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GSA To Change Broker Commissions, Stop Incentivizing Deals That Achieve Below-Market Rents

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Holland & Knight Bob MacKichan PBS Commissioner Dan Mathews
Holland & Knight partner Bob MacKichan and PBS Commissioner Dan Mathews

The General Services Administration aims to work with top brokers to help handle its more than 20M SF of expiring leases, and it is now changing its commission structure to address concerns some brokers have had. 

The federal government's real estate arm issued a solicitation Wednesday for the next version of its leasing services contract, and it detailed the changes it aims to make to its agreements with brokers. 

The new contract, named GLS Plus, aims to improve upon the current GLS contract by better aligning broker performance with the GSA's cost savings goals. It plans to change the broker commission structure to remove the commission tied to achieving below-market rental rates and putting a greater focus on giving assignments to brokers who successfully achieve the specific project outcomes for individual deals, with a focus on high-value projects.

Colliers Executive Vice President of Government Solutions Kurt Stout said this change is important because the existing process has been unfair to brokers by expecting them to negotiate deals that are not possible in the market. He praised the GSA and Public Building Services Commissioner Dan Mathews for introducing a solution to that problem. 

"Each GSA lease procurement is a competitive process that, by definition, produces market rents," Stout wrote in an email to Bisnow. "Yet, GSA tied their brokers’ commissions to achieving rents determined by their internal estimates, which were inevitably lower. This disconnect created a lot of tension and, frankly, was unfair to GSA’s brokers who have little latitude to 'negotiate' anyway. The market is what the market is, and maybe this is a sign that GSA finally recognizes that fact."

The GSA estimates the new contract would be used for 33M SF of leases over the next five years and would produce commissions for its brokers totaling $368M. 

"We want a new contract to improve our capacity and attract the best talent for high-value projects," Mathews said in a release. "That is how we achieve cost savings for the taxpayer."