Who Pays Commercial Real Estate Commission? A Simple Guide

When people start looking into commercial real estate, whether to lease a space, buy a property, or sell one, one question comes up almost immediately:

Who pays the commercial real estate commission?

It sounds like a small detail, but it matters. If you’re signing a lease worth millions or buying a building, you want to know who’s footing the bill for the brokers involved.

The good news: it’s actually pretty simple.

Let’s break it down in plain English.

The Short Answer

In most commercial real estate transactions, the landlord (if it’s a lease) or the seller (if it’s a sale) pays the commission.

Tenants and buyers almost never cut a check for broker fees.

Instead, the commission is built into the deal and paid out by the property owner.

But like everything in business, there’s more to the story.

Why Landlords and Sellers Pay Commission

Think of it like marketing.

A landlord has a space. A seller has a building. They need someone to fill it or buy it.

Brokers are the ones who bring tenants and buyers to the table. Without them, that space sits empty and empty space means lost money.

So the landlord or seller says:
“Alright, I’ll pay a commission if you bring me someone.”

That’s the incentive structure.

How Commission Is Split

Here’s the part most people don’t see.

Commercial real estate deals often involve two brokers:

1. Listing Broker (or Seller’s Broker): Represents the landlord or seller.
   
   
2. Tenant Broker (or Buyer’s Broker): Represents the tenant or buyer.
   
   

When the deal closes, the commission is split between these two.

Example:

• Commission is 6% of the total lease value (or sale price).
  
  
• Landlord pays the 6%.
  
  
• The landlord’s broker and the tenant’s broker split it (often 50/50).
  
  

This way, both sides of the deal are represented fairly.

Leasing vs. Selling (Key Difference)

Leasing

• Commission is usually calculated as a percentage of the total lease value.
  
  
• Example: If a tenant signs a 5-year lease at $10,000/month = $600,000 total lease value.
  
  
• Broker commission might be 4-6% of that total, paid upfront when the lease is signed.
  
  

Selling

• Commission is typically a percentage of the sale price.
  
  
• Common range: 4%–8%, depending on property size, location, and negotiation.
  
  
• Seller pays the commission, and it’s split between the seller’s broker and the buyer’s broker.
  
  

So Do Tenants and Buyers Pay Anything?

Directly? No.
Indirectly? Yes.

Here’s why:

Landlords and sellers factor commissions into their overall costs. When they set rent rates or sale prices, they’ve already accounted for paying brokers.

So while tenants and buyers don’t cut the check, they’re still paying through the deal structure.

Why You Should Always Have Your Own Broker

This is the part most people miss.

A lot of tenants or buyers think:
“Why bring my own broker? The landlord’s broker can just handle it.”

Here’s the truth:

• The landlord’s broker works for the landlord. Their job is to protect the landlord’s interests.
  
  
• If you go in alone, the landlord’s broker keeps the entire commission.
  
  
• You get no representation. No one negotiating on your side. No one looking out for you.
  
  

Meanwhile, if you bring your own broker:

• You still don’t pay the commission.
• You get someone fighting for your best deal.
• The landlord just splits the commission with your broker.

It’s literally free expertise. Not using your own broker is like showing up to court without a lawyer because “the other lawyer can help me.”

Big mistake.

Can Commissions Be Negotiated?

Yes. But not in the way you think.

• For sellers/landlords: Commission rates can sometimes be negotiated with your broker upfront (e.g., lowering from 6% to 5%).
  
  
• For tenants/buyers: Not really. Since you’re not paying the commission directly, you don’t negotiate the fee. But your broker can negotiate better rent terms, concessions, or purchase price on your behalf,  which is way more valuable.
  
  

What Are Typical Commercial Real Estate Commission Rates?

It depends on the market, property type, and size of the deal. But here’s a ballpark:

• Leases: 4%–6% of total lease value.
  
  
• Sales: 4%–8% of the purchase price.
  
  
• Large deals ($10M+): Commissions may scale down slightly (e.g., 2%–4%) because the numbers are bigger.
  
  

Who Actually Writes the Check?

Usually, it works like this:

1. The deal closes.
   
   
2. Title company or escrow collects funds.
   
   
3. Commission is paid directly to the brokers out of those funds.
   
   

So while the landlord or seller is the one paying, it’s not like they’re mailing a check. It comes out of closing.

Quick Recap

Let’s simplify:

• Leases: Landlord pays commission.
  
  
• Sales: Seller pays commission.
  
  
• Tenants/Buyers: Don’t pay directly, but it’s baked into the price.
  
  
• Brokers: Commission is split between landlord’s broker and tenant’s/buyer’s broker.
  
  
• Pro tip: Always get your own broker. It’s free for you and protects your interests.
  
  

Final Thought

Commercial real estate seems complicated. But on commissions, it’s straightforward:

The property owner pays.

And if you’re on the tenant or buyer side, take advantage of that. Bring in a broker who represents you. It costs you nothing, but it can save you everything.