Commission Tips for Commercial Real Estate Sales Today

When it comes to your career in commercial real estate, commission will always be important to you as you move through the year.  In any given sales year, you really only have 10 months in which to create the necessary listing bank and completed transactions.

January is usually a difficult month when it comes to property enquiry and completed transactions.  Most clients and prospects take holidays in this period.  That being said, some agents will come back to the industry early after the Christmas break so they can find the right people that are active and looking for commercial property in that quiet time.  The strategy does work if you decide to adopt it.  They say that ‘the early bird catches the worm’, and in commercial real estate that rule does apply.

Commission structures change throughout the industry based on property type, industry standards, and industry regulation.  When the property market becomes more challenging and slow, there is a tendency for some agents to discount their fees and commissions.  The fact of the matter is that discounting fees is a precursor to agency downturn.  You are the expert when it comes to property enquiry and property marketing.  You do not need to discount your fees.  You do need to sell your services comprehensively.

Here are some observations regards commissions and fees structures:

  1. In many locations you will find that the commission base for a commercial property sale is usually around 3% for properties that will sell up to a price of around five million dollars.
  2. Over a sale price of five million dollars, the commission structure tends to reduce.  The lowest commissions I have seen in the industry were around 1.25 per cent of the sale price.  That is based on a property selling for $500,000,000.  It is quite unlikely that you will ever find commissions going below 1.25 per cent nor should they.  The fact of the matter is that a large and significant commercial property for sale requires significant effort when it comes to marketing.  The best people and the best strategies are required to achieve a great result for the client.  A totally committed agency team appointed to a significant listing will produce far better results for the client than any reduced commission benefit.
  3. All of this being said, if you are still going to reduce your commission for some reason, ensure that you get a commitment from the client for an exclusive listing to your agency for a long period of time.  That will usually be for a period of at least six months.   As part of that process, also get a commitment from the client to vendor paid marketing.  That vendor paid marketing should be paid to you upfront prior to the campaign commencing.

If the client expects you to reduce your commission, then you should expect the client to commit to your agency in a well-structured marketing campaign.  Show the client that you have the right strategies and people to promote the property comprehensively into the target market.  Tell the client what will be occurring over the marketing period.  Give them an established process that they can fully appreciate as part of accepting your listing appointment.  Use a Gantt chart to display your actions and intentions.

The marketing of commercial and retail property today is not an experiment.  It is a very specialised process requiring top salespeople and experienced agencies.  Develop your skills and sell them into your client base.  Show the client that you have the database and the connections to spread the property marketing message into the industry.  They must be able to see that your agency can get the best price in the shortest possible time.