How to choose what asset type to work with in investment sales?
I could not find a specific thread on this topic, so curious to hear yalls input. I'm very interested in getting into investment sales but I do not know which asset type would be best. I am leaning towards retail since I kind of already have a few connections in that area, but don't want to rule out anything yet (especially since I do not even have a job lined up). Thanks in advance.
Sorry if this is a bit sloppy, writing on my phone. Here’s a quick answer.
i think it’s ideal to work on multiple asset classes for the broadest exposure, or at least work on multifamily + one of the other 3 for experience with both ARGUS based and excel based modeling.
I’ve worked on all 4 in IS and personally found multifamily to be the most enjoyable by far since I thought using Argus and reading/abstracting leases for the other 3 was very tedious (but still good experience To have). I also generally thought multifamily was the most fun since most people are naturally interested in it (I.e. there’s an entire tv channel called HGTV for people to just look at living spaces and learn about renovations etc).
The basic pros/cons of the other 3 are:
Office: typically the largest class A buildings (and largest $$$ deals) in a market are office. You look at any city skyline and it’s all office buildings. Get to learn about local businesses and their needs. Get to use ARGUS but will have to spend a lot of time tediously reading leases and other financial reports to input into ARGUS.
Industrial: very active rate now, some of the lowest cap rates and also large $$$ deals in many markets. Learn more about the logistical needs of businesses (storage/production/distribution) and learn about ecommerce and stuff. Not as tedious to model since most properties only have 1-4 tenants. The actual buildings themselves are the least interesting by far since they are typically just big ugly boxes out in rural areas. Expect lots of driving.
Retail: Tenants are the most familiar since everybody knows all the retail brands more so than office/industrial tenants. Can be cool to see what stores are expanding and doing well and synergize with other stores vs dying and becoming obsolete. For larger malls, the modeling can be extremely painfully tedious. Execution is very unpredictable since the industry is so in flux and nobody can really agree on pricing like the other 3 classes, so you may have to bust your ass on deals that either don’t trade or or take a very long time to trade or trade lower than you were hoping. Overall will have the highest caps and lowest $$$ amount of the 4.
If you think of a cap rate as a risk premium, it would make sense for retail to have the highest cap rates due to having the most uncertain/risky outlook. Many retail properties have declining sales and inefficient/obsolete layouts/locations which require redevelopment due to e-commerce growth and traditional anchors going out of business. I’ve seen tertiary retail centers with declining sales trade for 10-20%+ caps. There are also plenty of retail properties doing fine but they tend to trade less frequently.
Specialization will vary by office. Some offices have a shared pool of analysts doing everything while others will have specialized analysts assigned to each broker. The pooled approach gives analysts a broader experience, more balanced work load, and causes less disruption if somebody leaves. The specialized approach allows them to develop more expertise so the broker can give them more responsibility / less oversight (and tbh sometimes brokers just don’t like sharing resources with each other).