RE Brokerages

I've looked around a bit in this forum and naturally 99% of what I've read pertains to bank, PE, or REITS.

I was wondering if anyone here has gone the brokerage route. I'm interested and wanted to hear more about careers in this area, earnings, etc.

 
Best Response

I work on the RE PE side, so I'm probably not the best one to answer, but I work with brokerage guys daily so I'll try to weigh-in and hopefully someone more knowledgeable can add.

Brokerage is split into a number of categories. The main split is you have property/asset/equity brokers, debt brokers, and leasing brokers. Together, property brokers and debt brokers are often called Capital Markets. Leasing brokers are further split between landlord reps and tenant reps.

My impression in terms of compensation is that at the senior level, top brokers get paid exceptionally well (the best get paid on par with investment banking or private equity MDs). They are often getting paid a contractual split on the revenues they generate, so unlike in an investment bank where groups having good years end up subsidizing groups having bad years, in brokerage it is much more eat what you kill.

I also get the impression that there is a much wider gap in pay between the top performers and moderate performers than you would see in other financial industries, and the best brokers in each market have a tendency to dominate market share.

Also, compensation is much less generous at junior levels than at a PE fund or investment bank. I don't know exact numbers, but the job does not require the same level of analytics and modeling, nor is there as much of a desire on the part of the brokerage firms to build a cadre of Target School / Ivy Leaguers in their analyst classes. As a result, though, it seems much easier to get hired into brokerage from a non-traditional background than into other parts of finance. In general, I think the capital markets side of brokerage is seen as more analytical on the junior level and offers much better placement into other parts of real estate as compared to leasing.

A final note on firms: Eastdil is the 800-pound gorilla when it comes to capital markets and positions itself as more of a real estate investment bank and less of a real estate brokerage firm (even though the distinction is immaterial at best). Their analysts/associates seem to be paid better than other firms and have better exit opportunities on the buy-side. CBRE, Cushman & Wakefield, JLL, Cassidy Turley, HFF, and Colliers are some other major names.

 
re-ib-ny:
I work on the RE PE side, so I'm probably not the best one to answer, but I work with brokerage guys daily so I'll try to weigh-in and hopefully someone more knowledgeable can add.

Brokerage is split into a number of categories. The main split is you have property/asset/equity brokers, debt brokers, and leasing brokers. Together, property brokers and debt brokers are often called Capital Markets. Leasing brokers are further split between landlord reps and tenant reps.

Thanks for this detailed response. Could you possibly elaborate on the main differences between landlord rep and tenant rep leasing brokers ( besides the obvious). Is either viewed in a more favorable light?

 
FBitchesGetMoney:
re-ib-ny:
I work on the RE PE side, so I'm probably not the best one to answer, but I work with brokerage guys daily so I'll try to weigh-in and hopefully someone more knowledgeable can add.

Brokerage is split into a number of categories. The main split is you have property/asset/equity brokers, debt brokers, and leasing brokers. Together, property brokers and debt brokers are often called Capital Markets. Leasing brokers are further split between landlord reps and tenant reps.

Thanks for this detailed response. Could you possibly elaborate on the main differences between landlord rep and tenant rep leasing brokers ( besides the obvious). Is either viewed in a more favorable light?

I would draw distinctions between brokers a different way. (I think this varies by office/market size)

I would classify a broker by Office, Industrial, or Retail for leasing and then also Investment Sales. Some much larger markets are big enough to sustain someone who say, only works in Hospitals or only works in Hotels or something but this is few and far inbetween.

Within each property specialty there are landlord and tenant reps. Landlord rep and tenant rep are no more or less prestigious than one another. Landlord (also called "Agency" brokers win a building listing and are told "fill it & raise rents." Tenant brokers win a listing and are told "find us the best place for the best price considering this, this, and this factor). Sometimes a broker will do both. Sometimes (more often in Office) a broker will pick one and stick with it.

Landlord reps usually get paid 2% for the first 5 years, 1% after that. Tenant reps get a 4%/2% split. (This is really just generalization. The numbers change. Point is, tenant reps usually get paid more per deal.) It evens out though because as a landlord rep your deal flow is usually higher. As a tenant rep the amount of companies you can represent is limited by time and good faith (i.e. you don't want to represent two nearly identical banks and then try to convince each that you have their best interest in mind), but as a landlord rep you're basically telling all potential tenants "my building is better than this building you're also looking at" so there is less risk for overlap.

Commercial Real Estate Developer
 
re-ib-ny:
My impression in terms of compensation is that at the senior level, top brokers get paid exceptionally well (the best get paid on par with investment banking or private equity MDs). They are often getting paid a contractual split on the revenues they generate, so unlike in an investment bank where groups having good years end up subsidizing groups having bad years, in brokerage it is much more eat what you kill.

I also get the impression that there is a much wider gap in pay between the top performers and moderate performers than you would see in other financial industries, and the best brokers in each market have a tendency to dominate market share.

Also, compensation is much less generous at junior levels than at a PE fund or investment bank. I don't know exact numbers, but the job does not require the same level of analytics and modeling, nor is there as much of a desire on the part of the brokerage firms to build a cadre of Target School / Ivy Leaguers in their analyst classes. As a result, though, it seems much easier to get hired into brokerage from a non-traditional background than into other parts of finance.

This is all spot on. Something else to consider when it comes to compensation though is income beyond commissions. Almost all established brokers I know also own their own commercial properties giving them a "monthly paycheck" between hitting home run commissions. The sales cycle in brokerage can be 12-18 months (if not more) and it adds additional income and some bill paying stability to the process.

Also, along with the "wider gap between top performers and moderate performers," this is true on a person to person level but also on a company to company level. The CRE brokerage community is being consolidated like never before, and unless you're in a market big enough to sustain tons of firms, if you're not in a top firm you're pretty much never going to hit it big. Until you're a rockstar, company name matters far more.

Top: CBRE . Second: Colliers & JLL Third: Cushman, Cassidy, HFF . . Grubb? Local players? . . . . . . . . Everyone else

Commercial Real Estate Developer
 

I have heard from a reliable source within CBRE that the top guys in the entire company are almost always 'investment sale' guys and usually in New York, and the revenue they each bring in can be in the neighborhood of $30m in a year.

In a more normal city like Phoenix, I'm guessing that it'd be very unusual to break seven figures as a broker.

 
prospie:
I have heard from a reliable source within CBRE that the top guys in the entire company are almost always 'investment sale' guys and usually in New York, and the revenue they each bring in can be in the neighborhood of $30m in a year.

In a more normal city like Phoenix, I'm guessing that it'd be very unusual to break seven figures as a broker.

Darcy Stacom is the top girl at CBRE. She's focuses on New York. Easily makes 7 figures p.a. in income considering the size of deals she works on.
 
Relinquis:
prospie:
I have heard from a reliable source within CBRE that the top guys in the entire company are almost always 'investment sale' guys and usually in New York, and the revenue they each bring in can be in the neighborhood of $30m in a year.

In a more normal city like Phoenix, I'm guessing that it'd be very unusual to break seven figures as a broker.

Darcy Stacom is the top girl at CBRE. She's focuses on New York. Easily makes 7 figures p.a. in income considering the size of deals she works on.

True. Darla L is another CB hot-shot on the West Coast. It's funny how the biggest swinging dicks at CB are women. Those two have like 6 dicks between them.

Man made money, money never made the man
 
prospie:
I have heard from a reliable source within CBRE that the top guys in the entire company are almost always 'investment sale' guys and usually in New York, and the revenue they each bring in can be in the neighborhood of $30m in a year.

In a more normal city like Phoenix, I'm guessing that it'd be very unusual to break seven figures as a broker.

I've seen it done plenty of times.

Commercial Real Estate Developer
 
CRE:
prospie:
In a more normal city like Phoenix, I'm guessing that it'd be very unusual to break seven figures as a broker.
I've seen it done plenty of times.
Thanks for clearing that up. Guess I shouldn't underestimate these guys.
 

The analytical skills required for brokerage are minimal compared to the amount of financial modeling and analysis required for REPE investments. It also varies allot on the firms structure and the asset class being analyzed. Brokers normally either work in leasing (tenant/landlord rep) or investment sales. Leasing brokers use Argus to plug and play with basic leasing assumptions based on lease expirations, probability to renew, etc... Brokers in investment sales normally have a higher level of analytic skills b/c they need to have an understanding of the anticipated margins that an investor could expect.

At the end of the day, the broker is just trying to create a ball park estimate - before the equity investor comes in and does a much more thorough analysis using Argus/Excel.

The amount of deal flow depends on the firm and strategy.

 
REValuation:
The analytical skills required for brokerage are minimal compared to the amount of financial modeling and analysis required for REPE investments. It also varies allot on the firms structure and the asset class being analyzed. Brokers normally either work in leasing (tenant/landlord rep) or investment sales. Leasing brokers use Argus to plug and play with basic leasing assumptions based on lease expirations, probability to renew, etc... Brokers in investment sales normally have a higher level of analytic skills b/c they need to have an understanding of the anticipated margins that an investor could expect.

This, 100%

Commercial Real Estate Developer
 

[quote=kmzz]seriously?

http://www.realert.com/ranking.php?rid=279[/quote]

Next time specify that you mean investment sales?

On an overall level, including office, industrial, and retail leasing as well as brand recognition, you aren't right. Not to mention that even in investment sales, they're a whole 1.2 above CBRE, and Eastdil and HFF are known specifically for only going after the biggest deals. Other places can make just as much, if not more, in fees but hitting doubles more often.

I will give you that I should have put them on my list though. The slipped my mind because they are different in business model than the others and I deal in mostly leasing so that's where my head was. My mistake.

Commercial Real Estate Developer
 

Theres is no "transition" brokerage is extremly easy to get into. Anyone with a pulse can get a retail brokerage job.

That being said to get on the top teams in the big 3 cities you must know someone (or know someone who knows someone). Even then those teams like to see some sort of previous brokerage experience. Its just hardcore balls to the wall sales, no way around it. If you think wall streeters are in your face you've never see the guys running around the CBRE NYC office.

qualifications - NYC office broker for 2-3 years before moving to an investment shop.

 
bortz911:
SHB:

If you think wall streeters are in your face you've never see the guys running around the CBRE NYC office.

can you elaborate on this? no reason, just curious and i think it'd entertaining/amusing

Quite true. By and large brokers are alpha males who are consistently jousting for new business, a better deal for their client, etc. There is no doubt that 10% of the brokers do 80-90% of the business, with probably around half of junior brokers filtering out of the business in their first three years. this is due to the draw system that most juniors operate on, ie, you are paid a draw or 20-30K, and the deals you close chip away at that draw before you actually turn a profit. If you don't work on a solid team, especially on the tenant side, it is very difficult to claw your way through the first few years.

 

Bottom of the barrel is unnecessarily harsh. I'm sure working in brokerage can be an interesting and rewarding experience where someone can cut their teeth in real estate and learn quite a bit. However, if you're comparing brokerage against a background like investment banking, then admittedly that gets more traction with employers in the REPE / REIT world.

Part of the reason for that preference has to do with the real or perceived analytical intensity of the experience. While it sounds like you have gained some quality modeling and analytical experience through brokerage, I think most would agree that the ex-bankers they have worked with or employed tend to have a level of experience and training in this arena that exceeds their peers from the brokerage world. Another reason is simply selectivity. I-banking is viewed as a plus not just because of the skills acquired in the profession, but also because of the perception that the track is selective and delivers a somewhat "pre-screened" pool of applicants. This isn't to say there aren't great candidates from alternative backgrounds, but with limited time and resources to sift through potential hires, employers end up using rough, simple screening criteria to select interviewees.

 

If you are working for a top shop on a top team (eg great deal flow, good exposure to top deals) then it is a great experience. If you are on the investment side, it is even possible to transfer into a REPE (not a top shop, but some funds nonetheless) or a REIT (again not a top REIT, but the crappy ones would hire you). If you are in a shitty shop or on a shitty team, or trying to go it alone in your 20s, you are pretty screwed unless you are a complete rock star and somehow build a practice for yourself. Some of the young guys can make pretty good coin, but it is straight commissions.

Personally I wish I had done a few years on a top leasing team, gone back to MBA to learn finance and then gone into REPE or REIT. If you want to be a CEO, you need to know leasing. Most finance guys are void of this knowledge and it is where all of the value is created in real estate.

 

While looking to break into the industry myself multiple real estate investment professionals I met with suggested the best way to get into the industry was to do a few years of brokerage to learn the business and build up a network. I work for an investment firm now and pretty much my entire firm has a brokerage background in either investment sales or leasing.

 

I would say because it typically doesn't involve the excel knowledge that you would need in REPE or at a REIT. But having the experience is useful in knowing how to negotiate and also building a book of clients and references. I have interned on both the acquisition (heavy excel, argus) and development side and now am working full time as a retail sales associate (think representing Verizon, Chipotle, Potbellys). This requires much more market knowledge and less analytical skill. I plan on however transitioning back into a REPE/REIT role working on acquistions/capital raising. I think that one things that gets lost in these forums is that there is not just one way "cookie cutter" way to reach your goals. While some ways may better than others, some get "there" differently and many more do not make it at all.

 

Thanks for the thoughtful responses gents. re-ib-ny I enjoy most of your posts and this didn't disappoint. It's interesting that most senior RE bankers I've met in Toronto have their training in the brokerage world - all investment sales. It was a route that I targeted during my post undergrad job hunt 1.5 years ago, as it skirts many of the formal IB recruitment requirements. I actually got quite close to a hire - they recommended I get a couple of years training in brokerage and come back to them. That being said, most senior guys I met with for advice recommended IB after you've got 10 or so years in the business because of the burnout factor for juniors.

Mogul: I meet your requirements for great experience, and it has given me some fantastic experiences to discuss on my MSRED apps. I've been blessed in Toronto to have a very strong mentor from the get-go who has been instrumental in making key introductions, which I believe I could leverage for an associate position at a great shop after a couple of years of experience and a strong school on my resume. That being said, I want to stick around NY after Columbia and the vast majority of my contacts are Canadian centric. My mentor said the exact same thing as your last sentence (and it's been repeated by at least two other top dogs i've met with) - leasing drives cash flows and are essential to the understanding of asset values, pricing trends, and even as CEO of a RE firm you will work on/approve the big leases in your portfolio. Working purely on leasing transactions though... i can't imagine how people do it their whole careers. (applies to OB23 comments as well)

410: agreed. That is great you've had the opportunity to see different sides - sounds almost like CBRE's rotation (i think they call it the Wheel) program. Fantastic intro to the business IMO, and builds well rounded and knowledgeable professionals for the firm. One thing I've been warned about is getting pigeon-holed as a leasing guy. It's tricky because you don't start making decent money until your 3rd-4th year in leasing, and that's about the time you need to jump ship to avoid being branded.

 

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