In today’s commercial real estate thunderdome, at least two major brokerages have decided to attack that most sacrosanct of institutions: the broker commission.
First up is the venerable Cushman & Wakefield, which has made it more difficult for brokers to earn bonuses. Cushman encourages its brokers to close deals by tacking 5, 10 or 15 percent bonuses onto the normal 50-50 commission split (the commission from a deal is typically split evenly between broker and firm). That means that if a broker’s deal passes a certain dollar threshold, he gets to keep 55 percent of the commission. Pass another threshold, and he gets to keep 60 percent, and so on.
Cushman has recently made bonuses more difficult to attain by raising that dollar threshold. The changes don’t amount to a drastic decrease in broker earnings. If a broker grosses $1 million, maybe he’ll lose 15 grand. But still, as one broker pointed out, we’re talking about people “who would kill for a nickel.”
Cushman declined to comment on its new compensation practices.
Newmark Knight Frank was more forthcoming—perhaps because the changes it instituted are, from a business perspective, rather gallant.
The 10 equity partners at Newmark will give back a greater portion of their commissions to the firm, and Newmark’s top three partners—Barry Gosin, Jeff Gural and Jim Kuhn, who together own 75 percent of Newmark—will go unpaid in 2009.
That’s right. Unpaid.
“Ninety-eight percent of our brokers therefore are unaffected,” said Mr. Kuhn in an email. “We have virtually no debt and want to be able to take advantage of weakness in the market to expand and add top brokers. The partners, including Jeff, Barry and I, are building a war chest, to expand and keep all our employees.”
Meanwhile, a well-placed source at CB Richard Ellis confirmed that it is considering taking similar measures.
Needless to say, such measures will affect only brokers who are earning commissions. Those brokers are few and far between; so how much revenue this will produce for brokerages remains to be seen.