My friend is an independent commercial real estate broker (she literally rents her own office) who does investment purchases and sales, and tenant and landlord leasing representation across most asset types and classes, although about 50% of her business is retail tenant representation. Rather than specialize in leasing or sales (or tenant/landlord, etc.) or in a particular property type her specialization is in foreigners from East Asia. Unfortunately, she is overwhelmed with work as she does all of the origination, financial modeling, marketing, and administrative tasks (i.e. accounting, billing, etc.). Her clients are both institutional in size ($100M+) and tiny (like, restaurant leases) and her licensure doesn't allow her to work in some places where she does get business but isn't licensed (e.g. Pennsylvania).
I've encouraged her to join a major brokerage firm, such as Cushman & Wakefield or JLL. From what I understand--and correct me if I'm wrong, which is why I'm asking this--the majors have financial analysts who model deals, marketing teams that create marketing materials, and, of course, administrative support, and if a broker gets a deal in a place he or she is not licensed someone else at the firm licensed in that area can be the lead broker. Am I right on this? What kind of commission splits between broker and firm are typical at the majors?
Also, would any of the majors even consider taking on a broker who is a generalist (sales/purchases, tenant/landlord leasing, all asset types)? And would they be able to provide the support needed?
I'm asking these questions because I'm tired of her calling me three times a day asking me for help. It's starting to cramp my style.
1) Large brokerages do have a pool of analysts who model the deals or specific teams hire their own and solely use 1-2 people. This way their analysts can always tailor to their specific needs at all times instead of switching around and teaching different analysts based on availability.
2) There are marketing teams that create all the OMs with pictures, maps, etc.
3) Always admin support to setup calls/assist in escrow process, etc.
4) Splits can vary. I work in a larger brokerage and know people from ranks VP and above getting 50% to 60%, with a majority at 50%.
5) Taking on someone who is a generalist I believe would depend on the firm, but they would most likely have her focus on a general region and target a certain asset class. I know of a team doing IS and Leasing but in a specific market and one asset class at one firm, a couple teams covering the western US in one specific asset class doing IS, and another covering multiple states across multiple asset classes. It'll vary per firm, but for her coming in will depend on the value she can bring immediately and the firms market share in each category (IS/Leasing/Asset) at that time.
Great response, thank you. Are my recommendations of C&W and JLL legit? Do you have any other recommendations for "big heavies" that could possibly take on someone like this?
My initial thought was to have her hire staff, but after reading the recent posts it seems that having a brand name will help potentially close these deals. C&W and JLL are solid firms, others would be CBRE, HFF, NGKF and Colliers that would come to mind.
It would make more sense for her to hire support. Why throw away 50-40% of her fees if hiring an analyst and or marketing admin can be cheaper?
I've been discussing this with her. My position is that she won't be able to hire the kind of quality staff with the quality tools available at a major broker. She's running a P&L and is like, "I'll pay my analyst $40,000/year" and I'm like, "Come on. You aren't going to be able to hire quality at that rate. And if you do you'll lose him or her within a year and have to re-hire and re-train."
Makes no sense. If she is as busy as you say, she is going to lose WAY more than $40k to house splits.
I'm sort of a generalist like her as well. About half of what I do is commercial lending and the other half investment sales. People like she and I will struggle with the rules and P&P's (policy and procedure) at a large shop. If you're an indi broker making a half a million dollars in fees, you can build your own team. It appears she struggles with giving up control and/or trusting staff. Right now with such low unemployment it's really hard to find good cheap employees.
To put wages in perspective, from 1999 through 2009 I had a full time assistant/office manager. She did zero financial modeling but kept my my desk clean, contracts in order and her loan processing skills were fantastic. I paid her about $50,000yr plus health care of $15,000. No college degree or CRE experience.
Yeah, that's nuts.
I suggested that she outsource analysis to the Midwest where she might be able to pick up a solid analyst for 25% less than what she'd pay here, but she said something to the effect of, "No, I tried that once and I spent too much time correcting their work." But I'm not sure how it would be different by having an in-house person.
Are you independent?
Not a good move to go to a big shop if she's already killing it. Do you think they won't try to steal her business? They'll also tell her she can only work on certain types and sizes of transactions and everything else is out.
She needs to hire her own people and pay them well. Tell her to start with a receptionist / bookkeeper and then if she's still overwhelmed she should hire someone competent and pay them 60-70k + bonus to work 40-50 hours per week. She can then focus on dealing with negotiations and her biggest clients. With those two hires she should be able to handle over $1MM in gross fees per year, which is well worth the 120k/year in extra costs as opposed to giving up 500k to C&W.
Well, that's the thing. She's not killing it. The no-name-ness of her independent brokerage is making it difficult to close on the big clients, and she is so bogged down in administrative work such that she hasn't been able to effectively originate. In my view, even if she landed a whale I don't think she could execute without the support staff.
Your post it made sound like she has big clients. If that's not the case, then she should consider moving to a team at a big shop to learn the ropes and close clients.
I didn't want to start a new topic thread, so I'll ask this question here because this topic sort of hits on it--is there a market need for analytical support/marketing package preparation for independent brokers and non-franchise/smaller brokerage firms? (I'm not talking about "real estate consultant"--I'm talking laser focused on creating marketing documents and producing high quality analyses, i.e. valuations via Argus.) As I mentioned in the original post in this thread, my friend keeps calling me, asking me for help with analyzing potential purchase prices and structures she should recommend to her clients, and her marketing flyers and packages take up a ton of her time to prepare and are pedestrian (compared to what a trained professional could do with expensive software, i.e. Adobe Indesign). She actually offered to hire me full-time but I told her she that couldn't afford my full-time services. I doubt she could afford (or retain) the high-end personnel that a place like C&W could recruit.
I'm genuinely curious if you brokers believe there would be a market for "analyst services" from a third party firm for either monthly retainers or one-off fees? Seems to me one of the primary reasons brokers give up 30-60% (a gargantuan cost) to a brokerage house is the support staff provided. Also, I would imagine lack of professional administrative/analytical/marketing support would make it difficult for a small firm to recruit brokers.
Thoughts?
Maybe look into Buildout, they are not bad for marketing packages/ BOVs.
Wow, Buildout has the endorsement of Cushman & Wakefield's marketing manager, stating that they (C&W) use it.
Top Broker doing $1MM+ in Commissions: Hire a financial analyst and a marketing analyst. They'll handle a bulk of the time consuming work. Also, as they progress, moving them to a agent position and back-filling their positions provides a painless growth opportunity for business.
Broker doing $300K+ in Commissions: There's a ton of "generalist brokers focusing on eastern clients". They're mostly independent and are usually all in their own little brokerage shops. Make friends with 2 or 3 of them and start your own firm. That way, you can share resource team, office space, and administrative work. Also, the synergy over the client type will bring a reputation and name recognition that you're seeking.
Doing less than $300K in Commissions: Go work for a M&M, JLL, or CW. They'll help cover the burdens of being a loner in the industry. You'll be better off, however, going to work for a boutique regional firm. The splits are typically better for incoming brokers with existing clients, they have better analysts working because they're not dog-eat-dog atmospheres, and they often cover more of your expenses.
Just my quick thoughts!
Great thoughts, thank you. Curious on the "hiring your own analyst" thing. My thoughts--and I could be wrong--are that successfully recruiting and maintaining quality talent at one-man/small shops has to be difficult. The quality of analyst (in expertise, experience, work ethic, etc.) would vary wildly between individuals, and most really talented young analysts I would think want to work for big name firms with fantastic benefits and culture. I'd be afraid of losing my people every 12-36 months and then being forced to hire and re-train, with the quality of my hires being crapshoots.
Previous firm I was at had a progression mapped out. You started as a marketing analyst (InDesign making the OM's) and you did that for 12-18 months. After completing that role you spent 12-18 months as a financial analyst (Argus and cash flows). After completing the financial analyst role, you'd move to the brokerage side where they set you up on a draw. You'd keep your analyst salary and they'd just deduct it from your commissions -- that way you were never without your income. The idea was that by committing at a small shop, you'd receive one-on-one training, you were given much more favorable splits (60-70%) and you were put on a draw rather than made commission only right away. It was an awesome deal and plenty of top analysts came to the program. It attracts those who really want to be successful brokers... not those looking to make a quick few dollars. I know at that firm, those who went through the program were making $600,000+ while those who didn't were stuck around $300,000.
I agree with most of what's been said above. Sounds like they might not be going this route but one other pitfall you may want to advise your friend about is that some of the larger shops (CBRE, JLL, etc.) are moving toward a 'managed brokerage' structure whereby you have a bunch of player/coaches that effectively act as 'the boss' in a general region/product type specialization. For example if you do an office deal in NYC and it's over a certain $ value where it is size-able enough to garner attention, if there's an established power broker at the shop that commands a large portion of market share there they are going to want in on a cut of the deal without even doing any work. So you end up having to pay your split to the firm in addition to this amount. Usually the more benevolent ones will eventually offer to help on the leg-work to earn the fee, but you still end up sourcing the deal and having to pay out money just because they were there first.
Wow, that's crazy. What would be driving that move for the brokerages? Is it a way of incentivizing the biggest players to join? Because if I were the originating broker the first thing I would do after getting my deal stolen is leave.
I left that side of the business a while ago but if I had to guess, I would imagine that the draw for the brokerages is two fold: 1) you effectively give incentive for the top brokers to spend time helping the newer people, since they give a kick-back to the broker at the top and 2) it makes it easier for client bases to be consolidated and more likely to stay with the firm if there is a huge pool of brokers to help the client, instead of the client leaving to another power broker when power broker A retires, leaves, etc. The benefit to the top brokers themselves is obvious - minimal extra effort and more fees. The idea is that the smaller broker benefits from exposure/relationships of the big broker, but I rarely see that happening. It's like a pyramid scheme most of the time I've seen it played out.
If she is doing enough fee the brokerage house will subsidize most if not all her support costs provided that she keeps producing.
Source: my team did just that at a huge brokerage house.
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