Lesson 01 · 14 min read
Leasing as a Business
How commercial leasing works, the roles of landlord and tenant representation, how leasing commissions are earned, and why leasing is a strong first path for a new agent.
Most new agents picture a career built on sales. Much of the work a newer agent can realistically win is leasing. A contractor outgrows a bay, a strip center owner has a dark suite (a vacant space), a landlord needs someone to run the process. This lesson shows who sits on each side and how you get paid.
Leasing is also a relationship business. Terms of three to ten years mean each tenant's decision comes around again, so one relationship can produce a placement, a renewal, an expansion and later a purchase. Industrial and retail get equal weight here. Office appears only where the lease structure differs.
For finding tenants and owners, see Course 23. For reading a NNN (triple net) lease from the investor side, see Course 13.
Why leasing is a strong first path
| Advantage | What it means for you |
|---|---|
| More chances to transact | Every multi-tenant building has several leases on different clocks, so something is always nearing renewal or vacancy |
| Shorter cycles than most sales | Small deals are commonly described as taking weeks to a few months. Build-out-heavy deals take longer |
| Relationships that feed sales | The people you serve in a lease are the people who later list, buy or sell |
The limits are real. A lease commission is usually smaller than a sale commission, and payment often comes at signing or occupancy, months after your first call.
How leasing and sales connect
- Tenant today, buyer tomorrow. A tenant that outgrows 6,000 SF may look at a warehouse condo. Course 7, Lesson 2 covers the lease-versus-own math when that conversation starts.
- Landlord today, seller tomorrow. A landlord you help lease up a bay may ask what the building is worth, and investors buy leasing history. Course 22 covers listings.
The parties and who pays whom
A landlord rep (the listing broker for lease) represents the owner of the space. A tenant rep represents the business that wants to occupy it.
| Party | Role | Who pays whom |
|---|---|---|
| Landlord | Owns the space and grants the lease | Usually pays the listing broker, and often the tenant's broker through a split (a market practice that varies) |
| Tenant | Occupies the space | Pays base rent and NNN charges to the landlord, and its own attorney |
| Landlord rep | Markets the space and negotiates for the owner | Paid by the landlord under a written listing agreement |
| Tenant rep | Finds and negotiates space for the tenant | Usually paid by the landlord's side. The agreement should say what happens if it is not |
| Attorneys | Draft and review the lease | Paid by their own client |
| Lenders | The landlord's lender may ask the tenant to sign an estoppel certificate (a tenant statement confirming the lease terms) and an SNDA (subordination, non-disturbance and attornment agreement) | No commission role. The landlord repays the loan |
Base rent is the rent before other charges. NNN charges are the tenant's share of property taxes, insurance and common area maintenance (CAM, the upkeep of shared areas like parking lots). Base rent is never the whole cost of occupancy.
Landlord rep versus tenant rep
| Item | Landlord rep | Tenant rep |
|---|---|---|
| Client | The owner | The business |
| Goal | Lease the space at the best terms the market supports | Find space that fits the operation at the lowest total cost |
| Core duties | Price the space, market it, screen tenants, respond to proposals | Define needs, survey the market, tour, compare proposals, negotiate |
| How paid | Commission from the landlord under the listing agreement | Share of that commission, or a fee agreed in the tenant agreement |
| Work product | Listing package, tour schedule, proposal responses, lease handoff | Requirements sheet, market survey, proposal comparison, letter of intent (LOI) |
| Industrial day | Showing a small-bay flex suite to a contractor who also needs yard space, called industrial outdoor storage (IOS) | Checking a warehouse tenant's power, dock doors and expansion rights, such as a right of first refusal (ROFR) on the next suite |
| Retail day | Pricing an inline strip bay and answering signage questions | Checking parking, visibility, exclusives (the landlord's promise not to lease nearby space to a competitor) and co-tenancy (rent relief if an anchor tenant leaves) for a restaurant |
How leasing commissions work
Commissions are not set by law. Everything here is a market practice that varies and is negotiable. Published ranges disagree (bands of 3% to 6% and 4% to 8% both circulate), and we know of no Central Florida survey. Your listing or tenant agreement sets the real numbers.
| Structure | How it works | Where you see it |
|---|---|---|
| Percentage of aggregate base rent | Rate x aggregate base rent, meaning the total base rent over the whole term | The most commonly described structure |
| Flat fee per SF | Rate x square feet | Sometimes industrial and larger retail |
| Declining schedule | Higher rate on early years, lower on later years | Longer terms |
| Renewal or expansion | Often quoted lower, commonly 1% to 3% of renewal-term rent | Both, if the agreement covers it |
Three details decide your pay:
- Split. Listing and tenant brokers often split 50/50, though 60/40 occurs. Your split with your own firm is separate.
- Timing. Part at signing and part at occupancy or rent commencement is commonly described.
- Base. State whether the rate applies to scheduled rent or to rent actually payable after free rent, also called rent abatement (months of base rent the tenant does not pay).
Worked arithmetic (assumptions, not MaxLife Commercial results)
Method used throughout the course: commission = rate x aggregate base rent, where aggregate base rent is each year's rent added together, rounded to the cent each year. Base rent only, no NNN charges. Lesson 5 runs these same two deals with concessions, and Lesson 7 covers protecting the fee.
Industrial: 25,000 SF, 5 years, $10.00/SF/yr NNN, 3% annual increases.
- Year 1: 25,000 x $10.00 = $250,000.00
- Years 2 to 5, each the prior year x 1.03: $257,500.00, $265,225.00, $273,181.75, $281,377.20
- Aggregate base rent: $1,327,283.95
Retail: 2,400 SF, 5 years, $28.00/SF/yr NNN, 3% annual increases.
- Year 1: 2,400 x $28.00 = $67,200.00
- Years 2 to 5, each the prior year x 1.03: $69,216.00, $71,292.48, $73,431.25, $75,634.19
- Aggregate base rent: $356,773.92
| Deal | Assumed rate | Total commission | Each broker at 50/50 |
|---|---|---|---|
| Industrial | 4% | $53,091.36 | $26,545.68 |
| Industrial | 5% | $66,364.20 | $33,182.10 |
| Industrial | 6% | $79,637.04 | $39,818.52 |
| Retail | 4% | $14,270.96 | $7,135.48 |
| Retail | 5% | $17,838.70 | $8,919.35 |
| Retail | 6% | $21,406.44 | $10,703.22 |
Every later lesson uses the 5% rows for these two deals.
Now test the base. Lesson 5 gives the industrial deal 3 months of free rent and the retail deal 2 months, taken at the year 1 monthly rent because free months come first. Here is a 5% rate on rent actually payable:
| Deal | Free rent | Rent payable | 5% commission | Change |
|---|---|---|---|---|
| Industrial | 3 x ($250,000 / 12) = $62,500.00 | $1,264,783.95 | $63,239.20 | Down $3,125.00 |
| Retail | 2 x ($67,200 / 12) = $11,200.00 | $345,573.92 | $17,278.70 | Down $560.00 |
The rates, split and free months are invented. Use your own agreement's terms.
Florida's Commercial Real Estate Leasing Commission Lien Act (F.S. 475.800 to 475.813) can secure a leasing commission, but only with a written brokerage agreement and a statutory owner disclosure. Lesson 7 covers the mechanics.
What to say when a tenant asks what you cost
(a) Situation: a prospect asks whether a tenant rep costs extra "Good question. In many commercial leases the landlord's side pays the commission and shares it with the tenant's broker, but that is a market practice, not a rule. I put our arrangement in writing before we tour, including what happens if the landlord does not pay the full amount. Can I send you the agreement Wednesday and go over it Friday at 2 p.m.?"
Representation and conflicts
A single agent represents one party as a fiduciary. A transaction broker provides limited representation and is not a fiduciary. Florida presumes you are a transaction broker unless you establish a single-agent relationship, or no relationship, in writing. A dual agent acts as a fiduciary for both sides, and Florida bans it. The written relationship notices used in sales do not apply to leases, but we know of no rule or court decision saying the dual-agency ban lifts for a lease, so treat it as applying.
Your options when both sides call you: represent one side only, act as transaction broker for both sides with the written relationship in place, or use designated associates when the statutory asset test is met. Lesson 7 has the statutes, plus the rest of Florida's leasing rules: chapter 83 Part I, the signed-writing rule and the end of sales tax on commercial rent.
Education, not legal advice. Confirm legal points with your broker of record and a Florida attorney.
Confidentiality of each side's position
Answer factual questions about the space for anyone. Never tell a landlord the tenant's budget ceiling, deadline or lack of alternatives. Never tell a tenant the landlord's cash needs, lender pressure or lowest acceptable rent.
(b) Situation: an unrepresented tenant calls on your listing's sign "Thanks for calling about the bay on [Street]. I should tell you up front that I represent the landlord, so I cannot advise you on what to offer. I can answer factual questions and send the specs today. If you want someone on your side, you can hire a tenant rep and I will work with them. Can I call you Thursday at 10 a.m. to see which way you want to go?"
Call your broker of record when asked to represent both sides, when a commission is disputed, or when you hold an interest in the property. Do not decide those on your own.
Lease types and quoting conventions
Rents are usually quoted in dollars per SF per year, so divide by 12 for a monthly figure. Confirm the unit, and whether the square footage is rentable (RSF, including a share of shared areas) or usable. The label never controls: the lease language does. See the lease types guide and Course 13, Lesson 1 for the spectrum.
| Structure | What the quote means | Industrial quote | Retail quote |
|---|---|---|---|
| NNN | Base rent plus the tenant's share of NNN charges | "$10.00 NNN" per SF per year. Common for warehouse space | "$28.00 NNN" per SF per year, with the NNN estimate shown separately and marked as an estimate |
| Modified gross | Costs are shared, often with a base year where the tenant pays increases above it | Sometimes older multi-tenant suites. See modified gross | Occasionally a strip bay |
| Gross or full service | One number covers rent and operating costs | Some multi-tenant suites are quoted gross, so ask what is included | Uncommon. Ask what is included |
| Absolute NNN | Tenant carries nearly everything, sometimes roof and structure | Single-tenant buildings, if the lease says so. See absolute NNN | Common for single-tenant pads |
Full service gross appears most often in office.
Illustrative conversion: $10.00 x 25,000 SF = $250,000 a year, or $20,833.33 a month. Retail: $28.00 x 2,400 SF = $67,200 a year, or $5,600 a month.
Your first year: career path and income math
- Learn the two space types (Lesson 2).
- Pick a farm, a defined group of properties or owners you work repeatedly (Course 23, Lesson 2).
- Start with small-bay flex suites and inline retail bays, then add landlord rep listings and larger deals.
Income math (assumptions, not MaxLife Commercial results). Take the 2,400 SF retail deal at 5%. Your firm's side is half of $17,838.70, or $8,919.35, and you receive an assumed 50% of that: $4,459.68 (rounded). Six such deals: 6 x $4,459.68 = $26,758.08 before expenses. Add one 25,000 SF industrial deal at 5%: your firm's side is $33,182.10 and your 50% is $16,591.05. Total: $26,758.08 + $16,591.05 = $43,349.13.
The 5%, the 50% and the deal count are invented. The industrial deal paid about 3.7 times one retail deal ($16,591.05 / $4,459.68), so expect lumpy income.
How this course is organized
Lesson 1 is this one. The rest:
- Lesson 2, Industrial and Retail Space Basics for Leasing Agents: specs and measurement
- Lesson 3, The Tenant Rep Process: intake to signed lease
- Lesson 4, The Landlord Rep Process: pricing, marketing, screening
- Lesson 5, Deal Economics and Comparing Proposals: net effective rent and the tenant improvement (TI) allowance, the landlord's build-out contribution
- Lesson 6, The LOI and Lease Negotiation: lease letters of intent (LOI) and negotiation
- Lesson 7, Florida Leasing Law, Commissions, and Closing the Deal: statutes, liens, closing
How it fits with related courses:
- Course 13 (Lesson 2) reads the NNN lease as a buyer. Here the same clauses are negotiating points.
- Course 17 (Lesson 5, Lesson 6) covers small-bay flex and IOS as investments.
- Course 12 (Lesson 2) covers sale LOIs and negotiation mindset. Lease LOIs are Lesson 6 here.
- Course 23 feeds you tenants and owners. Its weekly plan checklist keeps you calling.
A worked example (illustrative rookie, invented tenant)
Dana, a newer agent, gets her first tenant rep assignment from Palmetto Trade Supply, an invented contractor supplier that needs 6,000 SF of small-bay flex in Seminole County. Small-bay flex is multi-tenant industrial with suites of a few thousand SF combining warehouse and office. The tenant needs 18 feet of clear height (usable height to the lowest obstruction), one dock-high door (raised to trailer-bed height) and two grade-level doors.
Her path, taught in Lessons 2 through 6: a written tenant agreement before touring, a building survey and shortlist tours, proposals compared on net effective rent, an LOI, then attorneys.
Assumptions (invented): $12.00/SF/yr NNN, 3% increases, 5 years, a 5% total commission on scheduled rent, a 50/50 split, and Dana receives 50% of her firm's side.
- Year 1: 6,000 x $12.00 = $72,000.00
- Years 2 to 5, each the prior year x 1.03: $74,160.00, $76,384.80, $78,676.34, $81,036.63
- Aggregate base rent (each year rounded to the cent): $382,257.77
Total commission: $382,257.77 x 5% = $19,112.89. Half is about $9,556.44 to Dana's firm, and her 50% is $4,778.22.
A first deal this size pays modestly, but Dana also gains a documented placement and contacts who may need her again.
Key takeaways
- Leasing gives a new agent more, faster transactions and relationships that later produce listings and sales
- A landlord rep works for the owner and a tenant rep works for the business, so keep each side's position private
- Commissions are negotiated, not set by law, and usually run as a percentage of aggregate base rent with a split
- Define in writing whether commission is figured on scheduled rent or rent actually payable after free rent
- Florida presumes transaction broker status, bars dual agency, and exempts leases from the disclosure notices
- Quote rent per SF per year, confirm the unit and structure, and remember base rent is not total cost
- Bring conflicts and any two-sided request to your broker of record
Next: Lesson 2 covers the industrial and retail space you will be leasing, how to measure it and how to qualify it on the first call.