What are the main differences between Commercial Real Estate Brokerages such as CBRE, Cushman&Wakefield, Colliers, etc and Real Estate private equity firms in terms of barriers to entry, company culture, working hours, compensation structure, prestige, etc..
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Prestige levels really top out at Marcus and Millichap. There’s truly no equal.
They are two different parts of the business.
Brokerage sells assets. Private equity firms buy them. Both can be hard to get into. For example, you may be able to get into CBRE, but can you get onto the top CBRE investment sales team in your market which has 12 people and only 2 analysts? To me, that’s just as hard as getting into a top PE firm.
As far as comp, they are similar. Brokerage you can make much more at a younger age. At the top levels, for the majority of people, you will make the same as a broker and as an MD at a PE fund.
I really do not think this is true. Top level folks at PE funds are going to make way more than their counterparts at brokerages. Which is why you don't see many 9 and 10 figure net worth brokers, but major markets are lousy with them from the equity side of things.
Ownership, because of the risk that comes with it, will always pay more than being a middleman leeching a couple points off a transaction
disagree, but our opinions are going to be very anecdotal. You likely know more high earning owners. I know more high earning brokers. And I'm not referring to cherry picking the famous RE billionaires, just speaking in terms of sheer number of anonymous folks earning 7-figures in their 30s-40s I know personally. Even the principals at REPE funds I've worked at or am friendly with regularly joke (but half-serious) that they should've been a broker.
Anecdotally I am inclined to agree with Ozymandia on this one. As Ozy already mentioned: risk and reward. There is waaaay more risk on the ownership side than the sellside. If a broker can't sell a property or the deal falls through..there isn't any financial repercussions to the broker, but there is A LOT for the owner. Also, many brokerage shops eventually turns to ownership over time. I'm not saying that they abandon their brokerage business, but I've never seen a developer or real estate investor go from developing/investing in real estate to selling it. It is always a broker turning into an investor/developer. There must be a reason for this - there is more money on the ownership side. If the risk to reward ratio left these brokers worse off, then they would stay purely as brokerages
No, it isn't, and you're falling prey to the same trap that most other people on here do.
Opportunity cost is not the same thing as risk. A broker has opportunity cost - if they don't sell, they don't eat. Fair enough. But they are never on the hook for someone else's mistake. This is a really, really important difference and one which I think a lot of junior folks in this industry don't understand fully enough. Developers in particular get paid because they are backstopping that the final product will come out according to schedule and design. To a slightly lesser extent, owners guarantee loans - if the market turns and the building is worth 50 cents on the dollar, the downside isn't "move on to the next one," it's "my equity is wiped out and the bank is reaching into my pocket to be made whole." You're not merely foregoing a paycheck, you're losing previously earned paychecks.
Also going to echo Ozy here, though this really is uber subjective and can look rosy from either side. But in my humble opinion if you're looking at the top performers over the course of an entire career, REPE is lights out. Of the group of guys who made intergenerational wealth in this business, a small amount did it through building adaptive commission-based businesses.
~4% weighted average gross commission on $X annual transaction value for CRE advisor vs 0.75x - 2x MOIC on $Y for REPE Partner.
Top Broker invests fees after paying his firm, support staff, potentially a lot to govt. He buys index funds and invests in sweet heart deals. Consistent annual income likely beating REPE Partner gross income in several years.
Top REPE Partner doubles every other check he writes in 1 - 3 years, realizes a significant depreciation tax benefit, and re-invests excess cash flow with greater opportunities. REPE Partner has some exceptional consecutive years over the course of his career and doubles capital base in 3 - 6 years more than once. Compounding math wins. Their LPs introduce them to other entrepreneurs during career upswings and puts money to work with them.
Comparing CRE brokerage to REPE = comparing income to wealth.
Equity and carried interest gets you wealth. Brokers have a front row seat to this wealth creation through their roles working with REPE and observing their clients process of wealth creation. They get into the game as soon as they can rub two nickels together.
Better to own the banana tree than to be stuck working for bananas...