Commercial real estate brokerage is investment banking but for real estate
I’m not sure if this is obvious to everyone, but I recently realized that commercial real estate (CRE) brokerage is the same as investment banking, just focused on real estate and with a much lower barrier to entry.
I didn’t go to college right after high school; instead, I worked in project management at my father’s general contracting firm for about 4.5 years. (Nepo Baby) I eventually wanted to shift into development or real estate private equity (REPE), and I thought starting in Brokerage would be a great starting point as it has low barrier to entry and when you’re working on a team that’s doing $20-40 million dollar property listings you’re constantly networking with all the industry experts in your area.
What I realized after researching finance roles is IB entry roles mainly consists of extensive market research, hours in Excel, comparable company analysis, and creating presentations to facilitate corporate transactions.
Now I compare this to my role in CRE which consists of countless hours on excel modeling property revenues, finding market revenues and identifying plans to achieve those goals, putting together property presentations, participating in “bake off’s” with property owners who are interviewing multiple brokerages.
I guess what I’m getting at here is, CRE brokerage seems to not have the same prestige as IB but it is literally the same job just a different market (trading real estate rather than trading companies). And based on what I’ve read about IB compensation, CRE Brokerage can be the same if not more. I work on a commission basis and share a split from the deals I work on, typically 10-20% of the gross commission. But on a team that can do 5-10 deals a year with 20+ million dollar listings with 1.5-2.5% listing fees. That starts to add up to be very competitive with IB roles.
And forget target or non target, I DONT EVEN HAVE A DEGREE !!
Based on the most helpful WSO content, here's a detailed breakdown of the similarities and differences between Commercial Real Estate (CRE) brokerage and Investment Banking (IB):
Similarities:
Market Research and Analysis:
Client Interaction:
Presentation Skills:
Differences:
Barrier to Entry:
Compensation Structure:
Market Focus:
Compensation Comparison:
Career Path:
Conclusion:
While CRE brokerage may not have the same prestige as IB, it offers a similar skill set and can be equally, if not more, lucrative depending on the market and deal flow. Your background in project management and networking within the industry positions you well for success in CRE brokerage, even without a degree.
Sources: What's with all the IB/PE bros asking about CRE?, https://www.wallstreetoasis.com/forum/real-estate/starting-my-career-in-cre-five-years-out-of-undergrad-brokerage-vs-development?customgpt=1, https://www.wallstreetoasis.com/forum/real-estate/whats-with-all-the-ibpe-bros-asking-about-cre?customgpt=1, Differences between CRE vs REPE, Capital Markets Intermediary Rankings
I think I generally agree - both being transaction-oriented roles at different levels. Brokerage can generally be thought of as a spectrum, and on the high end when you start working on structured finance, corporate finance that is technically IB. The general difference is people generally think of traditional IB vs traditional brokerage which is entity-level transactions vs property-level transactions. Comp-wise IB will generally win simply because of transaction size, but of course there are exceptions due to deal volume, etc.
Is the point of this post to convince yourself that your job in CRE brokerage is just as prestigious as IB? All investment banking is is market making. They connect those who have capital with those who need/want capital. When you think about investment banking this way, then basically every job that acts as a market maker ie broker is the "same" as investment banking. A realtor selling a $500k SFH works in "M&A" of single family homes. A car salesmen is an investment bank for cars. The list goes on. The only reason why investment banking is so "prestigious" is because of the money, the size of the deals, and because instead of calling themselves business brokers or debt/equity advisors, they call it investment banking. Change the name to business broker and investment banking loses a lot of it's prestige.
My advice to you is to ignore that chip on your shoulder of not having a college degree and not being as "prestigious" as investment banking and just make as much fucking money as you can because ultimately that is all that matters. You can't eat prestige.
No chip on my shoulder, was really just a statement of observation. Hopefully to help guide those who are having difficulty picking an industry or role. It was more of an idea of if you think IB is cool you may like CRE brokerage as-well, it may also be easier to break into. And I see your point about everything being “M&A” and selling used cars would even fall in that category. The difference is in CRE you’re analyzing investments with essentially the same process as you do in IB, it’s just different terminology and scenarios. I think it’s a little more similar then convincing a grandma to buy a beat up Corolla for $5k more then it’s worth 😂.
I wanted to add in that I mainly chose CRE Brokerage to help garner transaction experience and build capital to ultimately transition into running my own development firm as I find building properties incredibly rewarding.
All an investment banker is is a market maker. Period. Any other functions you try to add in are subjective i.e. "investment bankers must use excel."
We are defining what IB is. You can't use IB in your definition of IB...Whatever analysis you are doing for a company or a $100mm building can be done for a single family home. CRE Brokerage/Investment Sales, whatever fancy name you want to call it IS Real Estate Brokerage. Your job is to broker a real estate deal. Doesn't matter if it's a $500k SFH or a $100mm apartment building.
Countless hours on excel modeling 🤣
I agree with you.
I think the guy above tried to OVER simplify it however.
If you’re raising debt and/or equity for large real estate transactions, it’s akin to investment banking if it already isn’t directly.
Client comes to me, he wants to build a $100mm apartment building. I can easily raise the senior/mezz and then make the introduction for an LP capital apart of the common equity. That’s a full job, and the deal team will consist of 3-6 people with an IB like hierarchy.
Selling cars or $500k houses are not similar to investment banking in any capacity outside the component of ‘selling something’.
Why not? When a client comes to you and needs capital for a $100mm acquisition, aren't you just selling that acquisition project as an investment to potential investors? What exactly is the difference between investment sales/capital markets and a real estate agent selling a single family home or a mortgage broker other than the name?
So in order to be considered investment banking you must have at least 3-6 people on the deal team? So if a real estate agent creates a team of agents aka a real estate brokerage, then it's IB?
3-6 people working at a real estate brokerage or a car dealership are not working on a single deal in a unified capacity. Let’s be pragmatic here…
You know, I was going to dive deep into the semantics but I’ll pass.
There are superficial similarities in their role, but the skill and execution is incomparable.
Finance in general is simply not very complex. People who work on Wall Street try to tie a lot of bells and whistles on to what they do (long hours, crazy complex formulas, unending iterations of models) to make their job seem more difficult and as if it generates more value than it actually does, because as others are saying, most finance roles are middleman roles which have an important function in smoothing capital flows, but ultimately don't actually do anything useful. Most finance roles, moreover, have a pretty similar counterpart in real estate. I've said it before to a lot of howling but very little substantive rebuttal, but real estate acquisitions and development are fully as complex and difficult transactions to structure and execute on as any private equity deal.
The fact is that a lot more attention is focused on execution in real estate, because there is an asset to actively manage, than in most finance roles, which are more concerned about up front analysis.
Anyway, the point is, don't focus on the comparisons. Banking isn't inherently better than real estate, and in many ways is far worse of a leech on otherwise productive uses of capital and brainpower. Focus on doing your job to the best of your abilities.
I think part of the reason that real estate development is lower prestige is that much of the complexity is ultimately tied to construction, which is a blue-collar field without much prestige. But that of course says nothing about the actual amount of knowledge and skill involved in the field, which can be considerable.
I’m sorry but no…
Currently work in RE IB, and is substantively different than brokerage.
Maybe if your team is brokering trophy assets north of $1bn, but besides that everything from team culture to day to day workload is different.
No shame on brokerage tho, it’s a great place to start a CRE career and get well connected to your local market.
Bro came here, decided that he was right and that OP was wrong, and then left after deciding not to elaborate.
Commercial real estate is mainly investment banking but for real estate in the sense that it's a starting point that you want to escape from and work on the ownership side after a couple years.
I am not looking to hijack this thread but is "CRE brokerage being IB for real estate" mainly in in reference to work at the likes of Eastdil, Cushman, CBRE, Savills, JLL, Colliers, Newmark or Berkadia?
Or phrased in another way, if one would want to break into CRE brokerage which other firms besides the above should one target as an undergrad?
Those are all great firms, however in my experience the most important thing when choosing a firm is to find a top producing team regardless of the firm.
I see guys who only do $1-5 million dollar multifamily deals at CBRE, and then I’ll see a boutique firm with a team doing $20-30 million dollar deals. It’s very dependent on the broker and not the firm. Research brokers in your area, use “Costar’s Powerbrokers” to see who’s handling the recent big deals, try to network with them. I hope this helps!
From an incredibly high level— the principal - advisory relationship dynamic is comparable I guess. And you can say there is an aspect of both that is running a sale process for a seller and making a fee. Good training ground where you either quickly decide you can rise to top or jump to principal investing.
Past that I don’t think they are all that similar and idk why you care tbh.
Completely disagree, the actual work done is completely different, the comp is significantly different, (large brokerages start analysts at like 60k, large IBs are significantly higher than that). The work life balance is completely different. I say this all having worked at one of the larger brokerages for 2 years.
I understand what you’re getting at, I disagree with comp however. I personally get a percentage of the deals we close, and I’m on track to earn compensation that’s competitive with IB. It may just be the zip code I work in and the team I’m on, not sure. Pick your team wisely!
Sr Analysts at CB/JLL routinely make 140k+
But RE is tangible!!!
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