How Much Do Commercial Real Estate Agents Make & How Is It Earned?
Real estate is a multifaceted industry that offers unprecedented flexibility and personal choice in deciding the trajectory of your career. Commercial real estate is a popular path that draws prospective agents for a myriad of reasons. No doubt one of the perks you’ve heard about is the commercial real estate agent salary.
How much do commercial real estate agents make? According to Indeed, the average base salary for a commercial real estate agent is $84,475 per year. Beyond the commercial real estate salary and commercial real estate commission, working in this side of real estate can make for an exciting career. The following guide will explain what commercial real estate agents do and how their compensation is broken down.
Did You Know?
According to BizJournals, the 2020 top U.S. commercial real estate market was Dallas-Fort Worth. While every commercial real estate market was impacted by COVID-19, North Texas was the least impacted U.S. market.
What Is a Commercial Real Estate Agent?
Typically, there are two types of real estate agents: Commercial and residential. What is the difference between the two? This video helps to explain it, but commercial real estate agents deal with commercial real estate, such as a business acquiring land for a new office or an existing building. Residential real estate agents help people find and buy their dream home. In other words, the day-to-day responsibilities of a commercial real estate agent are completely different than those of a residential real estate agent. A commercial agent has to know the trends of the commercial real estate industry for their market, so there is more research involved, and they tend to be more data-focused than residential real estate agents. They also have to deal with more leases than the average residential agent.
Commercial Real Estate Agents Skills & Qualifications
One aspect that remains the same between commercial and residential real estate agents is the licensing process. As is the case when becoming a real estate agent, the licensing requirements vary depending on the state. You need to meet your particular state’s requirements, take and pass Pre-Licensing courses, pass your state exam, and then complete any required Post-Licensing education required of you.
Since commercial real estate is more data-focused, you may need to be good with numbers and understanding large amounts of data to be successful in this sector. You’ll also need an understanding of how leases work to be able to explain them to potential customers.
Commercial Real Estate Agent Duties
Now that you have a basic understanding of what you need to get licensed and the skills to become a commercial real estate agent, what are some common duties of the role? Though these duties will differ from agent to agent, here’s a brief list to illustrate commercial real estate duties:
- Property or business’s valuations
- Property management
- Property leasing
- Selling/marketing a property
- Property purchase
- Feasibility studies
- Site selection
- Investment analysis
- Investment sales
How Are Commercial Real Estate Agents Paid?
As is the case with most careers in real estate, commercial real estate agents are paid on commission. It’s important to note that there are two sides to working for a commercial real estate commission. If you don’t make a deal, you don’t get paid. On the other hand, there is unlimited earning potential. In fact, the commercial real estate agent salary is the main reason people want to get into this field.
Understanding Commercial Real Estate Commission
Trying to comprehend real estate commission can be a dizzying undertaking, but we can walk you through it! Due to antitrust laws, there’s no set commission percentage that is required to be paid by law. But most commercial real estate commission is anywhere from 4-8% of the sale price. Commission depends on the rate negotiated by the parties involved in the listing agreement, though the commission may be a flat fee in rare occasions. The percentage of the commission is generally set by square footage and the price per square foot. This methodology is one of the reasons why commercial real estate salary is so high. The bigger the land or property, the higher the commercial real estate commission.
What About Lease Transactions?
Another factor that plays a huge role in the commercial real estate agent salary is the commission of a lease transaction. Lease transactions require the commission to be paid on the total value of a lease. For example, if a five-year lease has a monthly rent payment of $3,000, the lease value would be the total rent payments made over the five years ($3,000 X 60 months = $180,000). The commission would then be paid on the $180,000, and typically commissions are due once the lease is signed and the first bills (first month’s rent and security deposit) have been paid.
How Commercial Real Estate Agents Split Commission
The split of a commercial real estate commission plays a significant role in commercial real estate salary. The practice of splitting commissions also makes it difficult to grasp what the average commercial real estate commission is. The most common splits involve the commercial real estate agent, their brokerage, and any other agents involved in the deal. Here are some of the ways commercial real estate commission can be split:
- 100% - The rarest of the commission splits, you’ll most likely see this split with commercial real estate brokers. In this scenario, the broker would receive the entirety of the commission. When it comes to commercial real estate broker salary, a 100% share is the ideal scenario.
- 50/50 - This split is exactly as it sounds. The commercial real estate agent gets half, and their brokerage gets the other half.
- Tiered commission plans - CommissionTrac explains that tiered commission generally begins with the broker keeping 50-60% of the gross commission, then moving up as they hit new tiers or breakpoints. These tiers and breakpoints are typically based on either the overall gross production by the agent or the agent’s net production.
- Gross - Similar to a tiered commission plan, a gross commission split creates breakpoints at specific grossed commission figures. The agent’s tier determines what they receive in agent net versus what their brokerage keeps.
With large commercial properties, agents often work in teams, which impacts their take-home commission. But, as noted earlier, the more expensive the land or property, the higher the commission - so there’s often enough of a commission to go around!
How to Increase Income
As you gathered by now, commercial real estate is extremely lucrative. However, scoring the highest commercial real estate commissions and boosting your commercial real estate salary doesn’t happen overnight. With time and effort, the following ideas can help grow your income as a commercial real estate agent:
- Utilize your network
- Provide excellent customer service
- Be selective about deals
- Continue training & gaining experience
Aside from gaining the necessary licensing and experience, the best way to make yourself stand out (and get the best commercial real estate agent salary) is to find an area in which to specialize. Focus on a specific type of property or area of commercial real estate that most interests you; that’s how you can become an “expert.” Instead of finding multiple areas of commercial real estate in which your performance is average, pick one that allows you to separate yourself from the rest of the crowd and excel.
Utilize Your Network
No matter the path you take in real estate, networking is paramount to your success. Commercial real estate is no different. In fact, it might be even more important given the size of the transactions and the top-tier people/companies involved. Making connections with the people of influence in your community both within the industry and outside of it will help you get a leg up on your competition.
Provide Excellent Customer Service
Word-of-mouth marketing is one of the most powerful tools for commercial real estate agents. Even in a digital world where human-to-human interaction is limited, great customer service is paramount to your success. If you want to make the average commercial real estate salary, provide excellent customer service. Treating clients well and understanding their needs may land you your next deal, if not a referral down the line.
Be Selective About Deals
Given the size of the transactions and the amount of planning each deal requires, commercial real estate agents have fewer transactions than residential real estate agents. That means you’ll need to spend more time on a smaller number of large deals that can pay off significantly more than numerous small deals. The small number of deals means you need to be selective about what you decide to undertake. Vet your clients as much as possible before signing any paperwork and address their expectations for the deal early on to ensure everyone’s on the same page.
Continue Training & Gaining Experience
Continuing Education is likely required to maintain your real estate license. On top of Continuing Education, commercial real estate agents should also become Certified Commercial Investment Members (CCIM). According to NAR, a CCIM is a recognized expert in the commercial and investment real estate industry. The designation process ensures that CCIMs are proficient not only in the theory of commercial real estate but also in its practice. Having such a distinction can further boost your reputation as you expand your knowledge base, which can lead to an increase in your commercial real estate salary.