Buy-side broker in CRE

[Shri Ganeshram]

Hi all,

I want to learn more about how buy-side brokerage commissions work for individuals working with one in CRE.

- What's the typical commission % for a buy-side broker representing an individual in a CRE deal (multi family, office, retail, NNN, etc) for various deal sizes ($1M-$2M, $2M - $5M, $5M - $10M, $10M-$20M, $20M+)?

- Who pays for the commission for these various deal sizes (seller vs buyer)? 

- In the case that it's a buyer, how do you negotiate for the seller or sell-side broker to take on that fee?

- Is it normal for people to work with buy-side brokers at each of these deal sizes? (what % of the time does that happen? why does that happen or not happen?)

Thanks so much!

[Daniel Salonis]

Hey Shri,

In a lot of cases the buy-side fee comes from the listing broker splitting his fee with the buy-side broker. So if the listing-broker negotiated a 4% fee with the seller, he may split with buy-side broker 2% and 2%, or some variation that would equal the 4% fee he's receiving. 

The listing-broker isn't obligated to split his fee at all, however, but most brokers do in order to entice outside brokers to bring buyers to the table. If the listing-broker is not co-broking his fee, the buy-side broker would have to negotiate a fee from his buyer. From my experience in dealing with the larger companies, JLL never co-brokes, CBRE and Cushman Wakefield rarely co-broke and Marcus & Millichap generally does. It's really up to the listing-broker whether or not he wants to.

Typically the larger the deal, the lower % fee the listing-broker is able to negotiate. I'd say properties $1-5mm could get upwards of 6%, $5-10mm maybe around 4%, and once you start getting into more institutional size deals you're looking at 2%, 1% in a lot of cases.

Ultimately there's no black and white way the buy-side fee is handled. Hope this helps 👍.

Daniel Salonis