by Neil A. Dolgin
For New York City’s ultra-competitive residential brokerage community, these are uncertain times. Amidst an already-softened sales market and growing concerns about a lack of affordable housing that have led to swifter rent stabilization measures and the possibility of a recession pending the outcome of the presidential election, it is also grappling with a potential permanent ban on broker fees. Now we are faced with the challenges of Covid-19 and we remain concerned for the health and safety of our colleagues, friends and family members during this crisis.
While a New York State judge temporarily blocked the ruling in February and for now brokers can continue to collect their standard fifteen percent commission, just how long this will last and what the repercussions might be remain uncertain. As residential brokers try to figure out what to do next, one option they may want to consider is switching to commercial real estate. After all, many of the job functions are the same and commercial real estate, particularly in a city like New York where demand almost always exceeds supply can be extremely lucrative. Another benefit is the hours since most transactions are conducted during the week.
Here at our firm Kalmon Dolgin Affiliates we were already seeing a noticeable uptick in inquires in recent months. We expect new opportunities to emerge in the post-Covid-19 phase. However, as in making any major career change, this should not be done hastily and you should always look before you leap. With that in mind, here are four things to consider before changing your real estate focus so you don’t have any surprises.
The Mentality of Residential vs. Commercial
The first thing to keep in mind is that residential and commercial real estate (CRE) are very different from one another. In CRE, it’s all about business. You’re generally working with a client on a business transaction – a building sale or lease. In residential, whether you’re trying to help a client buy, sell, or rent a home or apartment, you’re dealing with emotion and tight budgets, which can become a drain on some brokers. If you like relationship building, working with numbers and prefer to be working on larger transactions with building owners, managers and investors, then commercial real estate might be a better fit.
Like residential, in commercial you also work with lots of great people, but the interactions and end goals tend to be around driving a business benefit for building owners, lessors and investors. Surprisingly, the hours are also better. While in residential real estate, you can routinely expect to work many evenings and weekends because that’s when clients are usually the most available to see properties, in CRE the majority of transactions are done Monday through Friday during normal working hours.
The Importance of Networking
Like in any industry, who you know is key in commercial real estate. While you may already have a strong list of residential leads, you’ll likely need to canvas your contacts for clients who are looking to buy, sell, or lease on the commercial side. This means pressing the flesh and trying to make connections any way you can, including taking advantage of any associations such as BOMA International and REBNY, as well as tapping into the resources of your own firm for potential leads.
Planning for the Switch and Gearing Up
Keep in mind, too, that you’ll need to invest time learning the business and generally you’ll be working on a commission. For many people who change careers, it’s a good idea to build up a small financial nest egg before you make the jump from one career to another, and that applies to CRE. It takes time to get up to speed on industrial and commercial neighborhoods and the variety of building types — retail, medical, office, industrial, and land. Each affords unique sales and leasing opportunities for brokers. To be successful, a broker needs to be knowledgeable about each building type and be able to address and deliver on the amenities that a client might require. Brokers also need to understand commercial clients and investors and how they think, as well as zoning, tax and financing considerations that affect commercial deals. It’s also worth getting certified as a commercial real estate professional to give you the most credibility and knowledge. And while technology offers many helpful benefits, traditional shoe-leather-to-the-ground canvasing—a.k.a. getting out there, talking to people and seeing as many properties as you possibly can – is the key to success. And post-Covid-19 that’s what we’ll be doing.
If You’ve Got the Right Temperament for it, CRE Can Be More Lucrative
Compared to most residential properties, CRE whether it’s a factory, office building, or a retail space has the potential for significantly higher commissions compared to most residential properties since the sales and rents are typically much higher than those of an apartment or condominium. While CRE has many upsides and can be a viable career move—especially if you’ve already established a track record in residential real estate—keep in mind above all else that its not always as easy as it seems. Though it will be much easier to succeed if you’re coming from residential real estate versus diving in cold turkey from another industry. In both cases, you’ll have to learn a whole new side of the business and change your prospective and frame of mind too. Now’s a great time to think about a career change. Call me if you are interested in joining our team.
Neil A. Dolgin is co-president of Kalmon Dolgin Affiliates. Founded in 1904, Kalmon Dolgin Affiliates (KDA) has grown into one of the New York metropolitan region’s leading commercial and industrial real estate firms. Kalmon Dolgin Affiliates specialize in all aspects of real estate services for developing, managing, selling, leasing and marketing commercial and industrial property. KDA’s highly-trained professional brokers offer clients a practical, street-wise approach to commercial and industrial real estate brokerage, leasing and sales, supported by the latest in real estate marketing, management and research technology.