The Elephant in the Room: Who Does the Broker Really Work For?
Commission, representation and the value a commercial-property broker creates for both sides of a transaction.
There is a long-standing misconception in commercial property: “The broker works for the landlord because the landlord pays the commission.”
The reality is more nuanced. The party paying the commission does not, on its own, define the full advisory role of the broker. In many South African transactions the broker is facilitating a deal between landlord and tenant, or seller and purchaser, while the precise duties and representation should be clear from the mandate and disclosures.
Where the broker creates value
A large part of the broker’s day-to-day value is often delivered directly to the tenant or purchaser, including:
- analysing rentals and escalations
- identifying hidden or additional occupancy costs
- negotiating tenant-installation allowances and fit-out terms
- comparing buildings and alternative options
- challenging assumptions that could lead to overpayment
- coordinating information so both sides can make informed decisions
Digital tools such as AugI can make this analysis faster and more transparent, but they do not remove the need for judgement, negotiation and clear disclosure.
Why the confusion persists
In South Africa, the landlord has traditionally paid the broker’s commission. At the same time, tenants frequently expect the broker to advise them on rental structures, escalation risk, incentives, total occupancy cost and property comparisons. That can create the perception of a conflict if the broker’s role has not been explained clearly at the outset.
How other markets often handle representation
South Africa’s practical reality
The prevailing model is still straightforward: the landlord generally pays the standard commission, the tenant expects meaningful service, and the broker has to keep the transaction commercially workable for both parties. Commission may also be negotiated, particularly on larger or more complex transactions.
It is also worth separating commission from rental economics. A vacancy can carry substantial holding costs for a landlord, so a successful transaction can create value well beyond the commission paid to conclude it.
A balanced approach
- The landlord pays the normal brokerage commission where that is the agreed market structure.
- The tenant or purchaser can separately appoint and pay for deeper advisory work when they require an expanded tenant-representation or acquisition mandate.
- All parties understand who the broker represents, what services are included and how the broker is remunerated.
The direction of travel: clearer and more transparent
Technology is making property comparisons, costs and deal structures easier to interrogate. As that transparency improves, it becomes increasingly important that the broker’s role and remuneration are equally clear. The objective is not to shift the burden from one party to another; it is to recognise where value is created and to remove avoidable ambiguity from the transaction.
Not confrontational. Not revolutionary. Just clearer.