COMMERCIAL REAL ESTATE NEEDS TO INNOVATE & ADAPT IN ORDER TO STAY ALIVE
In my last article, I wrote about the changes the internet has made to how we, as commercial real estate (CRE) agents, market ourselves and our listings. If the internet has had such an impact, why is it that cold calling is still the number one way agents get new clients? As part of the adaptation of CRE agents, the accessibility of information on available properties to the general public has placed an emphasis on why good agents are still needed – they keep their client’s best interest in mind.
To stand out, a successful CRE agent needs to know more than just what properties are on the market. They need to focus on their clients’ needs and what is best for them. They need to understand their clients’ business model, their goals and create a plan of action that will help them achieve those goals. For a listing on a sale, that seems easy, list the property at a price you believe will achieve the greatest interest while minimizing the risk to your client (pricing it to low), and then marketing it to attract the buyers. It sounds easy, but often is not.
To find the right price for a listing, an agent must have a thorough understanding of the market in which the property is in. They should be able to recognize the potential “value add” of a transaction, and highlight that to attract the largest sphere of buyers and achieve the highest possible sales price. For an agent to successfully do this, they need to understand not just the pricing structure, but also the value of possibly leveraging debt, adding capital improvements, or just repositioning the tenants in a building so that a new buyer can achieve higher rental income. As the need for an agent to understand all aspects of CRE to fully realize the potential of a listing, so to must an agent adapt. Gone are the days of specialization. To fully assist a client to achieve the greatest price, a good agent must truly know all aspects of their submarket, not just the comparable sales, but also the comparable leases, debt placement, and of course, who is in the market for this product and who they are working with; while keeping in mind the true goals of their ultimate client, the seller.
There are companies out there that highlight the fact that they transact more deals “in house” (sell their listings to their own buyers) than they do through cooperation with other brokers. They believe this is a selling point, that they can effectively sell a listing quickly to their own client base, and thus accomplish the goal of selling the property for their client. What they have lost sight of is that the client selling their property has multiple goals, of course selling it, but they are usually looking to sell it at the best and highest price to maximize their return. During my 27 year career in real estate, I have transacted over 3,000 deals, and I on the other hand am more proud of the fact that over 95% of my transactions involved a cooperating broker. Would I have liked to sell or lease a property to my own clients and double my commission? Of course, but just because I represent both buyers and sellers, and tenants and landlords, it doesn’t mean that my buyer, or my tenant, is the best buyer or tenant for a listing I have, or that the listing is the best property for my buyer or tenant.
This brings us back to why the internet has not replaced the real estate agent, and how we as agents must evolve so that it does not. The agent’s value to a client hasn’t really changed much, it’s just that the emphasis towards information on what is available has changed to how an agent can maximize the value for their client and keep their best interests in mind.