Understanding fees and commissions can be a complex aspect of commercial real estate transactions. This article clarifies the structure of tenant representation and associated costs in the Atlanta market.

The “Free” Service Myth

A common misconception is that tenant representation is a free service. While the tenant may not directly pay the broker’s fee, most costs associated with the lease transaction including the leasing commissions are rolled into the final negotiated terms when a lease agreement is finalized and paid back to the Landlord in the form of rent over the term of the lease, including both the Tenant and Landlord agent’s commission. Typically these fees are paid by the Landlord/Owner within 30-days of when a lease agreement is executed.

Transparency is Key

For a successful transaction, transparency is crucial. A reputable commercial real estate professional will clearly outline the scope of services offered, associated fees, payment methods, and who is responsible for those fees.

Commission Structure in Atlanta

In Atlanta’s office leasing market, tenant representatives typically propose a fee structure consisting of a pro-fee, often equal to the fist full month of rent, and a percentage of the total lease value (usually 4%). Landlord representatives usually receive a fee equal to half of the first month’s rent and a lower percentage of the lease value (usually 2%). These figures may vary slightly, but they represent the prevailing commission landscape.

Investing in Expertise

Engaging a tenant representative is an investment in expert guidance throughout the leasing process. This expertise benefits both the tenant and the landlord. It is worth pointing out that if a landlord’s agent secures a lease directly with an unrepresented tenant, they typically receive a higher fee (usually equal to the 1st month rent, plus 4% of the lease value). So under this scenario, the Landlord’s broker earns a larger fee to negotiate against you. The net cost of a tenant representative is just a half month rent, plus 2%. A good tenant representative’s services will often save you five times this amount or more in occupancy costs over the term of your lease.