How to Calculate Leasing Commissions in Excel
Leasing Commissions (LC’s)
A leasing commission (LC) is a fee paid by a building owner to a leasing broker (“tenant rep”, “landlord rep”, or both) for procuring a tenant that successfully executes a lease with the owner. LCs are paid at the start of the lease (sometimes they are ½ at lease execution and ½ at tenant move-in date). They are commonly paid both when a new tenant occupies a suite, and when an existing tenant renews a lease.
How to Calculate a Leasing Commission (LC)
The LC amount is paid by the owner based upon a percentage of the lease value (i.e. total rent over term of lease).
For example, a tenant executes a 10-year lease for a 8,000 square foot suite at $24 per square foot (with no annual rent bumps).
Lease value = 10 years * (8,000 * $24) = $1,920,000.
If the leasing broker is to receive a leasing commission of 6.0%, then the total commission on this lease will be:
$1,920,000 * 6% = $115,200.
If there are two brokers (i.e. tenant rep and landlord rep), then you are paying 3% to your leasing broker (landlord rep) and 3% to the tenant’s leasing broker (tenant rep). Sometimes you can reduce the fee of the landlord rep (“inside broker”) to 1.5% on renewals.
Sometimes on longer leases, the leasing commission will have a reduced % for years 6+.
How to Enter Leasing Commission in ARGUS
For the Tenant Rent Roll and/or Market Leasing profiles:
Find ‘Leasing Costs’.
Using the dropdown under ‘Commissions Unit’, select “Fixed %”.
After selecting this, two new assumption fields should appear entitled “Commissions” and “Commissions Timing”.
Insert the LC % being charged by the broker under “Commissions” (default assumption will be 0.0%, so just replace this with the real number).
Under “Commission Timing” you can choose when the LCs will be incurred.
Ex: 100% upfront in Year 1 (timing = 100% month 1 of Year 1).
Ex: 50% prior year (upon lease execution) and 50% Year 1 (upon tenant move-in), so you would code 50% to month 1 in Year -1, and 50% in month 1 in Year 1.
