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While some within the real estate industry have differing opinions on the severity of the market and what it means for the future of not only real estate, but also the state of the banks, the numbers don’t lie, and they don’t look good.
One report shows that residential sales dropped 22 percent from April of 2022 to April of 2023, and U.S. new home construction was in a consistent decline from the middle of last year to the start of this one. But residential isn’t the only sector of real estate that has been hit hard, as commercial real estate seems to be at the heart of many people’s concerns regarding a financial crash.
The concern for the commercial real estate sector isn’t new since office buildings emptied out at the beginning of the pandemic, but the severity of this issue has grown significantly with the rising concern that they can’t fill them back up. With no tenants in these buildings, the owners aren’t receiving the rent money they need to pay their mortgage and property taxes. No money for the owners of these vacant buildings naturally results in no money for the banks, and herein lies the problem we are currently facing.
With commercial real estate prices down and even more declines expected, it is a surprise that brokerages are still succeeding, and even expanding, in these conditions, with some going so far as to claim that new developments can still be a lucrative business for real estate professionals.
The question on everyone’s mind as they see these brokerages finding success regardless of the market is how are they doing it? The answer to this question can be broken down into three simple steps that any real estate professional in a commercial division can take.
1. Hire an expert
It’s essential to evaluate your brokerage’s expertise and resources and consider whether your current team possesses the necessary skills and knowledge to handle certain transactions effectively.
If your team primarily consists of residential real estate professionals and you’re moving into commercial real estate, then you need to consider hiring experienced commercial real estate professionals or providing training and education to existing agents so your brokerage’s capabilities in this specialized field are strengthened.
This was the very first thing Robert DeFalco, broker and owner of Robert DeFalco Realty, did when he decided to expand his real estate business this year and open a commercial division.
“At Robert DeFalco Realty, we are known as the top residential brokerage in Staten Island, but not all real estate is the same. The type of work that goes into a commercial division, and gets produced by one, is vastly different, so we hired an expert in that specific industry to lead the way. This was an important step for us because we know the state of the commercial real estate market, especially in New York,” said DeFalco.
“This new partnership will allow us to successfully navigate the different market and different clientele that comes with the development of a commercial division.”
2. Trendspotting
A thriving commercial division needs creative minds to develop imaginative solutions for deals that not everyone can see. Beyond mere property sales, the commercial real estate industry is truly “what you make it.” To excel in such an ever-evolving and dynamic space, it is crucial to recognize the diverse opportunities that commercial real estate offers and stay attentive to emerging trends.
Many people think of commercial real estate as just office spaces or apartments, but the truly innovative professionals who are thriving see opportunities in the form of luxury hotels, giant factories or solar co-op housing. Those with the ability to think outside the box and find magic in creative spaces are the ones who are flourishing during this time.
Commercial property opportunities are endless, including, yes, retail stores and office spaces, but also malls, industrial warehouses and plants, and establishments in the leisure, hospitality and healthcare sectors. The ability to envision the potential of these properties is indispensable.
In short, commercial real estate is the vibrant, pioneering zone of the real estate industry, and staying on your toes is paramount to success. So, study the common trends in current commercial developments, and begin to hone your skills as a forward-thinking trendsetter to come out on top of the market, no matter its status.
3. Marketing and branding strategy
Creating a distinctive brand identity and developing a targeted marketing strategy are crucial when entering the commercial real estate market. Brokerages must differentiate themselves from competitors and build a reputation as trusted commercial real estate advisors.
You should tailor your marketing efforts to appeal to commercial property owners, investors and businesses seeking suitable locations or investment opportunities.
It’s also important, especially today, to consider developing a comprehensive online presence, including a dedicated commercial division website, social media platforms, and professional profiles on commercial listing websites. Leverage content marketing by producing educational articles, market reports and case studies demonstrating your expertise and industry knowledge.
Engage with local business associations and attend commercial real estate events to establish relationships and increase your visibility in the commercial sector.
“Everybody always gets worried about the markets going up and down, but commercial is sectioned out, and you have all sorts of ways to work within it. There is always a segment that is up and a segment that is down. What’s trending, what the future may hold, how to effectively market what you’re providing, that’s what we pay attention to and leverage in commercial,” said Brian McGowan, a development and commercial real estate professional who previously worked for Empire Alex and is now spearheading a new commercial division on the East Coast.
While the future of real estate, and the severity of the commercial real estate sector, specifically, may be unknown, what is known is that there are brokerages who are still managing to be successful, and there is potential for the success of others as well.
Victoria Kennedy is CEO of Atman Real Estate. Connect with her via email.
