Landlords Should Adjust Lease Agent Commissions to Bolster Incentives for Lease Renewals

ST. PETERSBURG - Landlords who pay substantially lower commissions for lease renewals than for new leases haven’t kept up with the commercial real estate market and that mistake could be costing them millions of dollars in operating revenues and portfolio values, says one real estate expert.

Rachel Elias Wein AIA (top right photo), who heads WeinPlus Real Estate Advisory Services in St. Petersburg, said antiquated lease commission structures worked well when businesses were expanding and new retailers were flooding the Florida market.

But that’s no longer the case, Wein said.

“Today, all things being equal, it costs much more to recruit and sign a new tenant than it does to renew an existing tenant,” Wein said. “Leasing agents are usually compensated significantly less for renewals than for new leases, and that has the effect of disincentivizing lease renewals,” she said.

“Typical lease commission structures are based on a high-growth market,” Wein said. “In a low-growth or no-growth cycle, existing tenants constitute a valuable asset.

"Vacancies reduce operating revenues, substantially impact the value of a portfolio, and significantly reduce the market appeal and retail sales of existing tenants as well,” Wein said.

Wein said most office and retail tenants today report they have been recruited by competing facilities.

“Competition that was focused on new tenants in a high-growth cycle is taking aim at existing tenants and landlords must adjust their strategies accordingly,” she said.

For more information, contact:  

Rachel Elias Wein, AIA, Founder / Principal, WeinPlus, 727-403-1595, http://www.weinplusassociates.com/; 

Larry Vershel or Beth Payan, Larry Vershel Communications 407-644-4142, lvershelco@aol.com