Who pays the broker commissions when you sign a lease or sublease for an office space?
The good news? It’s not you!
Think of the relationship between home buyers and their real estate agents. It works much the same way as does the relationship between you and your office broker. Residential real estate agents don’t get paid until their buyer clients find a house and sign the purchase agreement. And when this happens, it’s the seller of the home – the property’s previous owner – who pays the agent’s commission through the proceeds of the home sale.
It works the same in an office lease. Your office broker won’t get paid until you sign a lease. And the owner of the building in which your office space sits will be the one issuing a check to the brokers.
Two kinds of brokers
As you search for office space, you’ll most likely meet two types of brokers: the tenant rep and the listing agent.
The listing agent represents the owners of buildings, the people who are leasing out office space. Their job is to negotiate the best deal – they want their clients to get the highest monthly rent, for example – on behalf of building owners.
You’ll be working with a tenant rep. These agents work with clients who are looking to lease or buy office space. Their jobs are the opposite of listing agents: They want to get the best deal for their clients. The best tenant reps will negotiate lower monthly rents and more favorable terms for their clients.
When you sign an office lease, the listing agent will receive a commission of 4% to 6% percent of the lease’s value. The listing agent will then split that commission with your tenant rep. This split is often done on a 50/50 basis, though not always.