Broker fee for finding a tenant for a commercial office space

[Michelle P Stafford]

Hi there,

I'm just curious what the normal broker fee is for finding a tenant for a commercial space, specifically an office space. The broker that I worked with to find the commercial property charges "6% of the total gross aggregate rental for the first five-year lease term and 3% rental
for the term past five years". Is this a reasonable fee?

For reference the property should lease for about $5000/month = $60,000/year and $300,000 for that 5 year term. This means $18,000 to the broker upon execution of the 5 year lease. 

My bigger concern is:  If -------------, Inc., a cooperating broker working through Broker, the Owner, or anyone else exposes said property to a prospective Tenant during the listing period, and this prospect leases said property within six (6) months of the ending date of said listing, then Norris & Stevens, Inc. shall be due its stipulated fee"

Is this typical? I plan on working all my own contacts to also try and find a tenant and I sure don't want to do all the work and then still pay the Broker $18K! I have a lawyer who can draft the lease which would likely only cost me about $1000. I'm just not confident I can find someone on my own so I want to keep a good line of communication with the broker as well. 

Any thoughts and insight would be greatly appreciated!

Michelle

[David M.]

@Michelle P Stafford

Yup, thats about right.. Commercial real estate is very different than residential.  The deal volume is much less, and much of the commercial brokering is for rentals.  So, they need their commission based on the entire term of the lease.  You "spread out the pain" by having their commission paid over time, for example.

The exclusivity is normal --- its even normally on residential listings but most people don't read the fine print.  Basically, if they are listing it and they or somebody brings in a client, they have the right to get paid, even if after the listing is over.  Think of this way...  Lets say a potential tenant has their agent show your property 2 weeks, whatever, before the listing ends.  Wouldn't it suck for the agents involved if that tenant just waited for the listing to end and then approached you directly and cut them out?  Your broker has been spending time, advertising, etc. for you.  Why would they want to be cut out?  Of course, why shoudl you cut them out other than to be a very shrewd business person.

It sounds like you want a "... Named Exception" type of listing.  Basically, you need to name everybody that would be excluded from the Exclusive Right to Sell by your Broker.  In your case, that might kinda suck if you are basically turning over your entire contact list.  You'll have to work on that...  But, that's how you get exceptions to that clause.

Good luck.