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Commercial Real EstateFAQ

What is a typical commercial real estate broker salary?

By February 23, 2018 No Comments

The typical commercial real estate broker salary is well in excess of $100,000 a year. I know several seasoned commercial brokers who earn a seven-figure income annually. These commercial brokers are typically senior members of the brokerage firm and, in some cases, receive an override or residual from the junior members of the team.

In 2016, the National Association of Realtors surveyed their commercial members and discovered that the median gross income of those responding was $86,000.

According to the NAR survey, the median age was 57 years old and 66 percent of the respondents had a college degree or higher. The median number of transactions was seven, with a median transaction size of $2 million.

Based on these numbers, assuming a three percent increase in median transaction size, a NAR commercial member could expect to earn over $100,000 a year in median gross income once they have an established practice.

 

How is a commercial real estate broker compensated?

Compensation for all commercial real estate brokers is similar to how residential real estate agents receive compensation.

For purchase and sale transactions, the typical real estate commission is a total of six percent for transactions less than $5,000,000 in size.

For sales transactions over $5,000,000, the real estate commission percentage is usually negotiated downward to four percent.

The listing brokerage receives fifty percent of the commission and the selling brokerage receives fifty percent of the commission. So, each brokerage firm receives half the commission. The commercial real estate broker then receives a percentage of the real estate commission based on the side of the transaction they represent. For junior commercial brokers the split could be as low as fifty or sixty percent of the total commission.

For seasoned commercial real estate brokers, the commission split could be as high as seventy or eighty percent of the total commission received.

In many cases, a commercial real estate broker is required to pay an annual desk fee to the brokerage, depending on the situation, which could be as high as $50,000. This desk fee is based on the production of the commercial broker.

There are several ways a desk fee can function:

  1. It can be used by the commercial broker as a cap on fees earned by the brokerage
  2. It can be used by the brokerage to reach a minimum level of production required for continued association with the brokerage
  3. It can be used by the commercial broker to negotiate a higher commission split
  4. It can be used by the brokerage to offset operating expenses attributable to the costs of operating the brokerage and maintaining not only luxurious office space but also providing extensive research and mapping services. For example, say a commercial broker had $5,000,000 in sales production for a given year and the split with the brokerage was sixty-forty. If the real estate commission on the listing side of the transaction was three percent, the total commission would be $150,000 and the commercial broker could expect to make $90,000 and the brokerage would make $60,000. The $60,000 paid to the brokerage would meet the $50,000 desk fee requirement, so the broker would not have to come out of pocket to cover the annual desk fee. If production was below a minimum level to cover the desk fee, the broker would come out of pocket to make up the difference of $50,000 and what was actually paid through the commission split. On the other hand, the desk fee could be used by the broker to negotiate a higher commission split. For instance, once the broker had contributed $50,000 in earnings to meet the desk fee, they might receive 90 or 100 percent of the commissions or they might receive a higher commission split.