There are multiple entry points to the real estate industry. Most people choose to work in residential real estate, but this isn’t always the most lucrative approach. If you live in a small town and you aren’t a luxury real estate agent, you’re not likely to amass a lavish salary.
Commercial real estate offers more room for opportunity. There’s generally less competition in the field, as well as a greater potential for ongoing work with businesses that establish themselves in your area.
Here’s what you need to know about the average commercial real estate agent salary, as well as how to maximize your earning potential.
What Job Titles Exist in the Commercial Real Estate Industry?
Many people who become commercial real estate agents will remain commercial real estate agents. Some choose to increase their earning potential by becoming a broker. Other people may enter the industry through a different path, and they will often work with commercial real estate agents to facilitate deals or developments.
In your time as an agent, you will likely run into these fields:
- Commercial Real Estate Broker – a commercial real estate agent who operates completely independently or runs a brokerage where they oversee other commercial real estate agents
- Commercial Real Estate Development – purchasing land and working with companies to develop commercial properties
- Commercial Real Estate Investment – people who purchase or invest in commercial properties to modify, resell, or rent those properties
- Commercial Real Estate Management – people who oversee properties or assets for commercial real estate clients
Each job title comes with a unique set of responsibilities and a separate salary. People in all positions benefit from basic commercial real estate knowledge, as it improves their ability to be the best at their job.
How Do Commercial Real Estate Agents Make Money?
Commercial real estate agents make money on the unique negotiated commission of the sale of a property or on the specifications of a lease. Rather than making an hourly wage or a weekly salary, commercial real estate agents are paid at the conclusion of a deal.
Commercial real estate deals can take most of a calendar year to finalize. Most commercial real estate agents maintain several deals at once, all of which will inevitably close on different days. Since income isn’t regular or predictable, commercial real estate agents keep themselves busy and use carefully-crafted budgets to make their income last throughout the year.
How Is a Commercial Real Estate Agent’s Commission Split?
Unless a commercial real estate agent is an independent broker who completes a deal without the involvement of another real estate agent, they won’t take home the entirety of that commission. Many people get a piece of the sale of a property.
The Average Commission Rate
To begin, it’s critical to note that commissions are based on negotiations and, as such, can never be fully predicted. When looking at trends, the average commission rate is anywhere between 5% and 8% of the total sale price of a property. The national average is about 6% commission. This can and will vary from deal to deal.
When a multimillion-dollar property is sold, the commission percentage is likely to be lower. This is because 3% of $5,000,000 is $150,0000, and obviously, that’s a lot of money. Clients dealing with properties valued so high will often seek reduced commission to reflect that math. This is part of the art of negotiating.
Ultimately, the commission will be used to satisfy the salaries of several people who played a role in facilitating the deal.
Lease Commission
Commercial real estate agents often work with leases. Many businesses don’t purchase their properties outright. Instead, they’ll enter into a long-term lease of a property owned by someone else in the commercial real estate industry.
The value of a lease is calculated by multiplying the monthly payment on the lease by the number of months on a lease. If it’s $4,000 a month to rent a property and the lease is for 180 months, the total value of the lease is $720,000.
The agent is usually due a commission on the total amount of the lease when the lease is signed. The owner of the property is unlikely to provide the agent with the full amount as a lump sum. Instead, agents are usually given monthly payments throughout the duration of the lease. But again, each business deal can differ.
Splitting with Another Agent
In the event that a real estate agent represents both the buyer and the seller, the commission is unlikely to increase. Instead, it’s split between both parties.
This split is typically down the middle. So, if the hypothetical commission was 6%, both the buyer’s agent and the seller’s agent would receive 3% of the total sale price.
The Brokerage Split
If you aren’t a commercial real estate broker, you need to work for a brokerage. Sometimes, your share of the commission goes directly to your broker, and your broker pays you your piece. Brokerage splits can significantly differ. There is no standard amount.
Some brokers may require a 50/50 split of commissions. For this specific situation, the broker will get 1.5% of the sale price of the home, and the agent will get 1.5% of the sale price of the home. Other brokerages may be more generous, taking only a small portion of each sale.
What Is the Average Salary of a Commercial Real Estate Agent?
A commercial real estate agent’s commission might seem like too many people are taking a cut and the final check significantly whittles itself down. When you look at the breakdown, it might seem like a commercial real estate agent is left with nothing but scraps. Looks can be deceiving.
Since commercial real estate agents often deal in very high-value properties and usually face less competition in the market, many are able to fetch a substantial salary. Markets, skill level, and experience play a significant role in shaping a commercial real estate agent’s salary. Some agents may not make any money in a particular year, while other agents net a six-figure income.
The average salary for a commercial real estate agent is over $80,000 a year, which is more than a modest living. Some agencies report that the median salary of their agents is over $100,000 a year.
Is there any guarantee you’ll make the average salary or greater? No, there isn’t. Salary in real estate is performance and productivity-based. You’re always working to create a successful outcome for yourself and for your clients.
Your techniques, knowledge, skills, and market reach will ultimately determine your earning potential. The more you know, the better you’ll do.
Do Commercial Real Estate Agents Make More Money Than Residential Real Estate Agents?
The average salary for all real estate agents sits just north of $40,000 a year. Since the average salary for commercial real estate agents is significantly higher, it’s safe to assume that residential real estate agents are pulling down the average.
If salary is a significant motivator in your decision to pursue a career in the real estate industry, working in commercial real estate may be a better option for you. Your earning potential is significantly better.
Although lead generation is key to success in any area of real estate, it may be easier to build ongoing relationships with long-term clients who will need your services in the future.
How To Increase Your Salary as a Commercial Real Estate Agent
Your success heavily relies on your ability to find clients, create successful outcomes for those clients, and fortify your reputation in your community. Success doesn’t happen overnight, but every step you take to set yourself up for success will bring you closer to your goals.
Making connections, learning, and creating a tailored strategy for success will help you maximize your earning potential as a commercial real estate agent. If you establish a routine and implement the best practices, you’ll find that making strategic moves will become second nature.
Network with Other Professionals
People who have a need for commercial real estate often work with other professionals, like lawyers, bankers, accountants, major suppliers, and property management companies. You need to meet these people and make connections with them.
If you network with professionals who are likely to encounter someone who would be a perfect client for you, you can exchange business cards with these people and hope that they’ll toss your card to people who may benefit from your services.
You’ll increase the likelihood of developing functional professional relationships with these professionals if you also refer clients their way.
Listen To Podcasts and Learn
You’re going to be spending a lot of time in the car. Real estate agents frequently travel from location to location to meet buyers or sellers at properties, attend networking events, or have business lunches with potential clients. Why not make the most of that time by learning in the car?
The Tim & Julie Harris podcast covers a wide variety of real estate industry topics. There’s a wealth of valuable information for buying agents, selling agents, lead generation, listing properties, and even adopting the right mindset to succeed in the real estate industry.
All you need to do is play a podcast instead of listening to music in the car. You can learn while you’re on the go, and it won’t add any stress to your very busy schedule. It’s the easiest way to productively multitask.
Work with a Real Estate Coach
A real estate coach can help you identify your weaknesses and play to your strengths. Individualized attention from a professional coach can help you perform your best. Harris Real Estate University offers coaching to real estate agents in any area of specialty.
Our massive learning library can be accessed at your leisure, making it easy to learn at your own pace when you have the time. If you’re doing things right, you should be busy. That’s why our tools are flexible.
You can schedule a free coaching consultation call with one of our Harris certified coaches to learn how real estate coaching can help you maximize your earning potential and productivity. The sooner you start, the sooner you’ll see the results of your hard work.
Sources
Income Guide | Real Estate Express
Here’s How Much Real Estate Agents Earn In Every State | Forbes
How to Network with Powerful People | Harvard Business Review
How To Make a Personal Budget in 6 Easy Steps | The Balance
