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Building A CRE Brokerage Foundation To Sustain You Through Market Highs And Lows

Lee Kiser is a multifamily expert, active broker and Principal of Kiser Group, Chicagoland’s leading multifamily brokerage firm.

Two years ago, in the first quarter of 2020 when the pandemic hit, transactions in commercial real estate (CRE) stopped like water at a dam. Investors, lenders, appraisers and tenants all tried to figure out how to navigate the market. A year later, as everyone developed protocol, that dam burst and a wave of pent-up capital flooded the market. The wave continued through 2021, and most brokers still have a lingering pipeline of activity from the past year. When the market is heated like this, commercial real estate brokers experience record years and earnings.

I have seen this happen several times in my career. But for many newer brokers, this was their first experience with a boom market. However, most markets are not boom markets. The true gauge of a broker’s skill is whether they can sustain the same income levels in a down market as they can in a boom market. What will you do when the wave is no longer strong enough for you to ride? A strong foundation is the answer. A strong foundation can carry and guide you through unpredictable or slower times. Here are three pieces of advice for you to incorporate into your CRE foundation.

1. Make A Business Plan

A well-thought-out business plan is the first step to a strong foundation. Your plan should include data on your market, your intended market share and an income goal. You should also identify variable outcomes and the steps needed to achieve your goals during both active and inactive markets.

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2. Identify Key Performance Indicators

KPIs (i.e., closings, escrows, listings, analyses, conversations, etc.) provide the math that makes your business plan measurable. Consider your income goal and the average transaction/fee sizes in your market, then work backwards to determine quarterly/monthly/weekly/daily benchmarks to help you gauge whether or not you are on pace.

Developing KPIs and holding yourself to them is the most essential element of a strong and reliable foundation that will keep you afloat through varying markets.

3. Keep Perspective

Keeping perspective through a market boom is essential for long-term success. Self-awareness and appreciation of your skills (and areas where you lack them) are required for personal growth. Be humble and realize that your success in a boom market is very much correlated to the market itself: All boats rise with the tide. So be careful about how much credit you take for a big year unless it is directly related to your skill level. You will not want egg on your face when your performance in a down year is less impressive and clients remember your boasts. Remember, nobody likes a braggart.

During an active market, your successes run alongside the success of many others. It is your foundation that will set you apart from others and allow you future opportunities for success, even without the aid of the market. Your foundation will allow you to maintain your levels when other boats lower with the receding tide.

Final Thoughts

I wrote a 2022 outlook article for Forbes in December 2021. I mentioned how the market stopped (the dam) and crashed for 12 months, from late Q1 2020 to late Q1 2021. In Q2 2021, the markets went to high velocity (the dam broke), resulting in a record market in 2021. I stand by my prediction that deal flow will begin to stabilize in late Q2 2022 (the wave subsides), and the remainder of the year will be more in line with historical averages. This is the time when those who experienced success because of the market will be differentiated from those with good foundations. If you’re in the former group, get busy: You still have a few months to work on that foundation.

Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?

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