Commercial Real Estate Brokerage Deal Teams: Leadership, Trust, and Compensation

Canada’s real estate brokerage industry is changing and I believe the days of brokerage teams made up of a single broker working on his or her own, helped by an administrative assistant, and disappearing at the conclusion of a deal, are over. Although this model has been successful in the past, I have noticed that the real estate’s newer generations, especially so-called millennials, are all about co-operation, constant communication, and quicker rewards (not always in the form of money).

Plus, as deals become larger and more complex than ever, and as clients are more attracted to ‘one-stop shops’ than the old brokerage model, more and more value is being placed on multi-disciplinary brokerage teams.

What Are Brokerage Deal Teams?

I think multi-member brokerage teams are the replacement for today’s one-man or one-woman real estate team. Access to information and ‘big data’ requires a multi-disciplinary team of professionals, ranging from lead generators to researchers and database people, and from transaction managers to packagers. Specialization is the key and each team member has to be highly skilled and trained for their respective roles.

I entered the brokerage business when I was in my late 40s, having worked almost 25 years in the apartment industry. I knew the apartment business well but I didn’t know the real estate brokerage business. As my brokerage expanded and I started doing larger deals with sizes ranging from $14 million to $250 million, it became very clear I could not do this alone. I became a student of multi-disciplinary brokerage teams and traveled Canada and the United States to talk with top consultants about what makes a brokerage team successful and to find out how I could bring the best value to my clients.

I found it amazing but also heartening how willing people were to share their knowledge with me. I am deeply grateful to the following people in particular for talking with me: Peter Senst at CBRE in Toronto; Bob Knackle and Paul Massey (originally Massey Knackle, now Cushman Wakefield); Jerry Anderson of SVN Inc, Florida; Brad Gingerich at CBRE in Edmonton; and Harvey Russell at CBRE in Calgary.

What did I learn?

Transaction based commercial real estate brokers tend not to co-operate at the broker-to-broker level. This was once due to the economics of profit control, but slowly became mentality. The consensus among the people I talked with is that this will change because sophisticated sellers know that exposing the business widely in the marketplace results in a higher selling price. As it relates to brokerage teams, this older philosophy often translates into brokers not seeing the value of a reliable, retainable, and highly-engaged team. This means that most teams, like most brokerage houses, have a built-in revolving door.

Years ago before I bought the SVN master franchise for Canada, I became fascinated as to why commercial real estate brokers did not cooperate, so much so that in 2013 I worked with the Ivey school of business as to understand this phenomenon. They did a great job of analysing the industry and were very insightful.

Building The Team

At the team level, by carefully attracting, hiring, and retaining the right people a great deal team can be built and maintained. My experience has shown that residential agents and brokers trying to switch to commercial are challenged by the complexity and length of deals, so the best candidates are typically brokers with various types of commercial experience or apartment business experience. Having a corporate background also adds value since it brings an institutional-level mentality to client service. Few people have the skills to be ‘finders, minders, and grinders’ and to be technically savvy—this is where brokerage deal teams, by combining the right people with the right processes, technology, and support, have the advantage over lone brokers.

Success starts with the team’s leader, of course, because if you don’t have the right leader then the deal team model won’t work. As the leader of my deal team, I accept the leadership responsibility with humility. I seek to teach but also to learn, and this involves being in tune with my team’s daily dynamics, calling for adjustments where necessary, and bringing a lot of positive attitude and energy to our environment.

Next is the team’s members, senior and junior, who work together in an open team environment with the team leader and bring a wide variety of complementary skills, knowledge, experience, and contacts. We all work together and teach each other because we have a shared vision and common goals.

Team Compensation

For everyone on a deal team, compensation is a primary factor affecting the motivation, drive, and effectiveness of members. No one ever talks about compensation and there is no simple answer to what is the most appropriate or effective compensation structure for deal teams. There are several models for deal team compensation:

  1. The first is a straight commission, i.e. a fixed percentage compensation for the entire year. This means team members ‘eat what they kill’, which can mean spectacular compensation, but can also mean an intermittent income, can cause frustration if one team member isn’t pulling his or her weight, and creates disputes about who gets to work on which deal.
  2. The second is a base salary plus bonuses. Some larger commercial brokerage firms have tried this model but have generally abandoned it. For deal team members, it means that for much of the year the annual bonus is too far away, and maintaining enthusiasm and commitment over the long-term can be a challenge (I suspect the immediacy of getting a cheque when a deal closes, not at the end of the year, is part of what drives brokers to work hard).
  3. The third model is a hybrid: a base salary plus graduated commissions for deal team members based on their experience and what they contribute to each deal. This model reduces concerns about intermittent income while providing a clear rewards ladder for junior team members, and by giving all team members an immediate satisfaction from closing deals, it motivates them to work hard on the next deal. This is my current deal team model.

Ultimately, there are many factors to consider when building a commercial real estate brokerage team, especially if you are a well-established name in your niche market. Considerations include recruitment and retention; issues and risks associated with employees or independent-contractors that report to each another; the time-investment of the team leader in the development, management, and maintenance of team; the cultivation of complementary skills and complementary personalities; creating a fair-environment for all team members…and many others. Getting these considerations right can be a challenge, but I believe the brokerage deal team model is the future and offers the best value and opportunities for clients.

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