Frequently Asked Questions
Welcome to our FAQ page. Explore the answers to our most commonly asked questions below or Contact Us with any additional questions.
Landlord Commission Costs
Commission Rates are driven by market forces. The current custom for the I-680 portion of the East Bay is for Landlords to pay 150% of standard commission schedules when there is a procuring agent. Beginning in 2001, office landlord’s in our market started paying procuring agents a full fee. Agents did not complain and it became the custom. Additionally, landlords eager to fill vacancy will offer other leasing incentives like bonuses.
Note: Before signing the listing agreement we will discuss and document market conditions, rental terms and concessions.
Our team charges commission based on the two schedules below:
| LANDLORD TEAM WITH PROCURING AGENT | LANDLORD TEAM WITHOUT PROCURING AGENT | |
| 7.5% of the rent for the first 12 months | 6% of the rent for the first 12 months | |
| 7.5% of the rent for the second 12 months | 6% of the rent for the second 12 months | |
| 7.5% of the rent for the third 12 months | 6% of the rent for the third 12 months | |
| 7.5% of the rent for the fourth 12 months | 4% of the rent for the fourth 12 months | |
| 7.5% of the rent for the fifth 12 months | 4% of the rent for the fifth 12 months | |
| 5% of the rent for the next 60 months | 3% of the rent for the next 60 months | |
| 3% of the rent for the balance of the term | 2% of the rent for the balance of the term |
In our market commissions are paid as a percentage of the total gross base rent. In Oakland they are paid on a per square foot basis. A sample calculation is below.
Commission without procuring agent.
5-Year Table Year Annual Gross Rent Listing Fee Commission Amount
1 $200,000 6% $12,000.00
2 $225,000 6% $13,500.00
3 $250,000 6% $15,000.00
4 $275,000 4% $11,000.00
5 $300,000 4% $12,000.00
Total $63,500.00
The listing agreement will clearly state when fees are paid. Our standard agreement states that 1/2 is due upon lease execution and 1/2 upon occupancy. This will also be detailed in the letter of intent. Sometimes we encourage landlords to pay 100% of the commission upon lease execution as an incentive to the procuring agents.
Based on the market schedule below for years 1-5 procuring agents receives a 5% commission and the listing agent receives a 2.5% commission. For years 6-10 that schedule is reduced. A typical division of commission costs are as follows:
| Years | Total With Procuring Agent | Listing Agent | Procuring Agent | ||
| 1 | 7.5% | 2.5% | 5% | ||
| 2 | 7.5% | 2.5% | 5% | ||
| 3 | 7.5% | 2.5% | 5% | ||
| 4 | 7.5% | 2.5% | 5% | ||
| 5 | 7.5% | 2.5% | 5% | ||
| 6 | 5% | 2.5% | 2.5% | ||
| 7 | 5% | 2.5% | 2.5% | ||
| 8 | 5% | 2.5% | 2.5% | ||
| 9 | 5% | 2.5% | 2.5% | ||
| 10 | 5% | 2.5% | 2.5% |
The listing agent is the Landlord’s representative. The procuring agent is the Tenant’s representative. They can be from the same brokerage company. While that is considered a dual agency, the market custom still recognizes the procuring agent for the larger fee. Due to agency disclosure, all representation positions are required to be disclosed.
Years Without Procuring Agent
1 6%
2 6%
3 6%
4 4%
5 4%
6 3%
7 3%
8 3%
9 3%
10 3%
| 5 Year Table | |||
| Year | Annual Gross Rent | Listing Fee | Commission Amount |
| 1 | $200,000 | 7.5% | $15,000.00 |
| 2 | $225,000 | 7.5% | $16,875.00 |
| 3 | $250,000 | 7.5% | $18,750.00 |
| 4 | $275,000 | 7.5% | $20,625.00 |
| 5 | $300,000 | 7.5% | $22,500.00 |
| Total | $93,750.00 |
Leasing Basics
By having a concise real estate brief and carefully selecting the right properties on a shortlist you can create a competitive environment whereby the best rent can be achieved. Our Colliers International consultants can assist throughout this process.
The amount of space required will vary depending on the nature of the business and the ‘efficiency’ of the space you end up selecting. As a rule of thumb general office uses require roughly between 150ft² and 200ft² of space per employee. Please see our Space Needs Calculator.
Our Clients are in the driver’s seat throughout the entire process. The Colliers International consultant presents appropriate options and save the time and inconvenience of inspecting unsuitable options and dealing with multiple agents, architects and consultants. Our clients still create the shortlist and make the decisions.
If you choose to work with a Colliers International consultant as your preferred agent, the exclusive agreement ensures we receive a fee from the building owner (regardless of who the owner or leasing agent is). We are obligated to negotiate with ALL owners and agents in the market to find the most suitable accommodation for your business.
GROSS RENT is the rent calculated inclusive of all building operating costs. The tenant usually pays the increases in operating costs over a base year.
NET RENT is the rent calculated exclusive of building operating costs. Under a net lease operating costs are still payable but paid by the tenant separately to the net rent. tenant separately to the net rent.
FACE RENT the rent calculated before taking into account incentives or increases. This rent is stated in the lease.
EFFECTIVE RENT is the rent calculated across the full term of the lease after taking into account the effect of an incentive.
Most commercial leases allow the Tenant to sublease or assign their premises. Typically, the landlord may not unreasonably withhold consent to the sublease/assignment. A prudent landlord however will consider the strength of covenant being offered by the incoming tenant and will be reluctant to accept a sublease/ assignment where their financial position and/or security will be reduced as a result of the sublease/assignment.
Tenants are responsible for a proportion of any increases in the total operating expenses relative to the year or the part thereof. The proportion will be calculated in accordance with the Tenant’s pro rata share or percentage of the building as specified in the lease. Operating expenses are defined in the lease and vary from building to building. The base year is the nominated year stated in the lease. Base rent increases are defined in a clause in the lease.
Throughout the term of the lease Base Rent will increase annually by a CPI, percentage, or fixed increases. Depending on the market and building owner. Base Rent may remain at during periods of the lease. A ratchet clause ensures that the rental can be no less than the previous year’s rental. Ratchet clauses are seen in options to renew and are rarely agreed to in oversupply markets. Landlord’s rarely agree to fixed option rents but will agree to a Fair Market Value process along with Base Year changes upon renewals.
During a lease negotiation, leasing proposals are used as a format to determine terms and conditions acceptable to both Landlord and Tenant. This will lead to a ‘Letter of Intent’ document, outlining the final position of both parties. At this stage, both the Tenant and Landlord are not usually legally bound to commit to the premises (unless otherwise stipulated in the documentation to date) however, the Letter of Intent document provides a framework by which the Landlord instructs legal council to prepare formal lease documentation. The signing of the formal lease document legally binds the Tenant to the lease. This is accompanied by the provision of consideration (typically by way of a bank guarantee). The signing of the lease document by the Landlord will typically bind the Landlord to the lease unless otherwise agreed or stipulated.
Most Common Mistakes
Though there are high vacancy rates in most major cities, there are sectors of every market that are very tight. If a client requires something very particular, we need to allow plenty of time and be prepared to be very flexible in how the deal is put together. In some cases, clients have to be prepared to take on the risk of subleasing their own space or extend the current location to wait for a tenant to vacate that perfect location. A good property consultant will know what is becoming available and when – well before it hits the market.
Firms are not in business to shrink. Most tenants expect their business to grow over the next five to seven years (equating to the approximate length of your lease). It is important to sufficiently forecast how a clients’ business is likely to change over the full duration of lease or fit-out. Flexible lease terms and a realistic space budget will give clients the latitude to expand.
No two office buildings are the same. It is not possible to know how a particular option will accommodate a business until a “test–fit” is conducted. If one premise can accommodate more staff than another in an equivalent amount of space, then the total rental cost is lowered. We do not know how the options compare until we get a professional space planning perspective for both premises. At the minimum try our Space Needs Calculator.
Tenants often invest a considerable amount of time and effort going through the process of selecting a suitable accommodation option. Once the decision is made, it is imperative to “lock it away” quickly. Landlords often continue to seek tenants for the space until a lease is signed and a guarantee secured.
Restoration means returning the premises to its original condition. This can take considerable time and is often or overlooked by tenants. Missing this deadline could cost a premium post-expiration rent while contractors complete your restoration obligations.
Cloud computing and other workplace trends are revolutionizing the way people work and the space required to set up an office. We recommend beginning to tour premises once our clients have assessed their space requirements with the assistance of a consulting architect or designer. Having the right fit ensures clients that they are looking for the right amount of space. Try our Space Needs Calculator.
A single point of contact will ensure the right message gets out to the market and save time for all involved. Input from Finance, HR and IT departments, plus the advice of lawyers, architects and project managers are required. We advise our clients to appoint someone in their organization to take control of this process. Ideally, this individual is not only well organized and a good communicator but has authority to sign off on major project stages.
Too often, business accommodation decisions are made based on bottom line costs. Occupancy costs are typically a distant number two to the costs associated with attracting and retaining good staff as property costs are. If a firm lost 10% of its staff in a move, how much would it cost the business to rehire and train? Does the property pro- le and improvements send the right message to clients?
It is imperative that companies understand their company’s real estate needs, not just today but for the next few years. No doubt, managers expect their businesses to evolve over this period. We ensure that our clients’ long term real estate needs are considered at the same time as their immediate needs.
By failing to plan well in advance, you can find yourself in a poor negotiating position. The shorter the lead time, the fewer the options with which to leverage negotiation. We advise clients to have three to four suitable options on their shortlist, well ahead of their lease expiration date.
Brokerage Basics
Similar to an attorney when faced with legal matters, we represent our clients’ non-legal business interests when leasing or purchasing office space. The value we bring is the experience from hundreds of transactions and our relationships in the market.
We represent parties in leasing or selling commercial office buildings. We are not just space finders. A brief overview of the leasing process includes initial renewal/relocation evaluation, a thorough market analysis and tour, access to proprietary market data, financial analysis and comparison, and expert negotiation. We are happy to explain our process in detail and how it benefits our clients.
Tenants are not billed for our services. Customarily local real estate fees are paid by the Landlord upon lease execution. The fees are budgeted in the transaction.
Leases are simply operating agreements and when our job is done right both parties have the peace of mind that they made a market deal. There is no reason to over pay because the parties have a good relationship. We make a strong effort to preserve good tenant/landlord relations.
Absolutely not. One of our key value offerings is our relationships with landlords. Some “Tenant Representative Only” agents seem more interested in their fees and making a point of creating conflict in order to justify their position.
The representation agreement requires us to show our clients everything available in the market and provide the services outlined in the agreement. A letter of appointment is all the commitment we need to work exclusively as an advisor. In our experience tenants who do not retain representation or who engage multiple agents as “space finders” end up paying too much, receive poor attention, and do not get the terms they want.
The similarities stop with the minimum State license to practice real estate in California. We provide attention to detail and good will in every relationship. Our team is active in professional organizations such as The Society of Industrial and Office Realtors, or SIOR, and Certified Commercial Investment Members, or CCIM. We are always training to add new skills to improve our services.
Need More Information Regarding Office Leasing?
Download our Office Leasing Guide Here.