Get Smart Before You Start
Look before you leap, say veteran commercial brokers. Read on for tips on what tools you’ll need to be successful.
Like many Florida real estate professionals, Jim Mitchem is making a transition from residential to commercial sales. He’s taken training classes, he’s picked a market niche, and he’s handing out plenty of business cards. “In some ways, commercial sales is a numbers game, just like residential,” says Mitchem, a sales associate with The Keyes Co./Realtors’ Hutchinson Island office. “But it really is a different field, and you have to adjust your thinking.”
Veteran commercial brokers like Gregory Minto agree with that outlook. “If you’re thinking about going into commercial, you should start studying,” says Minto, a sales associate with Builders Realty and Investment Network in Coral Springs. “There are plenty of commercial classes you can take, and the lenders will be happy to teach you as well. While it can take longer for a sale to occur, the rewards of getting into the commercial sector are great.” Opportunity Is Knocking
Many economists and real estate analysts say Florida’s commercial real estate market offers business opportunities for sales associates willing to invest their time and money in redirecting their careers. Among them:
• Selling retail, office, industrial, hospitality and multifamily properties to investors and business owners
• Leasing commercial space to business tenants
• Selling condominium units in office, warehouse or medical buildings
For sales associates, the potential list of customers is almost as vast. Buyers include pension funds, hedge funds, private equity funds, investment banks and wealthy individual investors seeking commercial properties to add to their investment portfolios. And the list of sellers ranges from individual owners of small buildings to investment partnerships and major institutions.
Cynthia C. Shelton, director of investment sales for Colliers Arnold Commercial Real Estate Services in Orlando, points out that many new commercial sales associates start with smaller customers and gradually work their way up. “It’s easier to break into the market by representing individual owners and users of smaller properties, such as neighborhood retail centers, warehouses or office properties,” she says.
The diversity of the commercial sector provides plenty of options for sales associates, even in markets outside the major metropolitan areas. “Agents who are up to date on their local markets can make the conversion gradually,” says Darlene Taylor, broker with Ruckel Properties Inc. in Niceville, east of Pensacola. “Not every community lends itself to dedicated commercial work, and you might be able to continue your residential sales along with handling commercial properties.” First Steps
You first step? Start saving money. “You have to be realistic about budgeting and the financial issues,” says long-time commercial broker Jack Lowell, managing director of Flagler Real Estate Services in Miami. “It usually takes at least two years to start making a decent living in the commercial arena.”
That’s because it typically takes longer to cultivate and close a sale with a commercial than a residential customer—six months to two years or even longer, depending on the size and scope of the transaction. On the other hand, the financial returns can be substantial when closing the sale of, say, a $3 million shopping center, a $5 million warehouse or a $20 million office building.
“For me, the hardest thing about making the transition was saving enough money so I’d have a cushion,” says Alison Hodges, who last year became a sales associate with Coldwell Banker Commercial in Maitland after a career in corporate real estate. “But on this side of the business, the sky is the limit as to what you can make. Sometimes you make nothing, but you can really reach for the golden ring.”
A second important step is to brush up on your math and spreadsheet skills. That’s because numbers, not emotions, drive commercial transactions. A buyer will ask, “What’s the return on my investment” rather than say, “I just love this home!”
Mitchem says that’s one of the things that made him decide to switch. “I’ve always been a numbers person myself,” he says. “While there’s still some emotion in every deal, there’s not as much as on the residential side. For buyers, it’s always a matter of looking at the figures.”
For most sales associates, the third step involves taking a training class to learn the basics. This spring, Mitchem completed two courses offered by his brokerage company. “These classes covered the real nuts and bolts,” he says. “Like what you need to know about an office building like the sprinkler systems, drop-down ceilings and the types of flooring.”
And, most sales associates insist that the Certified Commercial Investment Member designation is a must. See “Take CCIM Courses” above. The CCIM designation courses teach real estate professionals the fundamentals of commercial real estate. Pick a Niche
One of the keys to success in commercial sales is picking the right niche. “When you start out, you should spend 100 percent of your time learning everything you can about a certain product type, such as retail shopping centers, or a geographic market,” says Shelton.
For Justin Latorre, an investment associate with Marcus & Millichap’s Orlando office, that niche was shadow-anchored retail strip centers located in the southeastern quadrant of the Orlando metro area. These are retail properties located “in the shadow” of a big box retailer like Wal-Mart, Lowe’s or Target. As Latorre says, the properties benefit from the high traffic generated by the main retail center and typically attract leading regional or national chains. “Having those high-caliber tenants gives an extra layer of security to an investor who might be considering a purchase,” he says.
Latorre, 27, spent 18 months in Orlando area residential sales, selling nearly 20 homes before deciding in 2007 to focus on the commercial marketplace. “I was approached by a friend who challenged me,” Latorre says. “He said, ‘I know you’ve been successful in residential, but the opportunity in commercial is so much bigger.’ Since I enjoy the investment aspect of real estate, I decided to make the switch.”
At that point, Latorre started to compile as much information as possible about his target market. “Building a database of owners and properties gives you knowledge and a tool to serve clients,” he says. “And once you’ve identified the owners and [learned] about their properties, you can go out and start marketing yourself to them.”
In March, Latorre closed his first commercial transaction: a $3.85 million sale of a 14,000-square-foot retail center. He has another property under contract and is getting new listings as well.
“The first thing is to gain that market knowledge,” he says. “That’s what gives you the credibility and the staying power to be successful in any business.” Hit the Streets
As any successful commercial associate will tell you, it takes plenty of phone calls, a strong Web site, continuous professional networking and old-fashioned legwork to attract customers. “I’m on the street all the time,” says Mitchem. “If someone’s within three feet of me, they’ll find out what I do.”
Mitchem’s niche is medical office facilities, a segment that’s projected to grow along with Florida’s aging population. “I felt that if I’m going to do commercial, I’ll do it in an area that appears to have unlimited potential for the future,” he says.
To build his network, Mitchem joined a commercial brokerage organization in Port St. Lucie. And he’s certainly not shy about knocking on doors and talking to owners about their properties. “That helps you build your connections and learn things you can enter in your database in case a prospective buyer calls.”
In fact, Mitchem spends a large part of every day on the phone or in face-to-face conversations. “At my last dental checkup, I mentioned what I was doing to my dentist,” he says. “It turns out he had a colleague who was interested in buying land for a new medical office. I think that to be successful, you just need to keep talking to people. After all, you never know who’ll provide you with the next lead.” Richard Westlund is a Miami-based freelance writer.