Free tool for brokers
Lease commission calculator
What a commercial lease pays its brokers: the commission on the rent over the whole term, with increases and free rent, year by year, per square foot and split with a co-broker.
Total commission
$142,389
3.63% of $3,924,858 in base rent over 10 years, $28.48/SF
| Co-broker (50%) | $71,194 |
|---|---|
| Your side | $71,194 |
| Year | Rent paid | Rate | Commission |
|---|---|---|---|
| 1 3 mo free | $262,500 | 5% | $13,125 |
| 2 | $360,500 | 5% | $18,025 |
| 3 | $371,315 | 5% | $18,566 |
| 4 | $382,454 | 5% | $19,123 |
| 5 | $393,928 | 5% | $19,696 |
| 6 | $405,746 | 2.5% | $10,144 |
| 7 | $417,918 | 2.5% | $10,448 |
| 8 | $430,456 | 2.5% | $10,761 |
| 9 | $443,370 | 2.5% | $11,084 |
| 10 | $456,671 | 2.5% | $11,417 |
5% on years 1-5 and 2.5% after. As a per-foot fee: $2.85/SF per lease year. $87,500 of free rent is not commissioned.
Arithmetic on your numbers, not advice. Commissions are negotiated and set by your listing or commission agreement: what counts as rent, when the fee is paid and how it splits are in that agreement.
The starting numbers are an example deal to show how the math works, not market rates. Change them to match your lease and your commission agreement.
How to calculate a lease commission
- Rent each year. Size x rent: 5,000 SF x $70 = $350,000 in year 1, then 3% more each year ($72.10 per SF in year 2, $91.33 in year 10).
- Less free rent. 3 free months come off year 1: $262,500 is paid that year, $87,500 is not commissioned.
- The base. Add up the rent paid over the 10 years: $3,924,858.
- The rate. 5% of years 1-5 plus 2.5% of years 6-10 = $142,389, or 3.63% of the whole.
- The split. A 50% co-broker share: $71,194 to the tenant's broker, $71,194 to the listing side.
Increases here compound once a year from the first year's rent, and free months come off the start of the lease. A lease with fixed-dollar steps, free rent spread over several years or a partial first year will differ a little; the commercial rent calculator handles fixed-dollar increases.
Questions
How is a commercial lease commission calculated?
Most often as a percentage of the base rent over the whole term. Add up the rent for every year of the lease, with its increases and less any free months the agreement leaves out, then multiply by the rate. In the example, 5,000 SF at $70 per SF with 3% yearly increases and 3 free months is $3,924,858 of base rent over 10 years; 5% on years 1-5 and 2.5% after comes to $142,389. Agreements usually count base rent only, not the tenant's share of real estate taxes or operating expenses.
What is a lease commission per square foot?
Divide the commission by the rentable square feet: $142,389 / 5,000 SF is $28.48 per SF, or $2.85 per SF per year of the 10-year term. Some deals pay a flat fee per square foot per lease year instead of a percentage; the per-year figure puts the two on one scale.
Why would the rate drop after the first years?
Some agreements pay a lower rate on the later years of a long lease. Enter the later rate to see what it changes: in the example, 5% throughout would pay $196,243, against $142,389 with 2.5% after year 5 ($88,535 of it earned on the first 5 years).
Is commission paid on free rent?
It depends on the agreement. This calculator leaves free months out, so the commission is on the rent the tenant actually pays: in the example the 3 free months are $87,500 of rent that earns no commission. If your agreement pays on them, set free rent to 0 and the commission becomes $146,764.
How is a commission split between two brokers?
When the tenant has a broker, the commission is often shared by a percentage set in the listing agreement. In the example a 50% co-broker share is $71,194 to the tenant's broker and $71,194 to the listing side. Some agreements instead pay the tenant's broker a full commission and the listing broker a separate, smaller fee, sometimes called an override: run each fee through the calculator on its own.
Who pays the commission on a commercial lease in New York?
Usually the landlord, under its listing or commission agreement with the broker. The tenant's broker is typically paid out of that fee or under a separate commission the landlord agrees to. Read the agreement: it says what counts as rent, the rate, the split and when each part is due.
When is a lease commission paid?
On the schedule in the commission agreement. Many pay part when the lease is signed and the rest when the tenant moves in or starts paying rent; others pay in installments over the first years of the lease, or only after the landlord collects. Get the schedule, and what happens if the tenant never takes possession, in writing.
Do you need a license to earn a commission in New York?
Yes. In New York only a licensed real estate broker, or a licensed salesperson working through one, can be paid a commission for leasing someone else's space, and Real Property Law section 442-d bars an unlicensed person from suing to collect one. An owner leasing its own space needs no license.