As transaction activity dries up, brokers are reinventing themselves to assist clients.
With office leasing and investment sales volume reaching new lows across the country, big brokerages are retraining idled dealmakers to become service providers rather than cowboys intent on roping the next mega deal. Brokerages have enormous fixed costs and in this challenging economy they are under pressure to provide tailored client services, such as mortgage workout programs.
Many firms are turning to independent training professionals to retool their ranks. That makes Mike Lipsey, a leading trainer to the brokerage industry for more than three decades and founder of The Lipsey Co., a busy man. Lipsey has contracts with an estimated 70% of the major brokerages; he predicts that 40% to 45% of future brokerage revenues will come from non-transaction activities.
“There are some skill sets within the younger brokers, maybe even some of the more experienced brokers, that now can be repackaged and sold as a service product, not a transaction product,” says Lipsey, who began warning clients 12 to 18 months ago that a slowdown was coming and brokers would need to quickly shift to consultation.
That's not exactly a new concept, since Lipsey dusted off a training program from 1990 titled “Consultative Brokerage,” revised it and now calls it “Real Estate Recovery Solutions.” It became his best-selling course. Other courses address workout finance and lease resolutions, but all are designed to find new ways for brokers to service clients intervening between borrower and lender, and landlord and tenant. Webinars and podcasts are in demand, since they save time and travel costs. “There are days where I'll do three webinars a day for three national clients,” says Lipsey.
Betsy Peck, chief administrative officer for brokerage in the Americas with Chicago-based Jones Lang LaSalle, oversees the company's training programs. “Understanding the multiple levels of service that can be provided beyond the transaction is clearly something that clients are looking for as they look into outsourcing and expanding their reliance on some of our professionals,” says Peck. “We try to anticipate the next client need. You're not selling a service unless you're listening to the client.”
Rather than focus on training individual brokers, Lipsey has identified training that works best in team environments. “Let's say a broker sold a property two years ago and now the mortgage is greater than fair market value. That broker can go back and say, ‘We've got some services for a fee that we can provide you until things get better.’ The broker brings the work in and the work is performed by the junior broker and the technician [researcher/analyst], and the bill gets submitted.”
The new key to success is flexibility and openness to fresh ideas. “Ours is a business of being intermediaries, which is different from being sales people,” says Harvey Green, CEO of Marcus & Millichap, a brokerage and investment services firm that closed 7,500 transactions in 2008. Although the industry is driven by transactions, brokers are becoming more aware of clients' needs, Green says.
“It really is a world of singles and doubles, there are no home runs,” Lipsey adds. “The number one skill is to listen differently. Listen for the service, don't listen for the transaction.”