Boost your revenue in difficult commercial real estate markets

The cost-of-living crisis is likely hitting others more acutely than us fortunate folks in commercial real estate…but that doesn’t mean there aren’t any impacts.

Asset price deflation, commission compression and fewer transactions lead to lower income, so I’m sharing some strategies to help you fight back.

Here’s some of what we’re covering on the show this week:

🏢 Reversing Fee Erosion: A small decline in commission rates can lead to a big drop in revenue. Uphold your value and stand strong against the pressure of lower fees.

💼 Deal Size Boost: If you dominate your market segment, it’s time to protect your territory and expand your horizons through targeting higher-value transactions.

⏩ Velocity Matters: Speed up deals by leveraging technology, streamlining your operations, and refining your process – then watch your revenue climb.

📈 Convert Listings to Deals: Educate vendors, market the asset, and extract multiple offers—so you can close more transactions.

🤝 Leverage Loyalty: Exclusivity, repeat business and referrals from your satisfied clients can be your goldmine.

Let’s thrive through tough times together in episode 155 of CRE Success: The Podcast (or watch it on YouTube).

Episode transcript:

There are three big issues going on in commercial real estate agency businesses right now from a transaction’s perspective.

One is that there is asset price deflation. As yields decompress, the value of the assets being sold is less, which means that the commission earned is also less.

We also have lower transaction volumes, which of course means that there are less deals being done.

And in some cases, there are also clients who are looking for a discount on the commission that they are willing to pay for the services.

So, we're dealing with all of these impacts, lower asset values, less commission being paid and less deals being done.

I think it's timely for us to do an episode talking about ways that you can increase your production to make sure that you don't fall behind in the current cost of living crisis.

Hello, and welcome to episode 155 of CRE Success: The Podcast. My name is Darren Krakowiak. I help commercial real estate leaders to accelerate growth in their business.

Thank you so much for joining us. For today's episode, we've got a whole back catalogue of episodes available for you to listen to, or watch for free.

So, make sure you check it out on your favorite podcast player or on YouTube and go back and consume all of that valuable content.

It's going to continue to be there in the future. But we are working on a rebranding and a relaunch of the podcast.

I mentioned to you in a couple of episodes before this one that we're going to be relaunching the CRE Success brand. 

But I've also decided that we need to do that for the podcast and maybe just have a little bit of pivot and the type of content that we're producing here.

So, look out for that, we're going to have a new intro, we're going to have new artwork for the podcast and also a new name for the podcast.

I kind of just decided that yesterday. And I thought, "Yep, let's do this." 

A few changes are coming along for this show, I hope that you will stick with us.

I'd love to hear your feedback about it as well. But I just wanted to, given you are a listener or viewer of the show, that I wanted to let you know that those changes are coming really soon.

Right now, though, we are talking about ways that you can grow your production and commercial real estate as an agent.

And let's get into today's episode. This is all about things that you can do to overcome the rising cost of living, because that is a real thing.

You know, I got the renewal for my Costco membership, and only my wife uses that one. But I get the renewal bill from the membership and they put it up by 18%.

I'm like, "Man, this cost-of-living increase. Crisis thing is really even Costco is putting up their membership price."

But anyway, let's talk about ways that we can overcome this issue.

And the first way is something I mentioned at the top of the show, which is fee erosion.

I think we need to just stand a little bit more steady, and push back a little bit on this fair version that's happening in some markets.

Because when we accept, let's say, a 20-basis point, decrease in our fees, so let's say the fee goes from 2% to 1.8%, we might go oh, "It's only point 2%, that's not much."

But that's actually a 10% decrease in your fee, right? That represents 10% of the total amount you would be paid.

And sometimes I see much bigger decrease as being accepted, like from 2.5 to 2%. That's a 25% decrease in your fee. 

And when you're also dealing with lower asset prices, then that's going to have an even bigger impact.

I think we need to be a little bit more confident in the quality of the services that we're offering, that we are differentiated from our competitors.

And that if a client decides to leave us to get themselves a better deal on the commission, then we one, want to consider if maybe they're not the best client to continue serving, if that's all they care about.

But two, we should have real confidence that the difference that we are insisting on charging for our fees versus our competitors, actually represents value.

And that the clients that recognize the importance of value, if they can see that the quality of the service, the outcome that's achieved, the work that has been done by our competitors isn't up to the same standard, then it will be a no brainer for them to come back as opposed to us just dropping our fee and continuing to provide the same level of service but not being compensated for it.

The next thing I wanted to mention was just this idea about increasing deal size.

And when we're in a market where the prices are actually deflating, then there is an opportunity potentially to start moving up into higher valued assets or a bracket which is above the bracket that we're currently in.

And the way I like to think about this and advise clients and members to think about it is that if you've got a pretty good solid consistent win rate in the area of the market that you are currently targeting, let's say it's at 80%.

So, 80% of the opportunities that you have a legitimate interest in or that you actively pursue you get, then you're pretty much dominating your market.

And there might be an opportunity for you to start just pushing up a little bit and start to increase the value of the assets that you are selling.

And that, of course, will result in an increase in the amount of revenue that you do not only because you'll be doing working at a bigger pool, but also the pool that you're working in will have higher asset values.

Another thing that you can look to do is just to do deals faster. So, this is the velocity of transactions.

And I think this will work for you, if you've got a lot of leads that you can handle. You can just decide to move transactions through your team through your process faster.

And this will involve you needing to outsource potentially, to hire people.

It's going to mean that you're going to need to have better systems to be able to control the amount of velocity and deals that you've got doing.

So, get some people to do more of the grunt work for you, or people who can help you win more of the work or handle more of those projects while you go out and when we're more of the work.

The better the system is, the faster that you can actually handle that work and get say something from an authority signed to something listed online.

How can you get that from, say, six days to maybe three days, for example? How can you utilize technology? How can you reduce time on market by properly educating your vendors about what represents a good offer? How can you reduce the length of marketing campaigns overall? Can you be conducting better marketing? Or can you secure a higher amount of vendor paid advertising, so properties come off the market faster than they would otherwise?

Maybe it's about you working the listing a little bit harder and having the team having the processes in place, so you're not so reliant just on inquire that comes in.

But you've also got a process a system, a way to also contact potential buyers or hot list of buyers that you can generate demand for and be able to put attractive offers in front of the vendors sooner.

And I think when you start to do some of these things, it's also going to lead to more of your listings actually turning into deals.

Because not only do we want to do bigger deals, not only do we want to do deals faster, not only do we want to be paid more on a percentage basis for the fees that we're doing, but I think we also want to make sure that the listings that we win do actually turn into deals.

So, making sure again, that our clients understand and have been educated on what is acceptable in the current market, that we're doing fantastic marketing, and that we are generating more offers for the listings is going to help us achieve that outcome.

There are a few other things that you can be doing. And I just want to highlight a couple of them now and then I'll talk to you more about ways that we can help you to actually action a few of these strategies.

The first one is to make sure that we're doing more work with existing clients, more exclusive work.

Or can we do more repeat business? That's going to help us get more deal velocity.

Can we be referred work by existing clients? That's going to bring us more opportunities, in particular more of the opportunities that we want to be working on.

Perhaps it's about pushing into new markets. I mentioned before increasing the average transaction size or moving outside of your current bracket.

Well, maybe it's also about pushing into different sectors or different geographies.

And, of course, when we talk about deal velocity, I mentioned a little bit about it's going to require you to hire more people.

I think the more that you are able to engage the services of whether it's someone on the outside of your firm outsourcing, or that you can delegate work, which is 'Below your paygrade', we've talked about many times on the show, well, that means you're going to have more time to be able to go out there and win more work. 

So, if any of these ideas resonate with you, and you think, "I need to actually start to action some of this."

Well, I want to invite you to join our new program, which is called +25k in 25 weeks.

This is a new program that we've created, especially for commercial real estate agents.

We've been talking about the work we do with commercial real estate leaders on the show. And I'll give you a hint that that's going to be the focus of more of our content moving forward.

But before we do that, I did want to make an opportunity available for the many commercial real estate agents that listen to the show.

And also, the content that we've created that we will continue to create for our private members.

For you to get access to that and for only $25 is the cost of joining this program. I think it's something that you'll want to take a look at.

If you want more information, you can go to cresuccess.co/25 and you'll find out more about that program.

That is our episode for today. Thank you so much for listening and I will speak to you soon.