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December 2, 2011
John Miller, senior managing director, Cushman & Wakefield-Commerce.
Scott Coombs, Northwest regional managing director, Colliers International.
Gordon Buchan, president and COO, Kidder Mathews.
Jim Bowles, senior managing director, CBRE.
1. Things haven’t gotten much better since we asked you this last year. But we’ll ask again. How are brokerages running their businesses today?
MILLER: In this ever-challenging economy, we continue to evaluate the services that we provide to our brokers who, in turn, provide added value to our clients. We have a renewed emphasis on training and a committed focus on mentoring younger brokers. Additionally, we continue to invest in our infrastructure, which includes our database software, financial analysis services and market research.
With this investment, we meet our clients’ increasing appetite for in-depth analysis, market data and broader spectrum of expertise. Whether it’s our financial consultants, our distressed assets resolution group, our project managers, or our research team, our brokers are leveraging our services more to retain and win business. Many tenants have a presence in multiple markets and, thus, they need a firm that can provide a suite of services, nationally and all under one roof.
COOMBS: We are going through a significant transition period as larger tenants and institutional property owners are seeking to work with fewer service providers offering consistent levels of multiple services in multiple markets. This trend has resulted in consolidations of small and mid-size brokerage firms with global brokerage firms so that they can compete in this business environment.
Brokers are often asked to provide lease administration, project management, financial analysis, appraisal services and tax appeal to their clients, in addition to transaction management. Brokerages today are providing more services to their clients and working with them in more markets than they have in the past.
BUCHAN: We are running our brokerage business in 2011 in the same basic manner as we did during the strong economic times in 2006 and 2007. The bottom occurred during 2009, but brokerage revenues have improved for us during 2010 and even more this year. It is getting better. The higher revenue is reflected in an increase in the number of transactions, but transaction volume is still below 2007 levels. As a result, competition for clients is strong, which is putting pressure on brokerage firms to continually improve technology and information resources.
BOWLES: Some industry sectors, such as the multifamily and institutional investment markets, are improving significantly. We’re also seeing reasonable growth in some office sectors.
At CBRE, we are intentionally focused on expanding our service offerings to our existing customers while making efficient use of our time and resources. There are always plenty of things to work on but a key to success in the brokerage business is time management. It’s easy to stay busy but our top performers are generally the professionals who stay focused on results. They always ask the tough questions early in the transaction process and they don’t let themselves become distracted with time-wasting trivia.
2. How do you keep your teams motivated in this economic climate?
MILLER: Hiring premier brokers and employees with natural motivation is key, regardless of the economy. If you don’t have a competitive edge in this economic environment, you’re not going to be successful in this business. We’ve placed an emphasis on hiring good people that attract other good people and creating a work environment that shares the same vision of success.
COOMBS: For the most part, brokers are self-motivated and are that way regardless of market conditions. We create an environment that they enjoy working in, that enhances their chances of winning business, and minimizes impediments or frustrations that dampen their motivation. We let them know that company leadership will do anything possible to help them win business or service existing clients. We work very hard to hire only quality people who are excellent practitioners, who our brokers will have fun with, and are proud to be associated with. These values create a work environment that is stimulating and enables self-motivators to thrive.
BUCHAN: Commission sales always promote a high degree of self-motivation. Certainly it is important to share successes and best practices, but brokers tend to be highly focused and motivated people. The economy has forced all brokers to work harder, so they are all on it! Many of our clients sense improving economic conditions and are looking to take advantage of current market pricing now.
BOWLES: Ours is a cyclical business that is most successfully serviced with an optimistic attitude. The market constantly changes depending on what is happening in the economy and with local market conditions. We encourage our professionals to adjust to these changes and prepare for the future by thinking creatively, proactively embracing technology and integrating their business with all of our service lines.
The most successful practitioners are usually those who are exploring new techniques and opportunities to service their customers. Ultimately, there is simply no substitute for good old-fashioned hard work. All things considered, the brokers with the most consistent business, the best customer base and the best market share are usually the ones who have the best work ethic. Nothing is more motivating for brokers than creative engagement and commitment to the business.
3. Is there a light at the end of this tunnel?
MILLER: I believe everyone in the industry remains cautiously optimistic. With more than 10 million square feet of vacancy in the Seattle market alone, the road to recovery may be long. But, on the flip side, we’ve had positive job growth for over a year and, as we all know, job growth drives our industry and our economy.
With Amazon’s recent growth in Seattle and the rumors that they will continue their recent hiring spree, job creation in the high-tech and aerospace manufacturing industries, and forecasted growth in retail trade, we are predicting positive absorption in most market sectors.
It may seem long and arduous, but there is definitely a light at the end of the tunnel.
COOMBS: Yes, definitely. A significant portion of our economy is already in recovery mode, specifically companies in the software, e-commerce, gaming and aerospace industries. Accordingly, the property market has started to recover as well, especially those properties that offer creative space or high-quality space and amenities.
The investment side of the business is also recovering inconsistently. Properties that are considered core assets are trading today at very low cap rates that are indicative of the extremely strong demand for the least risky investment properties in our region. Non-core assets are also experiencing increased demand, but at much lower valuations to reflect their higher risk profile.
Multifamily is especially strong right now as housing and demographic fundamentals in this region point to a shortage of apartment units for the foreseeable future.
BUCHAN: Yes, we are moving into the light and it’s getting brighter every day. The economy in Seattle and the forecast for our commercial real estate market is quite strong compared to other U.S. markets. Job growth in technology and aerospace is leading our local economy upward and causing additional job growth in local support service companies.
While commercial vacancies increased during the recession, we are now seeing absorption of that vacant space and improving buyer confidence in the acquisition of office, industrial, retail and apartment properties. Our firm is budgeting for further increased brokerage revenue during 2012.
BOWLES: Of course. That is the beauty of the real estate brokerage business. There are always opportunities to service our customers. There are always buyers and sellers and tenants and landlords who require help or advice with their facilities. Their various needs will dictate the method and approach that CBRE will use to meet their real estate goals. CBRE’s longevity has been based on our ability to adapt as the real estate landscape ebbs and flows.
4. One piece of advice for brokers moving forward?
MILLER: Diligence, creativity and the ability to leverage your time. Those three characteristics remain a key part of a broker’s success.
COOMBS: Every opportunity is extremely competitive today, so you enhance your chances of getting hired by being a part of a team. Find another broker with complementary skills to yours and team up on as many assignments as possible to provide better service. If you are newer in the business, try to team with someone more senior than you to enhance your resume of experience.
BUCHAN: Just a reminder that our clients need our help on all of their commercial real estate needs, whether a transaction is near or not. Stay in touch with your clients on a regular basis and look to add strategic value whenever possible. Whether a property owner or a tenant, your clients need to be kept abreast of market trends and forecasts in order to properly plan to run their businesses and to take advantage of opportunities. Leasing and sales opportunities available now may not be in the cards down the line.
BOWLES: Stay positive and commit to truly understanding what your customers need. Examine your habits and try new things and new approaches to meet those needs. Get out of your own way!
Barbara Travers, owner of BT Marketing, writes for and about the commercial real estate industry.