.
Typically, the landlord engages a broker (the landlord rep aka listing broker) to lease their property and agrees to pay a commission to get a lease signed – say, 6% of the total rent over the lease term.
If the listing broker secures a tenant who does not have representation, the broker might earn the entire 6% fee. However, if the tenant has a broker representing their interests, the tenant rep will share in the 6% commission that the landlord was going to pay anyway.
Let’s say the owner of a shopping center has engaged a broker (the listing broker) to lease their 3,000-square foot vacancy. The landlord has agreed to pay a 6% commission for successfully leasing the space, regardless of whether a tenant rep broker is involved.
Ultimately, a tenant rep does bring a quality tenant to the listing broker, and the two leasing brokers split the commission such that the tenant rep gets paid 4% and listing broker gets paid 2%. The tenant signs a five-year deal for the 3,000-square foot space at $40.00 per square foot annually; for simplicity, we’ll exclude any rent escalations in the commission calculation.
Listing broker’s fee: $40/sf x 3,000 sf x 5 years x 2% = $12,000
Tenant rep’s fee: $40/sf x 3,000 sf x 5 years x 4% = $24,000
Had the listing broker secured the tenant themselves, their commission would have been:
Listing broker’s fee: $40/sf x 3,000 sf x 5 years x 6% = $36,000
Either way, the landlord pays a total leasing commission of $36,000 in this example.
Given that their services are typically free for the tenant, it’s almost always advisable to have a tenant rep on your side looking out for your best interests. Tenant reps are incentivized to deal with any headaches during the leasing process and they often have valuable experience that can save you time and money.
If you happen to be a New York City retail or restaurant tenant looking for a broker to help you navigate the leasing process, we’re happy to help connect you with a pre-vetted expert when you list your requirements on LeaseToMe’s open marketplace.
Or if you’re not in NYC, feel free to email us at email@example.com and we can try to provide some guidance as you search for a qualified tenant rep.