Commercial Real Estate Broker
A state-licensed professional middleman who assists clients in selling, leasing, or purchasing commercial real estate.
What is a Commercial Real Estate Broker?
A commercial real estate broker is a state-licensed professional middleman who assists clients in selling, leasing, or purchasing commercial real estate.
These brokers are some of the most influential people in the industry. They bridge the gap between sellers and buyers, giving them clarity on property activity and advice on improving it.
Brokers utilize their knowledge of the market, property laws, financial management, and other tools to help find listings that best suit their client's needs.
Depending on whether or not a broker is dealing with a landlord or a tenant, a broker typically will have to undertake different responsibilities and priorities.
For transactions with landlords or sellers, the primary focus is finding prospective tenants, negotiating positive returns, and marketing the property. A broker will conduct a detailed market analysis and provide clients with buyers who can engage in negotiations.
For transactions with tenants and buyers, the objective is to find a space that meets the client's needs and goals.
Brokers will often use listing platforms to find the best properties. Once these properties are found, prices and terms are negotiated. Agents that represent both tenant and landlord are known as dual agents.
Most of today's businesses have worked or will work alongside a CRE broker or agent at a certain point. Therefore, understanding what they do can provide a more engaging relationship and prove beneficial for future transactions.
A real estate broker can manage their firm, while agents work for the brokerage firm.
If you're looking to start your own commercial real estate brokerage business or if you are looking for a broker, read this guide to learn more. Here are some essential things to know before getting started and what to expect along the way.
Why Use Commercial Real Estate Brokers?
Commercial real estate brokers are a necessary part of the commercial property industry. Without them, buyers and sellers would be looking for each other blindly, which could lead to missed opportunities.
CRE brokers can often represent the buyer and the seller in a transaction. Therefore, they understand what's happening with property listings and how to help their clients succeed.
As a broker, the primary responsibility is to help property buyers and sellers by advertising it to potential clients. They also help negotiate the property's final sale price or manage any necessary repairs or upgrades before its sale date.
Here are a few incentives for people interested in hiring a broker:
- Business owners and individuals who are time consumed by their work often do not have the luxury of finding their clients. Brokers eliminate this burden by taking the time to understand their client's needs and attending to those needs.
- Working with a broker can save money. They understand how the market works, notice hidden fees, and can negotiate better deals.
- Some commercial properties can often not appear on public listings. However, commercial real estate firms usually pay to access these listings, which can be readily accessible for brokers to give to clients.
- Highly skilled brokers will always use what they know and what they have learned to select the best properties for the best price. Most brokers can procure options that would be most beneficial for the business.
- Brokers often have a great extent of networking connections. Networking can provide brokers and clients with the best resources.
Many businesses do not use commercial real estate brokers because they want to pay commissions. However, the commission is rarely charged to companies. Instead, they are often taken care of by the landlords or sellers of the property.
Brokers will keep in touch even after completing a transaction. People can expect a continuation of this communication with their respective representatives.
Responsibilities of a Real Estate Commercial Broker
There are a lot of different responsibilities that come with this role. Professional sales experience and Office program proficiency are needed to be a successful broker. Ideally, a broker should be able to provide the best service while dealing with multiple clients.
The most common tasks for brokers are research, analysis, negotiation, and leasing.
They must know the market well to negotiate the best price for their clients. This also includes understanding how much space is needed, where their clients want it, and at what price.
A broker must do much research before they can even start searching for properties. They must understand what's currently available on the market, what's coming up soon, and their client's needs.
The location of properties is a critical factor when conducting market research. Some things that brokers often consider are nearby schools, restaurants, parks, and other resources. All these components determine the price range and the demand for such properties.
The analysis stage is integral to commercial real estate brokerage because it helps brokers determine what they need to do next.
After they have analyzed the information they gathered, brokers can then figure out which ones will work best for their clients.
Once a broker has analyzed all their options and found the best fit for their client, it's time to negotiate with sellers or landlords. The negotiation involves figuring out which terms are necessary to satisfy both parties.
Finally, once everything has been negotiated and agreed upon by both parties involved in the transaction, brokers will help find tenants for whatever property is.
Qualifications for Becoming a Commercial Real Estate Broker
One of the first things to do as a commercial real estate broker is get a sales license.
The process is almost the same as a residential agent, but the focus is tailored more to commercial properties. A great way to begin this process is to start online real estate school.
Most states require prior work experience of at least one year before qualifying to become a broker. It is best if aspiring agents look for a brokerage specializing in the type of real estate they wish to work at.
The general requirements to be a real estate salesperson include meeting specific legal requirements, completing the proper coursework, passing the final real estate exam, choosing a brokerage firm, and then applying for a real estate license.
To excel in this industry, the first position is a commercial salesperson. Gaining experience means learning everything possible from an experienced brokerage.
Understanding the industry's facets is needed to receive a broker's license. In addition, expertise in marketing and branding is also beneficial.
Joining a professional brokerage firm can assist in these connections and even in closing property transactions.
Over time, the branding strategy can be changed and adjusted more efficiently. For example, adding a job title on a social media platform is a good step toward promoting services.
As license holders, agents can work in either residential or commercial areas. Finding one’s niche is essential, especially when figuring out what properties seem enticing.
Commercial real estate includes different property types, such as hotels, apartments, offices, etc. Therefore, the best way to gain experience is to gain extensive knowledge of specific property types instead of trying to understand all of them.
Gathering prospective clients should also be taken advantage of at a brokerage firm. Agents receive access to a commercial real estate database that the public cannot see.
Sites like LoopNet provide listings of properties for sale or lease near any area of interest. Agents can also use sites like Craigslist or newspapers to find buyers interested in specific properties.
Once a good base is established, agents can start reaching out to local businesses about their needs. Showing clients the tools and access is an excellent way to prove the benefits of having a broker.
Compensation of a Commercial Real Estate Broker
CRE brokers are compensated off commission, which is usually charged to the seller. In some cases, the buyers of properties could also owe a fee. This usually occurs when the broker is representing both parties of the transaction.
This commission can be earned from the agents that brokers sponsor or from their closings. In addition, commissions can be split if two brokers work on the same transaction.
Clients and brokers must negotiate the commission fee before working together.
Antitrust laws allow for this commission negotiation due to the costs of properties being vastly different. Another factor is the difficulty in finding specific properties. This affects how much a broker should be compensated.
Generally, these fees range between four to eight percent of the closing price.
For example, if a six percent commission fee is agreed upon to sell a $600,000 property, the broker would earn $36,000.
If the buyer has a broker representative, the fee would be split among the two. More than often, the buyer agent will receive a minimum of 3%.
When dealing with the split between an agent and a broker, there are different ways it can be divided. Typically experienced agents with high sales will receive a more significant cut. This form of payment is known as a straight commission split.
Another way that commission splits could work is known as a tiered split structure. In these cases, brokers receive a larger cut of the commission. The agents can receive more as they continue to sell more. Each year the split is reset.
The average salary for a CRE broker is around $66,000. This number might sound high, but it's important to note that most brokers are self-employed. Salaries often will also depend on the number of certifications and experience brokers have gained.
Pros and Cons of Becoming a Commercial Real Estate Broker
Over the years, buying and selling property has always been a widely appealed career. However, this field is flexible and lucrative when done correctly.
Becoming a CRE agent is a difficult decision to make. Taking the time to evaluate the pros and cons will prove worthwhile. The market’s constant fluctuation can quickly affect the ability to make sales.
- The real estate market guarantees consistency. Even during a turbulent cycle, it manages to pick itself back up.
- Working as a broker allows flexible work hours.
- Income is affected directly by how much work is being put in. More work means more earnings.
- Being a broker gives you special off-market access to specific deals and opportunities.
- Commercial real estate sales often receive higher commissions than residential real estate.
- There are fewer competitors due to most agents deciding to do residential.
- Despite the flexibility in work schedules, brokers may also find themselves working around a client's schedule.
- There is no safety net when the market is struggling. These are unexpected events that are to be prepared for.
- Brokers should always consider the long life cycle of deals. Sometimes transactions can take a while.
- Clients can often be stressed, which may make the process difficult.
A property only classifies as a commercial property if used for business. These properties include office spaces, apartments, outlets, stores, and many more.
As technology improves, brokers find it much easier to market themselves. The real estate industry is also evolving in ways that make it much more accessible for new and seasoned brokers alike.
Most commercial agents and brokers have prior experience and a high caliber of knowledge within commercial real estate.
The future of commercial real estate brokerage looks bright. According to the National Association of Realtors, at the end of 2021, the number of agents is over 1.5 million.
Some brokerages have even begun using digital marketing to reach their clientele. Online marketing is no longer reserved solely for salespeople and small businesses—it's also become a viable option for larger organizations.
Brokers can use digital marketing tactics like email campaigns and social media ads to widen their reach and create brand awareness.
Sales in CRE can be highly lucrative. The larger the property, the greater the commission.
The CRE industry is more complicated than the residential real estate industry. More than often, agents often follow the path toward residential work.
Commercial Real Estate Broker FAQs
CRE brokers have specialized expertise that can help guide clients toward their goals, whether they are buyers or sellers.
To be productive and effective, brokers must understand their client's financial needs and goals. In addition, an open line of communication allows clients to trust in the broker's work.