How compatible are residential real estate agents for commercial businesses?

You probably already know that there aren’t enough experienced commercial real estate professionals.

This talent gap is the biggest obstacle to growing a commercial real estate business.

Since this shortage isn’t going away anytime soon, I believe it’s time to take another look at recruiting from the residential sector.

Some in our industry may be sceptical, but the fact of the matter is that residential agents bring valuable skills and discipline that easily translate into commercial real estate success.

In fact, many top-performing commercial real estate agents and principals began their careers in residential real estate.

And, with the lack of boundaries from their vendors and buyers, the requirement to work most weekends and, more recently, pressure to become social media influencers, some of our resi cousins are now looking for a change.

They still love real estate, but they are seeking new opportunities that better align with their personal values and desired lifestyle.

The obvious solution for them are career opportunities that commercial real estate principals can offer.

In my latest podcast episode, I dive into why It’s time to rethink compatibility and tap into this underutilised talent pool.

To find out why recruiting residential agents could be the key to solving the lack of talent problem, join me for episode 192 of Commercial Real Estate Leadership.

Episode transcript:

Do you know what the number one obstacle is to growing commercial real estate business in 2024.

It's not the market, it's not competitive threats, it's not the economy and it's not fee compression. It's finding good people.

Well, the residential real estate industry has plenty of people. It's an industry that churns and burns through people.

And I think making the switch from residential to commercial, from the perspective of someone in residential can see them accrue some massive lifestyle benefits.

So, if it's something you've looked at in the past but perhaps haven't looked at recently, I'm going to encourage you to take a look again in today's episode, because think that people in residential might be more open to making the switch.

I think there are some compelling reasons on both sides for considering it.

And today, I want to give you some of the most potent arguments that you can present to a capable and competent residential real estate professional to present them with the compelling opportunity to come across and work in commercial.

Hello and welcome to episode 192 of commercial real estate leadership. I'm your host, Darren Krakowiak. Really excited to be here for another episode.

I must say congratulations to the winner of the Grand Final, insert winner's name here.

Yes, I'm recording this week's episode a little bit earlier than usual because I actually have to go in for surgery two days after the AFL Grand Final.

Don't worry, nothing too serious. I'm getting a tumor removed from my left leg. A benign tumor.

I never had to go into hospital for anything like this before. So, I'll be under a general anesthetic.

I'll be in hospital for a couple of days, but I'll be back fighting fit for our next episode very, very soon.

So, yeah, I just wanted to say that I'm looking forward to being without that tumor on the other side of this episode.

So, today I want to talk to you about residential real estate agents and why they can be a good fit for a commercial real estate business and why they can help you grow your business.

Because like I said before, the number one obstacle to growing your business is recruitment, it's a massive challenge.

And I think that there has been a perception about recruiting people from residential to commercial, that residential is just not analogous to commercial, right?

The idea that selling a house has nothing to do with leasing a warehouse has some truth behind it.

But I think there are skills that are transferable between the sectors which I'll talk about in a moment.

I think another thing that people in commercial kind of look at residential as being a bit flashy and trashy or maybe a bit too emotional and just not as professional as the commercial real estate industry.

A couple of things I'd say there is that residential has become more professional. We also both deal with emotional buyers and sellers and lessees and lessors and residential and commercial.

And certainly, the residential industry, the proportion of investors has increased, which means there is more sophistication coming into that market.

And I think another, I guess argument against giving this a go is that, well, we tried to hire residential agents before, we brought them across to commercial and it just didn't work out.

Well, I think some things have changed and I think it's worth having another look at.

Because commercial real estate and residential real estate are both relationship businesses.

They're businesses where as an agent, you need to know your patch like the back of your hand.

So, you've got to be skilled at knowing the sales, knowing the transactions, knowing the owners, finding the owners.

And also, you've got to have natural ability and skills or at least the ability to upgrade your skills in marketing, negotiation and in selling.

And one area where I think residential agents actually are better than commercial agents is in the area of personal discipline.

I would also say that their businesses are generally a bit more structured and the agencies that they work in have better systems when compared with commercial real estate agencies.

So, there can actually be some things which we can take from what is happening in a residential business and import them into commercial and actually improve the way we're doing things.

And that's an opportunity that will come when you hire some great people from residential to come into commercial.

So, let's just say that you find someone who's got some potential you could see and they need a little bit of cajoling to come across to commercial. What are some points that you can raise with them?

Well, I think the most common one and some of my clients who I've interviewed on the podcast before, have talked about how they used to work in residential.

What's the number one reason why they moved across?

It's because they didn't like working on Saturdays. And that is still a massive issue for residential agents, particularly ones that are maybe not so young, that are starting a family or have a young family.

It's a huge thing, right?

People want to have more work life balance and that's not possible when for 30 weekends of the year, you must be working on Saturday.

And I think that as a commercial real estate agent or principal, if you could talk about, first of all, the fact that you just don't work weekends, but also the fact that you're able to take extended leave that is going to be a big differentiator and draw card for residential real estate professionals.

I think the next thing which is a big thing is about the clients that you're dealing with.

And I know I said before that residential versus commercial, maybe residential was seen as a little bit less professional.

But one thing that I want to sort of say here about that is that clients have more boundaries in commercial than they do in residential.

So, some of my clients who have commercial and residential businesses, talk to me about how in residential, the residential vendor will be calling the agent at all hours of the day.

And I think this makes sense because the person who's selling their house is selling their most valuable asset. It's a high-pressure situation.

It's something that they don't go through all the time and they're nervous or they just need some help. And so, they pick up the phone.

And I think residential real estate agents have to be available at all times in order to show that they are client facing and serving and doing the best thing by their client.

But the dark side of this is that I think that people generally aren't so nice to their real estate agent.

If you think about how in recent years, almost every retail shop now has a sign that says, “Treat our people with respect.”

Well, how do you think people are treating their residential real estate agent?

They just decided to employ for $20,000 or $30,000 to sell their most valuable asset in a country where people don't really respect residential real estate agents.

How do you think they're speaking to their residential real estate agent?

Well, the clients that I've got that have commercial and residential businesses tell me that, “It's not very nice.”

And by the way, the clients that I've got that have residential and commercial businesses, they're all in regional areas because all of my capital city based clients, a metropolitan clients are just commercial businesses.

But I've got some clients that are resi-commercial in regional areas. And people in regional areas are generally, I think more polite than people in metropolitan capital city areas.

So, if people in regional areas are being not so nice to their residential real estate agents, what are people in metropolitan and capital city areas being like to their residential real estate agent?

Probably not that nice, right?

So, commercial is more structured, more professional and I think that commercial real estate agents get a little bit more respect from their clients and from people that they're dealing within the marketplace than their cousins in residential.

And I think that could be a big selling point.

And the third point that I want to tell you which I'd never thought of before, but one of my clients just mentioned this to me and it's such a good point.

It's that, “In commercial, you do not have to create a high volume of content for social media, but in residential you do.”

Now, I'm not saying that content marketing and personal branding is not important in commercial. They can be your edge in this industry.

But I think you want to do it without feeling like a speed, you're a slave to it.

And in residential, I think there are a lot of guys that just feel like they have to do it even though it's something that they really don't want to do.

Or they just don't want to have to do to that level and to that, I guess, quantity as they're expected to do it just to keep up.

And in residential right now there's not so many deals to be done.

I think there has though, been a glamorization of this industry through TV shows and social media.

So, there's fewer deals to be done, but there's more agents in the industry.

And that means it's harder to survive unless you're willing to employ some pretty outrageous tactics to get attention and to attract clients.

Now, I don't want to see the reciprocation of the commercial real estate industry when it comes to social media. I think it's a little bit over the top in residential.

But the fact is that if a typical residential real estate agent did, let's say half of the social media activity that they were doing in residential, but they started doing that in commercial, they would be miles ahead of even the most active commercial real estate agents in terms of their presence in the market.

So, the argument is you're already good at social media. You don't have to do it so much, you know how to do a post, how to attract leads.

And it's something that you could transfer across to commercial where there's this hue blue Ocean because not many people in commercial are doing it.

So, I think that's part of the sell.

Now, I know that commercial deals are more complicated than residential deals. But I just want to say that those are skills that you can learn.

I did tenant rep for many, many years without really reading many leases back to front. I had a team that did that.

My job was to be out there dealing with the major terms, pitching for business and managing client relationships.

And if you've got a really good commercial team, then you can bring in a really effective residential, let's say salesperson to help you with that component of the business.

It is true that some residential real estate agents will probably need to take a bit of a haircut in terms of their income, particularly the good ones and probably the good ones are the ones that you want to get across.

But I think the argument there is that it's going to be a short setback and that's possibly worth it if it's going to increase their longevity in the industry.

Because what one of my clients was saying is that lot of these guys just don't last because they just don't want to be doing this forever in terms of, you know, dancing like monkeys on social media or dealing with irate clients or working every single Saturday for most of the year.

So, I guess the point of today's episode is that if you're a residential real estate agent and you're feeling burnt out and you're looking for a new challenge, I think commercial real estate might just be the next big step in your career.

There are plenty of commercial real estate businesses that need good people.

You should approach commercial real estate principles that are in your area and see what opportunities there are.

See if you can overcome some of the objections that some commercial real estate principles might have to employing someone from residential.

And my message to you if you're a commercial real estate principal is that I think it's time to take another look at residential real estate agents because they are the most obvious source of talent when you cannot find an experienced commercial real estate agent.

And a lot of the skills are transferable. And I think that you've actually got a really compelling opportunity for them if you want to go after some of the best people in residential.

So, that is our episode for today. It's all about hiring more people and overcoming that big obstacle in commercial real estate businesses, which is hiring people.

It's the opportunity to hire people from residential.

I will say that I think that agents are probably a little bit easier to convert across than property managers because property management is a bit more technical, but again, you can train all of that.

So, have a look at not just agents but also property management potentially, but just recognize that there will be a skills gap that you need to makeup.

But probably they're likely to have some of the things in place that people from other industries or other sectors or without any experience wouldn't have.

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