Commercial Real Estate Pay Explained

Most people get into commercial real estate to make money, but the way people get paid in this business isn’t all that straightforward.

And even though the income potential is extremely high in this industry, there are certain paths you can take that make a high income a lot more likely, while others can make this a lot more difficult.

So in this post, we’ll talk through how pay structures actually work in commercial real estate, how these differ in different parts of the business, and what to expect when you’re first getting started.

Watch the Full Video Here:

Principal Side Pay Structures

To start with roles on the principal side of the industry at real estate investment and/or development firms, when you first start out at the analyst or associate level, pay is typically made up of a base salary and a discretionary bonus.

At these levels, bonus targets usually come in somewhere between about 15% and 30% of base pay, with how closely you work on revenue-generating activities having the biggest impact on where you fall within this range.

This means that acquisitions or capital raising roles (where you’re working closely to get deals funded and closed) will usually have the highest bonus percentages in the industry, while jobs in asset management or portfolio management (where you’re primarily working on company operations) will usually have the lowest bonus percentages in the industry.

And unlike a salary (which is essentially guaranteed pay), bonus pay can be extremely variable, and this tends to be highly dependent on the performance of your team and the company as a whole.

Bonuses in commercial real estate are usually paid out somewhere between January and March each year, so you’ll typically need to stick around until at least after the holidays if you want this. And because this timeline is so common among companies in this industry, this also affects recruiting timelines throughout commercial real estate.

People will almost always wait to get their bonus before taking a different job and leaving their current company, and because of this, the most active months of hiring in this business tend to be in the winter and early spring. This is also a time when people tend to get promoted into more senior-level roles, which creates even more openings at the analyst and associate levels.

Pay Structures Change Over Time

The next thing to know about pay going into this industry is that, as you progress throughout your career, bonuses and other forms of income become a much bigger portion of your all-in compensation.

When you move up to the director or VP level in an acquisitions or capital markets role, this is where bonuses start to get significantly higher, often coming in somewhere between 50% and 100% (or more) of annual base salary.

This is also the level where other forms of compensation can start to come into play through participation in fees and promoted interest, which can really start to add up in years when transaction volume is high.

In asset management roles, senior leadership might be entitled to a portion of what are referred to as leasing override fees, which are usually calculated as a percentage of the total value of a new lease that’s signed in the portfolio.

In acquisitions roles, senior leadership will often be entitled to a portion of what are referred to as acquisition fees, which are usually calculated as a percentage of the total purchase price of a property they acquire.

For some roles, senior leadership will also receive a portion of promoted interest on deals they work on, which is a percentage of the profits over and above what they’ve invested, and this can often be the biggest portion of annual pay in later stages of your career.

This is also why jobs at the biggest firms (doing the biggest deals) tend to be some of the most sought-after roles in commercial real estate, since the bigger the deals you work on, the bigger those fees and promoted interest amounts are going to be.

What Pay Might Look Like

If an acquisitions director buys $200 million of real estate in one year and the company charges a 1.5% acquisition fee, that’s $3 million of acquisition fees in total. And if that acquisitions director receives just 5% of that, that’s an additional $150,000 added to their paycheck.

And if in that same year, the company sells a handful of properties and earns $10 million of promoted interest, if that same acquisitions director is entitled to 5% of that, that’s an additional $500,000 added to their paycheck.

If you layer these numbers on top of something like a $250,000 base salary and a 100% bonus target, this person would be taking home an all-in pay package of $1.15 million. And while this wouldn’t be the case in every single year, something like this isn’t unrealistic at all for more senior-level positions at high-volume shops.

Vesting Periods (Golden Handcuffs)

While this sounds great in theory, one of the most important things to think about related to promoted interest is that this often takes a number of years to vest. And if you leave before a certain date, you may need to forfeit this.

Most vesting periods I’ve seen in this industry last somewhere between about 4 and 6 years, and this can feel like a very long time in your 20s and 30s, especially if you’re in a work environment that doesn’t feel sustainable.

I’ve personally had opportunities where I’ve said no to structures like these, for the sole reason that I knew I wouldn’t stick around long enough for these to pay out. And with how high these promoted interest amounts can end up being, this can make it really hard to leave a company for a better opportunity or to start your own firm in the future.

Brokerage Pay Structures

With the caveat that brokerage firms will all pay a little bit differently, for people starting in investment sales or capital markets analyst roles at companies like CBRE, JLL, Eastdil, or Newmark in a major city, salaries are often lower than what you’d see on the principal side of the business. However, bonus targets are often significantly higher, usually somewhere between 50% and 100% of base pay (depending on production volume).

This can vary a lot based on the number of deals you personally work on and how much experience you have in the industry, and this tends to be made up of a small percentage of the commissions your team earns.

For more senior-level roles in brokerage, this is where you typically move into a 100% commission-based job, where you’re entirely responsible for generating new business. But again, if you’re working on bigger deals with equally high commissions, top-tier brokers can make a lot of money.

At big-name shops like the ones mentioned above, brokers will often take a deal to market as part of a team, with anywhere from about 2 to 4 individuals working to get that property sold.

And if a 3-person team sells a $30 million deal with a $600,000 commission, even if 50% of that goes directly to the company and support staff, this still leaves $100,000 of commissions for each team member involved with the transaction.

For someone doing 10-15 deals like this per year, an income in the low seven figures is very realistic. And while this isn’t necessarily easy to do, this is very possible in this part of the business.

How To Break Into Commercial Real Estate

If you’re trying to break into commercial real estate and want to make sure you have the skills you’ll need to land the most competitive (and highest-paying) jobs in this industry, make sure to check out our all-in-one membership training platform, Break Into CRE Academy.

A membership to the Academy will give you instant access to over 120 hours of video training on real estate financial modeling and analysis, you’ll get access to hundreds of practice Excel interview exam questions, sample acquisition case studies, and you’ll also get access to the Break Into CRE Analyst Certification Exam, which covers topics like real estate pro forma and development modeling, commercial real estate lease modeling, equity waterfall modeling, and many other real estate financial analysis concepts that will help you prove to employers that you have what it takes to tackle the responsibilities of an analyst or associate at a top real estate firm.