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Commercial Real Estate Agents: Traditional Pay Structure vs. the Question of Performance

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The traditional pay structure for commercial real estate agents lies at the root of the problem that many people have these days with working with brokerage firms. The way commissions have always been calculated plainly put the interests of the prospective tenant last. Commissions are based on a percentage of the monthly rent that’s agreed upon – therefore it only makes sense that the more a tenant winds up paying, the better off a commercial realtor will be. This also figures into the aversion many agents have to working out an addendum to a lease agreement that would result in more flexibility for the tenant.

Addendums to lease agreements often take shape in the form of certain concessions that a tenant may ask for – like asking for certain improvements to be made prior to moving in, or providing for an extension of the lease agreement once it’s expired. The trouble is, the more concessions a landlord has to make – and since the landlord is the party that pays the commercial real estate agent’s commission, these kinds of agreements frequently result in less payout to the agent.

In what can amount to a lose/lose situation for a tenant, there is something that can be done to ensure an equitable negotiation. Prior to hiring a commercial real estate agent, it’s critical to determine how that firm measures results. Will the needs of the client take precedence above all else? There are some brokerage firms, like Cardinal Real Estate Partners, that structure their commissions based on performance.

If the option exists to hire a commercial real estate agent that’s employed by the kind of company that values quality over quantity, there should be no alternative for a tenant seeking the best possible end result.

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