July 2021 - ICR Commercial

In many larger jurisdictions, commercial brokers focus on one asset class such as office, industrial or retail.

They do that because they know that to service their clients, it’s necessary to have a high degree of knowledge in one area.

In Saskatchewan we do not have that luxury.

Far and wide

Our population base is simply not large enough to allow a broker to make a reasonable living working in one commercial asset class.

Having first spent 14 years as a residential real estate agent, then 4 years as a non-competing broker/manager in that sector, and more recently 25 years as a commercial real estate specialist (the last 5 of those 25 years as Managing Partner), I have a broad, well rounded view of this discussion.

When I was a residential agent, I referred my clients who had a commercial need to a commercial agent. I did not trade in commercial real estate.

As a commercial broker, I refer clients who have a residential need to a residential advisor, I do not trade in residential real estate.

When our staff or agents buy residential real estate, they are required to use a residential broker.

Lessons learned

When I made the transition from residential to commercial, I floundered for about six months.

It was only after I decided it was necessary to wipe my mind of all I had learned on the residential side and start absorbing the information that was applicable to commercial only, did I start to succeed.

Regardless of the years of experience I may have in a specific sector, unless I’m working day to day in either commercial or residential, I am not well positioned to represent a client properly.

Our real estate world is becoming increasingly complex.

The education provided through the licensing process falls far short of providing the necessary information for an agent to sell or lease commercial real estate.

Our company educates our agents on an ongoing basis; providing relevant industry information as it changes rapidly.

A real estate company who is not focussed 100 per cent on the intricacies of commercial real estate is not positioned to provide the ongoing market information, education and direction required to prepare their agents.

How do those agents then advise and negotiate leases and property sales while representing the best interest of their clients?

For all these reasons and many more, an agent should therefore work in one sector only, he or she should not be permitted to trade in the other sector.

Do the math

Much of the challenge exists with the public who may not be equipped to ask the relevant questions before engaging an agent to represent them; example questions such as:

Does the firm and the broker you work for specialize in commercial only?

What percentage of the transactions you facilitate are residential and what percentage are commercial?

What percentage of those transactions are retail, industrial or office lease or sales?

I am a realist. This issue will not be solved quickly.

Unless we educate the public to ask these questions, things are unlikely to change.

No one can pinpoint a precise market number.

Run for the hills If a broker represents that they know exactly what your property is worth.

Doubly so if a commercial real estate broker tours you through property and does not point out the defects, as well as the features.

So who can you trust?

Find a truth telling broker

It’s reasonable when providing a professional opinion of value to estimate a sale or lease price range.

The exact final number is determined by many factors including the wishes of both parties to the transaction.

Every property has pros and cons which can be partly determined by the needs of the occupant.

You want a broker who has the experience and transparency to bring every element of the property to your attention that could impact your desired end goal.

Transparent car sales

I ran across research of transparency in The Globe and Mail earlier recently.

“In a recent study published in the Journal of Marketing, researchers led by Yashar Atefi of the University of Denver, observed more than 400 negotiations on U.S. car lots,” the article stated.

“When a salesperson revealed the invoice price of a vehicle-the amount paid by the dealership itself-that increased customer’s trust. In turn, car buyers spent an average of $1.400 more on add-ons such as extended warranties and insurance.”

“The reason? Consumers can verify invoice prices with relative ease through online research. And once they determine a salesperson is honest in one area, they assume trustworthiness overall.”

Interesting isn’t it? Transparency leads to trust which has a great chance at leading to a long-term client relationship.

Integrity is essential

If I try and represent to a prospective client that I’m perfect, I’ll not be believable.

No one is perfect and never will be.

There are times that things happen beyond my control that could implode a deal.

In most cases I will try and inform the client right away unless there is a significant piece of information missing.

If there is a possibility the situation could evaporate within three hours with no consequence, I may choose to wait rather than alarm the affected party prematurely.

If the feedback I’m receiving on a listing is credible, I have an obligation to share that positive and/or negative feedback with my client.

I have heard on more than one occasion from Vendors, who have had their property listed with another broker for a period and were not provided real reports of the feedback of showings.

If you’re seeking representation from a commercial real estate broker who only finds ways to support your strategies, I am not your guy.

Agents need to stay in their own real estate sandbox