The city’s largest office building landlord SL Green Realty is holding firm on 50 percent renewal commissions in office leases despite a downturn in the economy and competition from other large property owners who are paying full commissions.
The real estate investment trust headquartered in Midtown pays a 50 percent commission on renewals, a consistent fee the company has paid for a decade, the company said in a statement released to The Real Deal.
“We welcome the participation of brokers and have had a consistent decade-long policy during both strong and weak market conditions to pay a one-half commission on renewal transactions,” the statement said.
Several leasing brokers said they were chafing under the policy.
Four brokers, who asked not to be identified because they did not want to hurt their relationship with the major landlord, told The Real Deal that the low commission could influence leasing transactions, encouraging brokers to take tenants to other landlord’s buildings.
“Why encourage them to advise tenants to go somewhere else?” one said.
SL Green said the savings on commissions helps lower rents for tenants. “This policy is consistent with what landlords typically pay to third party agents to handle building leasing,” the statement said. “Additionally, the lower capital cost allows us to provide greater savings to our renewal tenants in the form of lower rents.”
Brokers said that many large firms such as Vornado Realty Trust and the Durst Organization pay full commission on renewals.
Vornado declined to comment. A Durst spokesperson said in general it pays full commission and a Moinian Group spokesperson said it pays full commission.
Barry Hersh, clinical associate professor at the Schack Institute of Real Estate at New York University, said companies often pay half a commission in renewals. But during hard times landlords often use incentives to attract brokers, who can be swayed by commissions.
“SL Green is making the calculation that they have a strong enough relationship with the tenant, that even though the broker may make an effort to steer [the tenant] to another place, they will come out ahead. Whether they are right or not, who knows,” Hersh said.