Those of you looking to break into commercial real estate brokerage careers have a number of factors to consider. These will determine your career path, income level, ability to be successful, and how enjoyable you find your job.
How To Be A Successful Commercial Real Estate Broker
There are a number of elements to consider when starting your commercial real estate career but we've narrowed them down to five key components that will set you ahead of the competition.
The following five factors are essential to your success as a commercial real estate agent.
Your Company Determines Success
The top five commercial real estate brands according to The Lipsey Company are as follows:
- CBRE
- Colliers International
- Jones Lang LaSalle
- Cushman & Wakefield
- Eastdil Secured
The importance of working for a reputable commercial real estate company cannot be stressed enough. Of the 25 service providers ranked the five I have listed are ahead of the game on reputation. While the top 25 list can be debated, what isn’t debatable is that CBRE dominates the landscape.
Below are a few of the ways CBRE has been recognized as an industry leader.
Until you build your reputation, your company name will get your foot in the door more than your name alone ever could. CBRE, Colliers, JLL, etc, are known international entities which provide clients with the security and success stories they are looking for.
There are also more informal rankings in individual cities. A company further down on the Lipsey Company list, nationally and internationally, can still do exceptional work in their specific, target markets. Denver comes to mind as a place where the typical hierarchy doesn’t necessarily apply.
Your Market Plays A Key Role In Success
While investment banking is highly centered in New York City, commercial real estate brokerage is big business in most major cities. They typically have more commercial activity and higher broker fees than smaller metro areas. While New York City, Los Angeles, Chicago, etc. are huge markets also consider the strength of smaller local commercial real estate markets. Brokers in Houston, San Francisco, and Seattle, for example, are finding loads of success with development projects signing huge leases before they are even built.
In smaller markets, the deals are smaller, the companies are smaller, and the fees are smaller than the major markets. However, breaking into one of the above-listed companies in New York City is much more difficult than in Atlanta. In a smaller market, you can have a more immediate influence. Also, smaller markets carry the advantage of higher commission percentages due to less competition and a handful of brokers can dominate the market. There are five brokers in my city who literally have over 75 percent of the office landlord market locked down.
The Specialty You Choose Plays A Factor
As the industry matures more people are finding niches within the commercial real estate market Major specializations include office, industrial, and retail. These can sometimes be broken down further based on people and teams, and into tenant rep and agency-landlord representatives.
An additional specialization is investment sales. Selling, instead of leasing, a property requires more financial knowledge and probably sets you up better for exit opportunities if a brokerage role is not your long-term goal. Some markets even have further specializations such as hotels, resorts, or corporate solutions, which is a lot like management consulting but with a real estate focus.
Certain people and personality types gravitate to certain specializations. Industrial brokers are usually more down to earth and blue collar. They are the type to wear button down collars and boots with their suits as they’ll be walking through warehouses and industrial plants all day. They are usually more no bullshit-types, the salt of the earth so to say.
Office brokers are by far the most common and personify the stereotype, if there is one, of a commercial real estate broker. Corporate, business-like, and perhaps even banker-esque, office brokers deal with businesses and building owner groups and dress and carry themselves accordingly. Think Mad Men if anything.
Retail brokers might be the exact opposite. They are dealing with landlords who own strip malls or the first floor of buildings and their tenants are mom and pop stores and major retail chains alike. Typically high energy, a little pushy, and more on the sales side than consulting. Retail brokers gather every year for a conference in Vegas. You get the point.
Your specialty obviously determines what types of properties you represent, but it also determines the sorts of people you interact with, the environment you will be in, and required knowledge you need during the process. Many people will say that a specialization chooses you as much as you choose it.
Firm Culture Determines Broker Success
Starting out in commercial real estate, your superiors basically control your bank account. Whether or not you have a draw, get put on listings, get a decent split, benefits, or paid when you should, is all determined by your superiors. Unlike banking, where salaries are almost lockstep and bonuses by firm get charted and distributed, commercial real estate income numbers vary wildly by market, company, specialization, and group.
When you start, you could be groomed in research with a salary, put on a solid team with a draw, or be given a phone and a computer and told 'good luck' on straight commission. I’ve said before that almost everyone burns out within a year or two. Unlike banking, however, you don’t burn out with an $80k salary plus a huge bonus. You burn out because you didn’t make any money. A company that fosters your growth and wants you to succeed is easily the best gig to get into. Being an employee and not a contractor is key.
Another important cultural distinction is how the office functions. Certain places lock their files, their doors, and don’t talk to one another in fear of one of their office mates stealing a client. This is stupid and inefficient. Some firms have a 20 percent referral fee. For example, if an office broker gets an industrial assignment through a connection, the office broker hands it off to an industrial specialist for a 20 percent cut. The client benefits by having a broker who knows the market and both brokers benefit as well.
Team structure is also important. A junior broker-senior broker team that functions well is a thing of beauty. The junior guy does the legwork with a connection that he wouldn’t otherwise have and the senior guy closes the deal with more time for sourcing future clients.
A minimum 50/50 split is what you’re looking for – both with your co-broker and between you and your firm. I’ve heard some 20/80 or even 10/90 nonsense. That’s atrocious and you’ll never make any money. 40/60 isn’t bad starting out, but you want to get to 50 and over as soon as possible. These splits are negotiated the same way salaries are.
Ultimately, you want a place where coworkers understand that everyone makes more money when there's a team dynamic. Everyone then gets and retains more clients, and dominates their piece of the market. Places, where distrust and competition are more important, are not functional.
The Right Personality Type Is Essential
Finally, the intangibles. You can work on self-improvement and transform weaknesses into strengths but there are simply certain types of people who succeed in this industry and those who don’t. It isn’t about the hard-sales, ABC lifestyle either. As a broker, you are simultaneously an architect, contractor, salesman, lawyer, designer, management consultant, and financial analyst without actually being any.
Watch this video for more advice on starting your commercial real estate career.
Can you manage a lifestyle on commission knowing if you don't close a deal, you don't eat? Can you deposit a six-figure check and not blow it all because you might not be getting paid for the next eight months? It takes a certain person to be able to ride these highs and lows.
There are several approaches and personality styles, but successful brokers are personable and driven to a fault. You need to be 'that guy or gal' otherwise you’re doomed to toil in mediocrity or worse. In commercial real estate brokerage, 'fit' determines everything. You have to fit the industry, fit your company, fit your team, fit the lifestyle, and fit your specialization. Do you have what it takes?
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