Leasing Commission

A leasing commission is the fee paid to real estate brokers for procuring a tenant and negotiating a lease, typically calculated as a percentage of the total lease value or a dollar amount per square foot. Standard commission structures vary by market but commonly run 4-6% of total lease value for new leases and 2-3% for renewals, often split between the listing broker and the tenant's broker. On a 10-year NNN lease at $20/SF on 5,000 SF, total lease value is $1,000,000, generating a $40,000-$60,000 commission. For NNN investors, leasing commissions are a significant cost during re-tenanting that must be budgeted as part of vacancy reserve planning. These commissions reduce the effective return during the first year of a new lease and should be factored into hold-period underwriting. Some lease structures include commission protection clauses that define commission obligations at renewal.