Commercial real estate professionals must drill deep if they want to go broad. Brokers who have a specialization tend to generate more commission revenue than generalists.
I define a specialization as 75 percent of your revenue and 90 percent of your prospecting efforts coming from one area of commercial real estate. Specializations can include office, retail, industrial, multifamily, investments and land. Some brokers specialize in transactions while others focus on landlord or tenant representation. Others will get even more specialized than that as time goes one.
I know of one broker who not only specializes in industrial real estate, he only works with certain kinds of manufacturers. Another broker focuses only on listing development ground in the northern half of one suburban county in one metro area. Guess what? He DOMINATES that submarket and makes good money, because land owners consider him THE choice in that area.
There are a handful of reasons I hear from brokers who don’t specialize:
- I’m a new agent, and I got to take whatever business I can.
- I work in a small market, which can’t support a specialization. You need to do a little bit of everything in order to make a living here.
- I’m a generalist. I’d get bored doing one type of real estate plus I have friends in all sorts of businesses and want to work with everyone.
- I would specialize but it would take a couple of years to build up my practice in just one area, and I can’t afford that ramp-up time.
These excuses all make sense, but they ultimately come down to FOMO. F—O—M—A. Fear. Of. Missing. Out. They’re afraid if they focus on one area, they’ll miss other opportunities elsewhere. But because people value specialists more than generalists and are willing to pay for their services, you won’t miss out. You’ll probably make more. Drill deep in order to go broad.
Now, I’m not saying you have to be a specialization “purest” so that you exclude all other business. I’m saying you spend the preponderance of your prospecting time looking for business in one area. If a prospect within your specialty area needs help with a different kind of real estate, you can either go ahead and do that deal or refer it to one of the trusted colleagues in your firm and either co-list it with them or take a referral fee.
Our brothers and sisters in residential real estate often employ a sales technique known as “farming” in which a residential agent chooses a certain geographic area to place particular emphasis. It typically is one neighborhood or subdivision consisting of several hundred houses. This area becomes the real estate agent’s “farm.”
There’s nothing to stop such a real estate agent from doing deals outside their “farm” in a variety of neighborhoods throughout the city, but they place particular prospecting focus on the one neighborhood. They memorize all the houses in that subdivision and try to get to know all the current owners. The agent becomes the specialist or expert in that neighborhood. They make sure every homeowner in their “farm” has calendars, pens and other tchotchkes with their name and contact information on them. If the neighborhood has a Fourth of July parade or a block party, the agent is there.
The hope is that anyone thinking of selling a house in the neighborhood would think of the agent and list the house with that expert agent. That neighborhood “farm” becomes a launching pad from which the residential agent brokers houses all over the broader market.
Well, commercial agents can think of their specializations to be analogous to a residential farm.
So, what’s YOUR specialization within commercial real estate? Is it a geographical farm or will you farm an industry list? How about the members of Rotary, your local chamber of commerce or a country club or an influential social/philanthropic organization to which you belong?