Some brokers help clients by providing all of the services listed above while others specialize in just one of the areas.
Project leasing is when a broker signs a listing with a landlord to find tenants to fill a shopping center for the landlord. The leasing agent markets the available space(s) to tenants and brokers who represent tenants until they find a tenant who is interested in leasing space. Once you get an interested prospect you usually begin negotiations by drafting a letter of intent (LOI) to the tenant to try to come to a basic understanding of the terms and conditions under which you would lease space to them. After several rounds of negotiation you hopefully arrive at a signed and agreed to LOI which then gets sent to an attorney to turn into a lease. The LOI provides the framework for the lease. Once a lease is created the verbiage or lease form usually get negotiated between attorneys for a few rounds before a final lease document is agreed to. Once leases are fully executed then the brokers involved in the deal split the commission which is usually based on a percentage of the lease income (usually 6%) on smaller shop deals (6,000 square feet or less) or a per square foot arrangement for larger spaces. Leasing commissions are usually paid out first half upon lease execution and the second half upon tenants opening for business.
Tenant representation is when a broker represents a tenant in a transaction or every transaction they do. Larger and more active tenants are more desirable to represent. Representing Target or Wal-Mart is as good as it gets. Commissions are paid as is referenced above and are typically per transaction.
Investment sales are pretty self explanatory. Brokers can either represent a seller or a buyer in the purchase of a retail investment property. Cap rates are used to determine value and purchase prices and brokers are typically paid at closing with a 6% or lower commission being shared at closing. The larger the transaction the higher the likelihood that the commission percentage will be less than 6%.
Development is where a broker helps a developer build a project from the ground up. Roles can vary from finding land for the potential project to assisting the developer with a project from inception through lease up and eventual investment sale. Land sale commissions on the front end with leasing commissions in the middle followed by investment sales commission at the end would be the ultimate development brokers hope. We call that a triple dip.
I hope that gives you a basic understanding of how retail brokers work and how they are compensated.
I thought I would give everyone a basic breakdown of what most retail commercial real estate brokers do and how they earn their commissions.
Most retail brokers fall into one of the following four categories:
1. Project Leasing
2. Tenant Representation
3. Investment Sales
4. Development
Some brokers help clients by providing all of the services listed above while others specialize in just one of the areas.
Project leasing is when a broker signs a listing with a landlord to find tenants to fill a shopping center for the landlord. The leasing agent markets the available space(s) to tenants and brokers who represent tenants until they find a tenant who is interested in leasing space. Once you get an interested prospect you usually begin negotiations by drafting a letter of intent (LOI) to the tenant to try to come to a basic understanding of the terms and conditions under which you would lease space to them. After several rounds of negotiation you hopefully arrive at a signed and agreed to LOI which then gets sent to an attorney to turn into a lease. The LOI provides the framework for the lease. Once a lease is created the verbiage or lease form usually get negotiated between attorneys for a few rounds before a final lease document is agreed to. Once leases are fully executed then the brokers involved in the deal split the commission which is usually based on a percentage of the lease income (usually 6%) on smaller shop deals (6,000 square feet or less) or a per square foot arrangement for larger spaces. Leasing commissions are usually paid out first half upon lease execution and the second half upon tenants opening for business.
Tenant representation is when a broker represents a tenant in a transaction or every transaction they do. Larger and more active tenants are more desirable to represent. Representing Target or Wal-Mart is as good as it gets. Commissions are paid as is referenced above and are typically per transaction.
Investment sales are pretty self explanatory. Brokers can either represent a seller or a buyer in the purchase of a retail investment property. Cap rates are used to determine value and purchase prices and brokers are typically paid at closing with a 6% or lower commission being shared at closing. The larger the transaction the higher the likelihood that the commission percentage will be less than 6%.
Development is where a broker helps a developer build a project from the ground up. Roles can vary from finding land for the potential project to assisting the developer with a project from inception through lease up and eventual investment sale. Land sale commissions on the front end with leasing commissions in the middle followed by investment sales commission at the end would be the ultimate development brokers hope. We call that a triple dip.
I hope that gives you a basic understanding of how retail brokers work and how they are compensated.