Leasing Terms: Full Commission

In New York City, landlords typically pay commercial brokerage commissions. If a tenant is ever looking to sublease their space, they should expect to pay a full brokerage commission unless they find someone to rent the space on their own.

It is expected that the outside/tenant’s broker receives one full commission (100%) and the landlord’s broker receives one half commission (50%). One full commission is typically calculated as follows:

  • Year 1 – 5%
  • Year 2 – 4%
  • Year 3 – 4%
  • Year 4 – 3%
  • Year 5 – 3%
  • Years 6-10 – 2.5% each

Each brokerage firm can have a different schedule, but they are usually a variation of the above schedule. Commission is usually paid on base rent only, not annual escalations. So for example, the commission on a 5 year lease is equivalent to 19% of one year for the outside broker and 9.5% of one year to the representing broker.

There are some brokers that will offer commercial spaces on a reduced commission basis, but most tenant brokers, especially good ones, will not take their tenants to properties that don’t pay full commissions. Basically, if there are 5 properties that match their tenant’s criteria and 4 of them are paying twice as much commission as the “cobroke” listing, why would the tenant’s broker show the property that is only paying them half the amount?

If the landlord’s (or overtenant’s) broker finds a tenant without the assistance of the outside broker, then they receive one full commission.