My new iPhone 4s arrived finally arrived this past weekend. My oldest son and I opened the package with much anticipation and we immediately dropped what we were doing to configure the device. Among the many new features made part of the 4s is Siri – the speech recognition device which, as Apple advertises, “Understands what you say, knows what you mean, and takes dictation.” So, gone are the days when I have to manually type a query into Google to search for a nearby Sushi restaurant, find directions, or, get this – type to text or email. From now on, all I have to do is talk. So, over the weekend I dictated and had Siri read aloud roughly 100 text messages sent and received. I quickly grew so accustomed to iPhone dictation that I became annoyed when I had to manually type an email on my Mac later that evening. On one hand, I felt more efficient, on the other hand I questioned if I was simply becoming lazy…

Separately, as a CEO, I am constantly striving to predict the future and react to it in advance. Not only with respect to positional real estate strategies, but also in terms of adopting (and creating) new intellectual technologies – which extend mental capabilities and enable us to gain more information faster. So as a fan of applications in this category, I’ve researched and adopted as many CRE and non-CRE of these intellectual technologies as anyone. I use Dragan Dictation to dictate most of my laptop writing, regularly use Loopnet to create space surveys, view comps, and get a read on the market. SVN Advisors are LoopNet power users and many are subscribers to CoStar, including their CoStar Go iPad app, which allows you to take real estate data into the field, where you can even view detailed tenant information, including lease expiration dates without having to charm past building security or receptionists. And all of this has me thinking – are the convenience applications mentioned above changing the way I learn, eroding at certain skill sets, and making me less knowledgeable?

While I can say with reasonable certainty that my IQ remains the same since becoming an early adopter, my ability to easily become immersed in the analysis of raw research data has eroded. In addition, my typing skills aren’t what they used to be and my spelling skills, thanks to auto-correct, have gone from good to average. For those of us in CRE (or any other field for that matter), what role have research products played in the reduction in the amount of market research that we retain? Posed another way, are the CRE practitioners of yesteryear, who had to physically walk building floors, drive every property in their area of focus, conduct live courthouse research, etc., more knowledgeable than we brokers of today?

Are we becoming dependent upon these resources because we’re lazy, or because we need to in order to remain competitive? I’m not making a value judgment here, I’m just asking you to do a gut check – Do you use technology to advance your learning, or to fill a knowledge gap? The distinction between the two is subtle, yet important.

The human brain is malleable. It is capable of being reshaped and while I don’t know the answer to the above questions, I do know that my mind now approaches learning a bit differently. My mind now expects to receive information the way that Loopnet feeds it to me – instantly, and with little effort. I have made it a personal challenge to add to my cognitive skills rather than replace them. This has required me to slow down in the short run at times, but in the long run I feel as if I’m expanding my knowledge base, not shrinking it.

So, I ask – has our “encyclopedic knowledge” of CRE markets and beyond become artificial intelligence? Are Loopnet/Costar and the like making us stupid, or are we better off? I think the answer largely depends on approach and motivation. Thoughts?

These developments, alongside heightened volatility in stock markets, have obviously prompted concerns about the resilience of the commercial real estate recovery. In assessing what all of this means for the investment outlook, our clients are looking to us for leadership and a more balanced, long-term assessment of the future. Along those lines, and while I could certainly fill this post with a summary of the downside risks stemming from recent events which have recently imbued the blogosphere, the following is a different but pragmatic take on the road ahead – the market is currently sensitive to the downside risks, but it is also prone at this juncture to discount positive information. There is some good news, which stands apart from the cacophony of recently sounded panic alarms.

On the economic front, there are indications of continuing resilience. Among them, the details of last Friday’s employment report have been lost in the discussion of the downgrade. That report shows the private sector adding over 150,000 jobs during July, easily beating economists’ projections. And while job growth needs to improve further, it is significant that businesses added a meaningful number of jobs even in the midst of the budget crisis. Corporate profits have rebounded, more than doubling from their recession levels and even surpassing their pre-recession peaks. Those profits will feed hiring once a sense of long-term normalcy returns to the market.

Closer to my world, trends in commercial real estate investment markets suggest a degree of resilience in the face of market disruptions. Some of the key trends to consider are as follows:

Investment Activity Continues to Increase

CRE property sales continued to increase in the second quarter, hitting levels comparable with sales during 2008. Even as the economic news has become more tentative, activity in July remained strong. The large coastal markets remain the most active, but rapid declines in cap rates in these locations are supporting a stronger value proposition in secondary and tertiary markets and for relatively smaller properties. Spillovers into the middle market have been slower in coming, in part because sales depend on the availability of financing, but that piece of the puzzle is also falling into place.

Credit Availability is Improving

The latest data show that delinquency and default rates at the regional and community banks that account for a large share of mid-size and small property lending have come off their peaks. As the stress from legacy loans has become more manageable for many institutions, a large number have actively returned to the market in making new loans. These banks are less active in the major metros, where lending by foreign banks and other lenders is driving outcomes. Instead, they are relatively more active in the markets where large institutional lenders and investors are not. CMBS lending is also contributing to credit availability for mid- and small-tier borrowers. We expect CMBS to be an important contributor to overall credit availability, in spite of recent bumps in the road for issuers.

As for today’s downgrade of Fannie Mae and Freddie Mac, this probably means higher costs of capital for these institutions, in spite of their unique relationship to the government under their conservatorship arrangement. Not receiving much attention over the last 3 days, however, is that strong fundamentals in the apartment sector mean that other sources of credit are eager to finance investment activity. This is clearly in evidence with banks, which Chandan Economics find have increased their net apartment lending in 2011. Keep in mind that residential mortgage rates will generally rise if Fannie and Freddie’s costs go up. That supports apartment fundamentals, supporting non-GSE lenders’ favorable assessments of the sector’s risk profile.

S&P Downgrade a Wake Up Call in Washington

I’m oversimplifying, but the U.S. debt downgrade, in my opinion, wasn’t much about the ratio of public debt to GDP or any other metric for that matter – the downgrade wasn’t rooted in math, or with respect to the U.S.’s ABILITY to service its debt. Rather, the downgrade was about our government’s WILLINGNESS to do so. The chaotic two month’s in Washington and the partisan rancor which transpired was significant, and spoke as much to the likelihood of default as anything.

Perhaps most important, when issued, the S&P downgrade offered very little in the way of new information about the quality of US debt. More than anything, it spoke to the character of the U.S. government. Dare I say that this may trigger a new, more levelheaded approach to governance and policymaking? With many of the pieces of a resilient recovery in place, stronger signals from our elected officials that the rules of business will normalize and that our countries’ challenges will be addressed in a timely and meaningful way, this could be the best legacy of the ratings rebuke. Until then, be on the lookout for continued improvements in credit availability, the debt capital markets, and other positive economic indicators which fuel the resilient commercial real estate marketplace.

I’m not being Pollyanna, but there is some good news to consider of as of late.

Today’s post won’t be long, but I think perhaps brevity is well suited for the message. It was Shakespeare who said “brevity is the wit of soul.” – I tend to concur. While today’s message is specifically directed at our Advisors, I hope others that read it will take away positive, actionable insights as well.

To our Advisors: You need to know that I just haven’t been able to shake a few thoughts which have truly invaded my brain, and which stemmed from our recent national conference in Las Vegas – I want to briefly share those with you. First, as your CEO it was my job to set the vision for the conference and to deliver what was a hopefully inspiring and motivating message. While I trust that I successfully accomplished this, what I can’t get over is how much inspiration and motivation was given to me by YOU. I spoke a lot about the benefits of our unique culture, and quite frankly, it was easy to see why as I reflect on the many conversations I was able to have with those in attendance.

It is YOU that makes Sperry Van Ness what it is. It is YOU that I draw my inspiration from. It is YOU that consistently build our brand equity. It is YOU that encourage me. It is YOU that serve our clients well. It is YOU that create our special culture. It is YOU that I’m honored to serve. It is YOU that I’m thankful for. YOU are Sperry Van Ness. YOU are the future of Commercial Real Estate.

For nearly 20 years, Sam Zell, the grave dancing, yet eternally optimistic public and private entrepreneurial investor, has issued hard hitting prognostications. In typical, creative, Zell fashion, he delivers his predictions for the year ahead in the form of year end gifts – bronze encased music boxes. Redesigned each year with a new look and feel, their one commonality is that all of the boxes share one feature – when you press a button, you are rewarded with the music of a popular tune, accompanied by lyrics, written (but not sung) by Zell, wherein he expresses his current view of the world.

On the heels of a difficult 1994, Zell’s music box theme was “Staying Alive,” which, perhaps, would have been equally apropos in any of the last 3 years.  The music in 2005 was set to Burt Bacharach’s “Raindrops” classic, which included such lyrics as “Capital is raining on my head…”  But my all time favorite was his 1999 edition, the theme of which was “The Emperor Has No Clothes,” where Zell played off of the similarly titled Hans Christian Anderson story, suggesting, with remarkable accuracy, that the valuations of the technology companies of the day were way out of whack – without balance sheets, earnings, and in some cases, revenue.  Interestingly, and consistent with his 1994 theme, the lyrics could be applied to later, more contemporary controversies, such as the over-valued commercial real estate market of a few years ago.

Like him or not, find him combative or just succinct and to the point, today’s post is not intended to exalt Sam Zell, but rather to steer you to a powerful collection of Zellesque music boxes:   The folks at www.CRE-Advice.com have assembled the first ever, free and online Commercial Real Estate Leadership Summit, which features industry insights, market overviews, and prognostications from close to one dozen of the commercial real estate industry’s thought leaders…it’s like having unfettered access to some of the most influential leaders in CRE on your time and in a setting of your choosing…or like pressing play on a dozen of Sam Zell’s music boxes.

I was a participant, and my video contribution appears in the video above.  You can gain access to the free summit by registering here: CRE-Advice Leadership Summit

Look around the commercial real estate industry and you’ll find that many practitioners have taken shelter and have even found comfort in the weakened market as far as their low transaction and production levels are concerned. Other slightly more optimistic practitioners are working, but were perhaps late to the restructure game, are in “batten down the hatches” mode and are hyper focused on the “now.” With so much pressure to survive current challenges, my fear is that many will take their eye off the real drivers of long-term success: vision, strategy, and innovation.

There is no denying that the commercial real estate industry has struggled over the past 2 years. It is human nature when things are tough to get very tactical – survival mode requires you to live in the moment. That said, winning the battle does you little good if you lose the war.

Dr. Sam Chandon, of Real Capital Analytics, recently spoke at the SVN national conference, and had the following to say about U.S. sales volume: “Just as we found it hard to believe that 2007′s record setting sales volume levels would appreciably decrease, so goes the common belief that 2009′s extraordinary low sales volume levels will appreciably increase any time soon.” In other words, regardless of how you may feel about current market dynamics, the one thing I can assure you of, is that what we’re experiencing today, won’t be what we have to contend with tomorrow.

My challenge to you is to not confuse surviving with thriving. Take the lessons learned over the past two years and apply your new found tough mindedness to forward thinking actions. Begin to reevaluate your operating strategy, consider increasing investment back into your business, start applying strategic focus to preparing for where the market is going, because it will be there faster than you realize. And while it might be less dangerous to fail to capitalize on a market upturn than to over invest in your business too soon, the former failure is just as tragic – capitalizing on emerging markets, timing upturns, developing strategies that deliver results, and earning are why you are in business.

The bottom line is this…It is not possible to prepare for the future without anticipating the future. In fact, the most important job that I have as CEO of SVN is to describe the future, to anticipate what lies ahead. Your job as CEO of your practice, or as CEO of “You,” is to do the same.

If your comfort zone as a leader has been built around the discomfort associated with current market conditions, it is incumbent upon you to break out of this unhealthy mindset. You cannot grow a business by maintaining the status quo, and in fact, any attempt to do so is an exercise in frivolity. For the good of your business, to the benefit of those you serve, and for the betterment of the industry it is time to elevate your vision and begin to look forward.

Background
Let’s start with a fundamental premise:  While you can attempt to be all things to all people, eventually reality will set-in and the ruse will be exposed. You simply cannot be everything to everyone.  In business and in life, it is impracticable to think that one can become a master of a variety of skills without being better at one than the other.  Intellectually, we all understand this – participate in a variety of sports as a child, play a range of company roles as a young executive, expose yourself to a critical mass of activities, and specific skills and talents will emerge.  Once we understand where our true gifts and abilities lie, our chances of success increase as we dedicate a significant amount of time to honing, further developing, and becoming better at one function than all others…it’s just common sense.

To further process the premise, consider the competitive disadvantage that exists for the individual whose exposed talents are not harnessed and given a greater level of attention because they are being diluted by the emphasis on other less valuable skills. The chances that the individual will grow and blossom to become an expert, authority, connoisseur or specialist shrinks in proportion to the amount of general practice that is applied, and it grows in relation to the amount of specialized practice that is carried out. In Malcolm Gladwell’s book Outliers he cites the research of Dr. Anders Ericsson who maintains that it takes approximately 10,000 hours of dedicated practice to acquire expertise regardless of the subject matter attempting to be mastered. You need to ask yourself, are you willing to put in the time?  At a minimum, are you trending in this direction?

The Generalist
So, back to the original question: Are you a commercial real estate generalist or specialist? My experience has been that if you consider yourself to be a generalist, then you are either young in your career, or are likely an individual not willing to invest the time and energy to acquire the expertise necessary to become a specialist. As harsh as it might sound, if you’re a generalist, I sincerely believe you’re on a path to mediocrity or irrelevance.

I never cease to be amazed at the plethora of CRE brokers who purport to be a master of all things to all clients all of the time.  The “widespread” natures of their practices span the horizons of geography, product type, price, and transaction type, their calling cards and marketing campaigns suggest a “one stop shop” for all things commercial real estate. Savvy clients and prospects realize the fundamental flaw with this line of thinking. They want deep levels of competency…they want an expert, not a generalist.

The Specialist
If your market considers you the “go to” advisor for a specific problem or opportunity within your submarket, it’s very likely because they view you to be a specialist in that area. They feel this way because of the investment you made in acquiring encyclopedic knowledge of a specific product, geographic area, or vertical within the commercial real estate industry.

Specialization is and always has been in high demand.  Specialists are the first to be sought when a specific opportunity arises. Their practices are the first to feel the positive effects of economic growth, and the last to experience the pains of a recession.  Their calling cards suggest specific, expert advisory services from a professional who has dedicated their entire practice to a single facet of the business.  As we say at SVN, these advisors are the “brain surgeons” of the business (The point being that a patient doesn’t go to a general practitioner for brain surgery).

In the bullet points that follow, I’ll share with you the reasons why CRE industry specialists outperform and out produce the industry’s generalists, have proven to be amazingly resilient to changing market conditions, and are uniquely positioned to attract business on an ongoing basis:

• Increased Market Share – In terms of controlling the controllable, and focusing on that which you can affect, there isn’t a more productive focus than that which is market share.  There will always be a certain number of transactions in a given marketplace.  How many will you be a part of? Specialization within as narrow a vertical as possible virtually ensures that you will have opportunities to vie for the business that will take place. Examine the market share of any product category or asset class in any market and you’ll find it is the specialist that consistently outpaces the generalist.
• Economic Resiliency – Those who specialize are better equipped to resolve complex real estate issues, and are better suited to handle sophisticated real estate assignments.  In the current market, the overwhelming majority of assignments, whether Landlord/Tenant, or Buy/Sell side, are in the complicated category.  Specialists are earning in this market, generalists have little work and will not be able to make it past initial meetings with banks, special servicers or private clients whose needs far exceed the “broker” whose past experience is limited to matching the high net worth individual with eager seller.
• Business Development - Specialists are sought after – they are magnets who attract business.  The specialist’s phone rings while the generalist is out beating the streets for potential opportunities. They are proactively contacted based not only on past successes, but on having demonstrated subject matter mastery, a trait that all professionals appreciate and recognize as invaluable.
• Market Size - I often hear, “I am in a tertiary market…there aren’t enough transactions in a given year to specialize.”  While I will admit that it becomes difficult to carve out a niche in a small market, and an Advisor in Lubbock, TX, can’t focus on shopping center sales under $10M within a 10 block radius, that same advisor would be best served to limit his focus as narrowly as possible, and to specialize in retail sales and retail leasing, for example.

Conclusion
Bottom line…smart commercial real estate brokers invest the time and resources necessary to become true specialists while others either pretend to be experts, attempt to wax eloquent about why specialization doesn’t matter, or make excuses for why they don’t choose to become a specialist. My strongest recommendation is that you do the right thing for your career, your company and your family by doing whatever it takes to become a specialist in your chosen practice area.

While it might be obvious that the commercial real estate industry took a beating in 2009, what may not be so obvious is that during times of  adversity come the greatest opportunities. Those who thrived during 2009 understood this principle, and as a result, they will likely be the ones who lead the way in 2010 as well. They adapted their business models, reengineered their business practices, and implemented new initiatives while their brethren sat on the sidelines whining and complaining. Rather than talking about about constricted capital markets, they sought out the investors and lenders still doing deals and restructured transactions to fit the changing guidelines of active capital partners. Rather than complain about transaction bottlenecks, the smart players began to work with institutions and special assets groups to work around and through the logjams.  They key to success in down markets is to participate in the present while looking toward the future, but refusing to allow yourself to live in the past.

My encouragement to you as we enter 2010 is to not buy into the negative rhetoric…don’t offer excuses – don’t travel the path of the pessimist. Rather build your reputation on creative thinking and innovative practices that allow you to solve the problems that others struggle with. Embrace change, innovation, sound strategic planning, and execute accordingly. As a consultant friend of mine is fond of saying, “chaos only exists until you decide to restore order.” I wish all of you the best of success in 2010.

It’s never been about the market. Great producers don’t only thrive during robust markets, they thrive regardless of markets. Top performers understand the need to adapt their business practices to help clients in advancing, declining or flat markets. Sub-par performers, on the other hand, often fail to adjust their plans of attack out of stubbornness or lack of knowledge. Regardless, I would submit to you that salespeople adjusting to a changing market is more of a challenge than dealing with the market itself. You cannot control the market, but you can control how you choose to deal with it. Let me point out one thing that should be obvious, but seems to be invisible to many…At no time do clients need more advice and counsel than during down markets. Your clients need you more now than they ever have. Your clients are seeking solutions, but are you providing them? The strongest relationships are built during the toughest of circumstances. The simple truth is that you have the opportunity to earn more trust and engender more confidence by solving tough problems when no one else seems to have the answer.

If you want to have a better year in 2010 than you did in 2009 you need to create a better 2010 for your clients. Your clients want more of everything from you, and it is the advisors that are capable of understanding and can delivering this that will be the most successful in the coming year. I believe 2010 will be a defining year commercial real estate advisors as they are either going to step up, or step away. Advisors perceived to be stepping away will have a difficult time surviving, while those advisors who step up will position themselves as a cut above the rest.

So, will the market get better, will the market get worse, or will the market stay the same? The truth is that it doesn’t matter. What matters is what you’re going to do differently. My challenge to you is this…find ways to grow and develop, not to shrink. I’m not advocating that you don’t seek to eliminate waste or to create sustainability, but wherever possible, reinvest those resources to expand other areas.

Bottom line, even if you were a top performer in 2009, it will take changes in your business plan to continue to grow in 2010. If you weren’t a top performer in 2009, than you business plan for 2010 better incorporate massive changes that are built around growth and not shrinkage.

So, what does doing things right mean anyway? That’s the problem…doing things right is a moving target…It is based upon influence, power and control, and whatever the status quo at the time happens to be. In many cases, doing things right is just another way of conforming to a politically correct agenda, taking the easy way out, or focusing on short term earnings. But sadly, it often has little connection whatsoever with doing the right thing. The simple truth is that regardless of your position, title or station in life, the way to separate yourself from the masses is by doing the right thing.

It doesn’t require much ability to conform to the norm, or to acquiesce to pressure and do things right. Because it’s easy, popular, and receives little attention, it’s rather simple to do things right. However you’ll find that it is many times the case that doing the right thing means making a personal sacrifice, standing against the masses, deviating from the norm, incurring great risk, and rejecting the status quo. For these reasons it takes great character, conviction, and confidence to do things right, which is why it has become a rarity in the professional world.

Doing the right thing requires work-much more work and effort than doing things right. While each of us has numerous examples of situations where doing the right thing was not the chosen course of action, and not all of these “mistakes” have come back to beset us, I assure you, they were costly errors whose delayed impact will be realized at some future point in time. The following are some examples of doing the right thing positively affecting profitability, your career, and your personal brand:

1. Strive for harmony in a meeting and you won’t get anything accomplished. How many of us have approached board meetings, staff meetings, or important discussions with a written or unwritten “you watch my back, I’ll watch yours” deal in place? Here, while not challenging a program, initiative, or the status quo might be the plan to conduct the meeting the “right way,” this behavior is not in the best interests of the company for whom you work and is certainly not the right thing to do. Challenging thinking, playing the devil’s advocate, shooting holes in another department member’s business plan and engaging in intelligent, healthy debate are what your employer needs most out of you. Conversely, rubber stamping presentations, and not being appropriately disruptive will foster nothing but stagnation, stifle growth, profitability and can lead to a company’s ultimate demise.
2. Approaching transactions with personal interests in mind. Treating a deal as if it were your last and only deal will cost you money, render you unable to procure client’s for life, and will damage your personal brand. Seeking to “Double-end” a commercial real estate transaction (striving to independently identify the buyer of your listing on your own and without the help of an outside broker so as to earn a higher commission), negotiating a one-sided purchase contract, consulting agreement, or unreasonable price are short term, zero sum gain victories which will eventually be realized by the losing party. Rather, approaching negotiations as a facilitator as opposed to a feared negotiator, and being mindful and respectful of the interests of all involved, will produce good deals and increase the chances of your being hired again vs. having the client regret the day the two of you met.

Whether interacting with clients, vendors, partners, peers or subordinates, it is those willing to evaluate every action within a framework of “is this the right thing to do?” that will stand head and shoulders above others. Mind you, this is not easy; it does not come without personal and professional risk, but it does come with great satisfaction. As you watch your right thinking and right acting improve the lives of others, you’ll find that you’ve earned the confidence, trust and respect of many.

Bottom line…When you can be trusted to keep your word, rather than manipulate circumstances to obviate your commitments, you’ll find that the big opportunities start to come your direction as opposed to ending-up in the possession of someone else.