Specializing: Starting a Career in Commercial Real Estate
There are several different areas of specialization in commercial real estate. This list is should help identify some areas of interest but it is not all-inclusive.
- Brokerage
(mortgage and leasing) - Real
Estate Development - Corporate Real Estate
- Institutional
Real Estate Investment
Commercial Real Estate Brokerage
Brokers often conduct business on behalf of a firm and they represent a buyer or seller in a transaction. Commercial real estate brokers earn a majority of their compensation via commissions. They can conduct business with corporations, institutional buyers and sellers, foreign and domestic business, as well as various other investment entities. A commercial broker will usually focus on a single type of property such as industrial, retail, office, lodging, or apartments. Brokerage is a client facing business that requires good people skills.
Here’s an excerpt from
. Last Night on Mad Men, Roger Sterling used a connection at the airport to "happen to bump into" a potential client. He talked to the guy, became fast friends, and got Sterling Cooper Draper Pryce into the pitch at the last minute by cultivating current relationships and forming new ones.
Not too far off from Sterling's world of 1960's advertising account executives, Commercial Real Estate brokerage is a career based entirely on relationships. Unlike banking, as a broker, your personality and people skills matter immediately. You aren't going to be spending a solid handful of years toiling behind the scenes and having an intimate relationship with Excel before you become client-facing.
Almost immediately you'll be on the phone, pounding the pavement, knocking on doors, emailing everyone, networking at formal and informal events, and your relationship with other brokers in your market, both within your company and outside of it, is just as important as your relationships with clients. If your personality sucks, so will your bank account (at least at first).
Real Estate Development
There are multiple different “levels” of real estate development. However, we’ll take a look at two of the more popular levels, the entrepreneurial (i.e., starting your own firm and managing your own projects) and the established fund (i.e., joining the ranks at Hines, Tishman, or another established firm).
The following is a high-level overview of the business conducted by a real estate development entrepreneur. Once a firm has been established, the land will be acquired and prepared for development or a site will be purchased. The developer will then oversee the construction process. Commercial developers will usually have a specialization which is determined by the property size and type.
I left NYC for another city (between the coasts), and got a job with a local multifamily developer/investor. Spent two years doing that, and then (roughly 11 years ago) left with another guy to start our own apartment development group.
We started with about $50K between the two of us, and a 300 SF office. We kept at it, stayed aggressive (but didn't take foolish risks) and fast forward to now, we've so far done about $500 million (cost basis) of multifamily and mixed-use development in our market(s). We've gotten paid reasonably well along the way (some years better than others), and have managed to build up meaningful net worths.
Corporate Real Estate
Corporate real estate here means the real estate division of any firm or company. The path to corporate real estate manager is hazy. A corporate real estate manager can have a broad range of responsibility, This may include planning, acquisitions, design, and construction. The real estate manager approaches these responsibilities as the owner, occupant, or purchaser. Here are some examples from the real estate community
from certified user @coolhandlucas"
This is some quoted text.Never worked in corp RE but I worked with several large corp RE teams while I was a tenant rep broker.
Corp RE works with the exec team to develop a growth/consolidation strategy (i.e. where what type of buildings, budget, lease vs own, etc.) Various jobs depending on if the firm leases or owns space: project managers, property managers, facilities, financial analysts, accountants, assistants. Overall, much fewer sales and people-oriented than most other areas of real estate. Generally a pretty stable/average desk job, and there is absolutely nothing wrong with that.
A couple of examples:
-If an organization has many leases across the country for a certain division and wants to consolidate, the corp RE team would identify a brokerage team to help them align lease ends and search for new space
-If a company needs to expand, they can choose to find a new lease, develop/construct new and own or leaseback, etc.
-lease administration: if there are certain options/rights/terms of existing leases the corp RE team manages theseComp is on par with pretty much any other corporate position. F500 real estate execs make excellent money. I know for certain the former RE exec for target was making $millions, granted that was in the heyday of bricks and mortar retail.
Base pay is probably in the neighborhood of the following:
Entry: ~$50K
VP: ~$125-175k
SVP: $175-225K
Institutional Real Estate Investment
Institutional real estate investment refers to real est investment at a large scale by an institution. The institution is usually a real estate investment trust (REIT), insurance company, or pension fund. The transactions are usually valued above 10 million dollars. Institutional investors employ their own brokers and analysts among many other roles. An analyst can be responsible for monitoring markets, tax law, regional market changes, geographical economic trends, local and global market trends, as well as micro trends. Institutions invest in real estate in a variety of ways. In public markets, an investor may allocate resources to a REIT or commercial mortgage-backed security (CMBS). Common investment vehicles may include pooled funds, joint ventures, and separate accounts. Basic direct investments include investments in offices, retail, industrial, and multifamily space.
from certified user @monkeywrench
REITs/core funds basically buy and hold something forever as long as it's spitting out relatively good annual yields relative to bond rates whereas the structure of value-add/opportunistic funds generally have a lifespan of 5-10 years. So, of course, depending on the vintage of those funds they could have vastly superior/inferior returns to REITs which are in a more steady state..
A basic explanation of the function of institutional investors.
from user @c00guy
Low risk
High liquidity - publicly traded just like stocks / mutual funds
Tax exemptions
Most profit is distributed to investors
May or may not directly invest in real estate assets (e.g. mortgage REITs)
Investors include both retail and institutional.
