Slow Market, Busy Brokers

Sales volume sours, but service providers work twice as hard to close transactions and chase new deals.

An epic slowdown in property sales and leasing activity has forced commercial real estate brokers to work harder while earning less than in recent years, but market veterans say now is the time to prepare for the next growth cycle.

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“I'm laying the groundwork to be prepared whenever things start to sell again,” says Helen Jobes, senior investment advisor in the Austin office of brokerage Sperry Van Ness/Gold Eagle Investments.

Jobes brokered a $5 million office sale in Houston earlier this year and has closed some leases and owner-occupied acquisitions, but those deals have been few and far between. In the meantime, Jobes is applying to the Women's Business Enterprise National Council to certify her office as a woman-owned business. She believes that will help her win property listings from sellers that give preference to female-owned firms. She also is tracking Texas properties likely to be foreclosed upon.

Across the nation, brokers are looking for productive ways to use their time while transactions are at a near standstill. Just 650 commercial properties in the United States sold for $5 million or more in the second quarter this year, a 33% drop compared with the same period a year ago, according to Real Capital Analytics.

Brokers are becoming busier, however, as property owners seek proposals for assets they plan to sell, says Dan Fasulo, managing director at the New York-based research firm. Significantly, recent offerings in New York and other cities have drawn as many as 40 bids. “It's a pretty safe bet at this point that we're going to see transaction activity pick up in the fall,” he says.

Brokers must work even harder in a down market to generate commissions, according to Gene Berman, senior vice president and managing director in the Fort Lauderdale office of Marcus & Millichap. “Our brokers know that to earn 50% of what they earned in 2005, they have to double their efforts in 2009,” he says.

During the buying frenzy two years ago, brokers spent their working hours taking orders from investors who were lined up to buy or sell real estate, says Berman, who oversees his company's brokerage activity in Florida and Texas.

Brokers today need sharper skills — the best of them are adept at managing client expectations on pricing. “We can't make the market,” Berman says, “meaning that we can't get sellers to do something that they don't want to do.”

Marcus & Millichap is focused on three strategy types for its clients this year. Conventional proposals guide private parties in making the most of their equity in a commercial asset. Strategic proposals map out a course of action based on what is likely to happen in the next six to 18 months, while distress proposals help lenders plan how they will handle foreclosed assets.

What deals are closing? The local banks that are an important source of financing today are better able to fund small acquisitions or refinancings than large ones. Multifamily deals and owner-occupied office or retail projects are easier to finance than other property types.

Brokers who face and overcome challenges to transact business today will have stronger skills to offer in the years to come, Berman says. “Agents who see it as an opportunity to grow their skills and to create relationships with all three types of clients are going to do well.”


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