Starting a Career in Commercial Real Estate
“Why do you want to be in commercial real estate?” That’s the first question I ask folks who call asking advice. Why do I ask this? Because the advice I give them is directly related to their answer to my “why” question.
Here are some of common answers I receive:
- I want to make lots of money.
- My family has dabbled in it.
- I have some family money or land which I’d like to develop.
- I know "so and so" who is in the business.
- I heard about it in school and wanted to know more.
- I used to own a business and leased from a commercial broker.
- I was in banking/lending/architecture, etc.
So you see, the motivations are quite different and in some of these cases, the person seeking information already has a leg up on the person off the street but doesn’t know what to do with it (or even that they have it!). This is when they turn to me for advice.
Do you make more money on commercial real estate? Let’s try some math:
Agent sells $275,000 home. Agent co-brokes. Agent’s firms receives 3%. Agent receives 65% of his/her firm’s share. Agent’s commission = $5,362.50.
Agent leases 7,500 SF, 3 year lease, $12/sf. Co-brokes, agent’s firm receives 3%. Agent receives 65%. Agent’s commission = $5,265.00
Oh ho! What about selling a $50,000,000 mall? Well, likely, you won’t be doing many (if any) of those right away. Sure, you can make a pile of dough on big deals, but they take much longer –- one of mine took three years (and it was no where near $50M!). I had a bunch of marketing and promotion bucks in it and had it cratered (which it threatened to do several times) I would have been out that money.
Most residential deals (even the big ones) usually close within one to two months of contract. Not so on commercial deals. Even the 7,500 SF lease example above could have taken six months or more to get done and paid.
Since I am one of the few commercial real estate instructors (outside the higher level designation programs like CCIM, SIOR, CPM, etc), I receive numerous calls from past attendees of my classes. There is very little information about commercial real estate training, unlike the wealth of information about residential real estate. While there are many different avenues one can take in residential real estate, there are even more (and they are more distinct, I think) in non-residential real estate. Let’s take a look at the major categories of non-residential real estate:
Is there overlap? Yes. Are there sub-specialties within these categories? Yes. For example, in larger markets, a broker or developer may specialize in only high-rise office in a certain part of town. In small markets, to survive, most brokers do a little of everything, even residential, as the market does not have the depth to allow specialization unless they do most of their deals out of their area or handle a very large area.
So why do the resources seem so limited? I would say that there ARE vast resources, but they are industry specific, not marketed nor directed toward the general public or even the commercial real estate generalist. However, one must be aware of the numerous professional organizations in commercial real estate to know where to look. Also, many of the publications are somewhat technical, filled with industry jargon, again, meant for those in the business. Some information may be restricted to its members.
Don’t worry, in the next article, I will list many of the organizations so that you may look them up, peruse their offerings and make your selections based upon your needs and direction. I say up front that I do not know of any “Sell a MultiMillion Shopping Center in 60 Days” type of book you would think you’d find at a Barnes and Noble book store. The publications which have what most folks are seeking will be available through industry related organizations. It’s the nature of the business, I think.
OK, getting started ... Let’s say that you are either a successful residential real estate agent or a business person looking to change careers. You are not sure which area of commercial real estate you’d do best. You have business experience and you know people. (We’ll call these folks your “sphere of influence”.) What should you do? Here is the advice I give everyone:
- List everyone you know in commercial real estate.
- Call all of your relatives and closest friends and list everyone they know in commercial real estate.
- Start calling.
What you are going to do is what is known as “an informational interview”. You are NOT seeking a position, because you don’t know what you want yet or where you may fit in. Most of us are somewhat clueless at this stage and to ask for a position when we are clueless is a mistake and can perhaps make us look very stupid. That is not the way to begin a new career, which depends upon reputation and business savvy. Here are the steps:
- Call first those from your list you feel will give you some time. Ask for a 15-minute slot. Explain that you are gathering information only, not seeking a position at this time.
- During the interview, ask the real estate professional how (s)he got started and what advice (s)he gives a newcomer. Ask for a brief overview of the business and their industry. Before you leave, ask for two to three names of others you should talk to. Ask if you can say that this person referred you. (This can really open doors for you.) Thank the professional for his/her time. Send thank-you follow up note a few days later. (Not an e-mail, please.)
- Continue to call those on your list for informational interviews. At some point you will begin to eliminate areas of commercial real estate and start honing in on those areas we are becoming interested in.
- When you think you have narrowed it down, go to the industry specific web sites (shown later in this article) and do some research. What should you seek? Well, get to know the jargon, types of projects and key players. You can do this by reading their publications. (Oh, yes, do ask your helpful contacts if you can have or borrow some industry publications – usually found in the reception area or their library.) Visit company web sites to learn more.
- Look at projects done by local companies or being brokered by the companies you are interested in. Create some questions about these projects.
- Attend as many commercial real estate classes as you can. Not only will you learn; you will probably make your BEST contacts there.
- Get an idea of compensation structure. Some are commission only, some may be draw against commission, some may be salary. Decide what you can live with and what you cannot. Unless you have something really swell to bring to the table (i.e. you are the Wal-Mart heir) you will not be in much position to negotiate. Feel free to try, there’s usually a little wiggle room, but others may be seeking the same opportunities as you.
You are now ready for serious interviewing. Narrow your final choices down to no more than five. Unless you are in a very large market, commercial companies will know exactly who is in the market and who is interviewing. Just like commercial properties, we don’t like to have them “shopped,” hence, you need to narrow your list down.
At this point I am usually asked, “Should I go with a developer or a general broker?” I answer, “It depends. Will you have some product to market? No? Then I think you should start with someone who does.” Starting with a developer allows a new broker to learn the product and market with the safety net of having “captive product.” Eventually, the brokerage community will know you and you them, through your marketing of your developer’s real estate. You can decide once you have some experience behind you what you should do next. But this article isn’t about your life in commercial real estate, it’s about getting started, so back to getting our toes wet.
- Call back your contact person for another meeting. Explain that you have talked to many professionals, have narrowed it down to XYZ field (retail, office, etc), you’ve visited some of their deals/listings and have some specific questions.
- When you meet, ask your questions, share what you have learned (we are a gossipy bunch so any appropriate tidbit you can share without sounding gossipy will earn you some attention) and ask what opportunities his/her company has.
- Keep in mind that most commercial firms don’t have “openings” but create slots depending upon need or opportunity.
- Explain what you can bring to the table. Remember that the company is interested only in WIIFM (what’s in it for me?). Don’t rattle on about your wants, needs and desires unless specifically asked, then be brief. Who cares?
If you have an “in” USE IT! If your dad and the company head are golf buddies and you have decided that you can do well there, go for it! Most opportunities are created.
Next -- what do do once you land a position.
(Cindy S. Chandler, CCIM, CRE, is the 2007 Chair, REALTORS Commercial Alliance.The Chandler Group, Charlotte, NC 28226. She is the author of The Insider's Guide to Commercial Real Estate.)