Commercial Brokers, How did you go about identifying your niche?

Question

I just finished reading a book by John L. Bowman, "How to Succeed in Commercial Real Estate" and I really really enjoyed it.

For those of you seasoned full time commercial brokers, how did you go about identifying your niche and specialization early on in your career whether it is retail, industrial flex, multi-family, office, or triple net lease. What would you say were your greatest challenges as a commercial broker?

I don't think that I can ever give up residential, but at the same time I know that I want to get into commercial. It seems that retail and triple net leases are the areas I am in interested in the commercial space, but I am 100% sure yet.

Thanks.

Brian P. · Answer

OK, I have done plenty of commercial deals during my lifetime. I considered my office a full service real estate office and that was residential and commercial. When I first got involved with commercial I was a broker but my entrance was through investing and I quickly found out that commercial brokers had the tendency to stand on pedestals and sit on thrones while smirking at residential agents. The truth was they just had some knowledge that hadn't been acquired while learning residential and normal house sales but was not anything that required a PHD and was really just basic business and didn't really require joining some secret club and learning the secret handshake where you then received the secret info.

One of my early deals was brought to me by the seller of a house I had listed. We were having lunch and he said what do I know about the XYZ area, which was industrial. Found out he was the owner of the company I thought he worked for, their lease was coming to an end and the leasing agent was trying to get a large increase and a much longer lease and I said don't you think it's about time to buy and control the properties you need for your business and why extend the lease, you said you need to expand. Long story short, I sold him the property they had been leasing and the one next door. I think the leasing agent was going to go for a listing after the new lease was signed.

And was soon receiving a phone call from the junior god upset that I had wandered into his realm without his permission and had stolen his client. And I said you were representing the landlord weren't you and your only legal duty was just to rent out the property right, and then he declared yes but thanks to you I can't do that now, and don't you know your not qualified to deal with commercial real estate and should stick with houses. I said you know when the title company gave me that great big commission check they didn't ask if I had a license stating commercial real estate broker, they though the one saying real estate broker was just fine. And as for the leasing do you think learning the few extra things or clauses needed in a triple net lease requires a couple extra years of college or something.

I didn't deal with property, I dealt with people and I found solutions to their problems, if their problem was whatever, my job is to solve it and sometimes I brought in other professionals to assist me in doing that. I once brought in a commercial broker to assist in one deal but it wasn't his expertise I wanted, he thought it was, but it was really his contacts in the city involved and I needed them to smooth out getting the project off the ground. When we were done he said to me hiring me and my expertise really helped you to advance your knowledge of  commercial real estate and you should consider taking advantage of what you learned from me and maybe switch from residential and do commercial real estate, maybe with my company.

And he was sort of right, even though he taught me nothing new and I think he learned something from the deal, wearing both hats is tough and specializing in one is the right way to go but the variety I got from solving peoples problems, whether a home, a multiple family deal, land development, selling a ranch or a farm or a motel, or a truck stop or a high rise office building, all provided  sort of a thrill and satisfaction that just selling single family homes only didn't do, but I loved the satisfaction homes and helping families provided too. To me this is a case of variety is the spice of life. And I miss it, I retired as of January 1st officially so my wife of 55 years and I can spend the day getting through our medical problems together, Golden Years, BS, that term was invented by the medical community to describe the years our gold is transferred to them.

Adam Johnson · Answer

@joel owens may want to weigh in here, but I would tend to go with Chris Soignier comment that if you don't go all in with commercial brokerage, you will have a limited success with it.  My experience in talking with several commercial brokers is that it can take up to a year to close any deal (longer if you aren't lucky).  You need to earn and retain respect among clients, build relationships, and know what the he.. you are talking about to succeed.

I am a broker myself by license, but much more of an investor by trade.  I am at a point in my career where I am transitioning my investments from 2-4 family where I started to more complex commercial investments.  With that said, I have been involved in commercial construction and property management for a considerable amount of time (decades), so I have a lot of background knowledge to rely on.

With residential, things are pretty simple since it is much more of an emotional buy in many cases.  In commercial, it is much more facts and numbers based.  Knowing such things as ceiling heights, utility availability, environmental concerns, traffic counts, etc, etc, etc is critical.  Knowing what you need to know is equally critical.  It is pretty easy to "fake" your way through residential, in my opinion.  This is not the case with commercial brokerage.

While I think you can start to transition, there will come a time that you need to step up to the ledge and jump.  You should plan on not making much for a while right after that.  Learn as much as you can before that if you rely on commissions for your income.  This will help move you through the transition more quickly.

To answer one of your questions - maybe you could find commercial agents/brokers that will allow you to shadow them on different types of deals.  See what interests you the most so that you can be passionate about it.  Also see what types of property are common in your area.  You don't want to be an expert in heavy industrial on rail if there aren't any railroads in your area.  Likewise, you don't want to focus on Office space if your area is more retail.

You will likely need to look at yourself to answer your questions.  Residential and commercial are 2 different animals.

Joel Owens · Answer

James and I have met up before for lunch.

He is talking more small balance commercial for his business owners say 500k etc.

I mentioned before that he does a referral and then shadow the commercial broker to learn from them. That was my thought on it.

A true commercial only brokerage doesn't handle residential. You can find small firms that do residential and dabble in some land listings or small mom and pop gas stations and things like that.

Those are not the brokerages buying or selling the main line corporate quality properties trading in the millions to tens of millions in price.

Every once in awhile they might get a property to sell but not on a consistent basis.

James Park · Answer

Adam and John,

Thanks for your replies and your valid points. I've been having lunch with several industrial / retail commercial brokers who work in my area and I am very surprised to see how much they are willing to share about their business and willing to help me out. I agree that commercial brokers have more of a finance background than what i have seen with residential agents. I can actually have an intelligent conversation about finance and economics with CRE brokers.

It appears to me that relationships and who you know is much more important in commercial arena than it is in residential. Couple of them wanted me join their CRE brokerage but the deal breaker for me is if I hung my license with them, I would not be allowed to do any residential transactions.

Many of my existing clients are tech entrepreneurs and home based business owners. Couple of have contacted me that they need to purchase their first commercial property to house their businesses, so I think it is good that I am starting to network with the strong commercial listers in my part of town.

Anyways thanks for your responses.

-James

Chris Soignier · Answer

If you don't give up residential, how do you plan to compete against commercial brokers who devote 100% of their time and effort to that niche?    I'm admittedly no expert here, but I'd want to hire a broker who specializes in commercial, not a do-it-all, to sell my commercial property.

Commercial Brokers, How did you go about identifying your niche?

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