Commercial real estate is a growing, highly competitive industry. Brokers new to the business must put in the hours to develop the skills, experience, opportunities, and contacts that investors seek.
Working in commercial real estate has pros and cons, much like any industry. In this article, we’ll look at the top five things to consider if you’re considering becoming a new CRE broker.
Look Before You Leap
Before taking the plunge to start looking for commercial real estate agent jobs, let’s discuss some important things to consider.
Money
First things first: commercial real estate brokers can generate a higher income than residential real estate agents. According to the St. Louis Fed, the average price of a house sold in the US is $434,200 as of July 2021. At a standard 6% fee, assuming you do a 50-50 split with another agent, your commission would be $434,200 x 3% = $13,026.
The average per-square-foot price of an office building sold in the US is $285. A relatively small office building of 10,000 square feet would net you a sales commission of $71,250 ($250 PSF x 10,000 SF = $2,850,000 x 2.5%), assuming you receive a fee of 5% and split half with another agent.
These examples don’t include fees paid to your employing broker, administrative support, or sales team members. Commercial sales deals also come along less frequently than residential.
As with any commission-based role, new brokers may experience long periods without any money. As is the case with residential agents, most CRE brokers don’t receive a regular commercial real estate agent salary.
Sales skills
You have to be a great salesperson if you want to be successful in commercial real estate. Plan on spending most of your working hours trying to convince prospects that you should be their CRE broker.
You’ll need to know the movers and shakers in your market to win clients and deals. Understand what the competition is doing and seek out leads through networking and cold calling.
Education
While every state requires a license to sell, lease, or manage commercial real estate, the educational requirements to get a commercial real estate license vary from place to place. In general, courses average around 90 hours of classes plus a final state administered by the state.
After getting licensed, you’ll need to continually stay updated about what’s happening in your market by reading trade publications, studying economics and finance, communicating with other CRE brokers, and continuing your formal education to renew your license every two to four years.
Employer
Most people begin their commercial real estate broker careers by working for a large CRE firm. Some of the US’s most prominent commercial real estate companies include brokerages such as CBRE, Cushman & Wakefield, and Avison Young.
Working for a big player in your market is an excellent way to learn about the commercial real estate business. However, be prepared to do grunt work and spend hours “dialing for dollars” and chasing down leads. It’s hard work, but your efforts will pay off in the long run with enough perseverance.
Difference Between Residential and Commercial Brokers
Many real estate agents begin their careers working in residential. Then, after a few years, they discover it’s time for a change. If this sounds like you, keep in mind that residential and commercial real estate brokers have some significant differences.
CRE brokers receive more specialized training and must be familiar with financial investment concepts such as cap rates, net operating income, ROI, and IRR. They also usually work 9 – 5, Monday through Friday, while residential agents often work nights and weekends.
CRE brokers usually complete fewer total deals because fewer commercial properties are on the market. Transactions take time, as commercial real estate deals can require months or even a year to close escrow, while residential transactions typically close in 60 days or less. However, CRE commissions are larger for CRE brokers in both sales and leasing.
Steps to Become a CRE Broker
Now that you’ve done the research let’s discuss the steps involved in becoming a new commercial real estate broker:
Research your state-specific CRE licensing requirements. To obtain a license, you must fulfill specific requirements. These include being a resident, meeting a minimum age and education level, completing prelicensing education, and passing an exam.
Enroll in a real estate school. Most states’ real estate departments offer resources for required courses and hours on their websites. The total cost for classes is less than $1,000, and you may take courses in a classroom or online.
Take the exam and apply for your license. Passing the final exam is required by each state’s department of real estate. Exam questions usually consist of multiple-choice and require the use of a simple calculator.
Be prepared to present your identification and proof that you’ve taken all required courses. Some states also need you to be fingerprinted and submit to a background check.
Choose your area of specialty. Typical commercial real estate asset classes include large multifamily and hotels, retail, office, industrial, and land. You can be a sales or leasing broker within any of these categories and represent buyers, sellers, landlords, or tenants. Some CRE brokerages will let you do everything, but the most successful commercial real estate professionals specialize in a specific niche.
Hang your license with a CRE brokerage. Apply for a job at a local CRE brokerage with an excellent reputation in your local market or for the field you want to work. Some large brokerages do everything, including sales, leasing, and property management. Other smaller boutique firms may focus on only one asset class or transaction type, such as office leasing or apartment building sales.
What CRE Clients Expect from You
Clients are golden in commercial real estate. Without a building owner on the sales side or a tenant to represent you when looking for space, your deals will be few and far between. CRE clients will expect several things from you:
- Expertise in your niche (such as leasing or value-add investing), types of commercial property, and locations in the market or submarket.
- Excellent communication– regular office hours and promptly returned phone calls and emails.
- Market connections your client needs help finding on their own, such as knowing about specific office suites or off-market deals.
- A full-time focus in the commercial real estate business, not part-time as many residential agents are.
- An understanding of clients’ investment objectives and the ability to help them meet their long-term business goals.
Setting Yourself Up for Success
Having a commission-only job like commercial real estate can be challenging. That’s why it’s essential to set yourself up for success by having a system to close more deals faster and generate income.
Find a niche that allows you to make the most of your skill set and personality type. Commit to working at least 40 hours a week by planning out each day, allowing time to meet with potential clients or take property tours.
Network with people in your office, brokers from other commercial real estate firms, lenders, escrow officers, building inspectors, and property owners. Build your client list as quickly as possible to generate repeat business, referrals, and co-broke with other CRE agents specializing in a different niche or asset class.
The Bottom Line
If you’re considering becoming a new CRE broker, keep your options open and work hard in your selected niche. Unlike home buyers, commercial real estate investors buy property to make money instead of as a place to live.
The more you can help your clients with profitable investments, the more money you will earn as a commercial real estate broker. The more specialized you are, the more clients will value your skills and experience, and the greater your success.
