Commercial real estate is a lot different than residential real estate — but, in so many ways, it's exactly the same.
Residential Realtors looking to tap into the commercial market may have more pull on this side of the industry than they think.
According to a longtime commercial real estate broker, “Most business owners view real estate as one big industry. Real estate is real estate. So the residential Realtors I’ve seen work with us are usually well regarded and able to get some business going commercially.”
Once you educate yourself on the commercial market, dipping into the field is not out of the question, even if you've never worked in it before. Your real estate license works just as well working office spaces and buildings as it does homes and apartments. But, there are some major differences to familiarize yourself with before you test out your local commercial market.
This may be the biggest difference. Data also drive your listing presentations more than pictures and staging typically would. Commercial property owner leads are usually more concerned about their return on investment (ROI). Tenants are probably not looking for a dream office — just a good and reasonable lease in a functional space. Very little is emotionally driven.
There is also less turnover in commercial real estate, but you get paid based on the total length of the “gross rental.” When you land a listing and sell someone's home in residential real estate, you take home a certain percentage of the sale price. When a business rents an office through you, for, let's say, five years, you get a percentage of that five-year total.
This is important to recognize because most commercial properties operate as rentals and leases. Sometimes, a company will purchase a space, but this isn’t the norm.
Commissions can be 10 times greater than a normal residential deal. However, if you only focus on commercial properties, you need to keep slower deals moving along and carefully budget. Deals can take longer to negotiate, and searches can take longer, too.
You must be well-informed about the market, influences affecting pricing, and the return on investment for the owner. The majority of deals involve Realtors finding tenants for a property owner, but working with the tenants themselves can be just as profitable.
These are the most important traits of successful commercial Realtors. If you’re a residential Realtor, you’re probably already trained in targeting niche markets. Just like residential Realtors target expireds and FSBOs, commercial Realtors might target office spaces and retail properties.
A major benefit of working with commercial property owners is the possibility of a more set schedule. Since most companies operate during normal business hours, you aren’t likely to have to work a lot of nights and weekends.
Your residential listings may get traction on social media and the MLS. Databases like CoStar and LoopNet work the exact same way as the MLS and are used religiously in commercial real estate.
When you’re prospecting commercial tenants or property owners, you can use similar techniques. Commercial Realtors cold call businesses and ask about their current property needs. They go on building walkthroughs and network for leads just like a residential Realtor, driving past FSBOs or stopping by expired listings.
As I said before, most business owners and tenants believe that “real estate is real estate.” You won’t be judged or disrespected if you’re a residential Realtor trying to get into commercial real estate.
A lot of these methods are similar to or the same as residential prospecting.
Networking at conferences and meetings can take you farther in commercial real estate than it can in residential real estate. Give out your cards and follow up with any property owners you meet.
Connect with businesses you meet and let them know how you can help them when their leases expire. Give them CMAs and advice to prove you know the market.
Like I mentioned before, these two sites are just like the MLS, but for commercial agents. They allow you to find property records, listing, and lease information. Target owners whose current tenant leases are about to expire. If you can find them tenants and improve their ROI, they’ll choose you to work with.
LoopNet has a few free features, but you need to be a member for the important stuff. CoStar has no free features.
There are other sites like this that help you find properties most likely to be empty or whose leases will expire in the next year.
It uses an algorithm from data it’s gathered based on the characteristics of properties that just sold and properties that have yet to sell and produces a list. Prospect Now does the same for residential homes, so it's worth checking out even if you don’t dip into the commercial market.
These are the same prospecting methods we talk about over and over again. That's why so many agents choose to go both ways. It’s essentially the same business. This is one of the reasons you're going to be respected for your background in real estate if you choose to work with commercial properties.
Use your books the same way you do now. When you meet a prospect, give them one. Don’t worry that it’s about residential homes. It still makes you look like a proven expert.
Tell them you put together this book when you focused more on residential homes. Commercial property owners and business owners are simply going to respect your real estate knowledge. The difference doesn’t make a difference to them.
If you give your books to a lead and talk to them, mention important market information or useful commercial knowledge. You’ll gain their respect even with a book focused on residential buying and selling.