Social Media and Commercial Real Estate – while some say the two don’t mix, I say they’re flat wrong. I’ve been evangelizing the innovative use of technology and digital media in commercial real estate on this blog since day one. While I normally don’t use this forum to tout the company, I’m making an exception for this post.

The video above simply validates what I’ve been saying for quite some time, which is that social media and commercial real estate fit like hand-in-glove. Yes, I know it’s difficult to believe, but it’s true – there are still naysayers who decry social media and its effectiveness – they just don’t exist at Sperry Van Ness. We have won listings, received media exposure, broadened and deepened relationships, and yes, we have closed real deals with social media. While some of our industry peers play the skeptic and hold on to the past, we embrace the demands of the market and look to the future.

Sperry Van Ness is the only major national brokerage firm that has mandated and achieved a 100% corporate wide adoption of social media. In fact, our position within the commercial real estate industry is so dominant with respect to social media that we dominate the top 25 most influential commercial real estate professionals on Twitter as ranked by wefollow.com. We actively blog, tweet, participate in discussions on LinkedIn and Facebook and we are huge believers in the power of viral video. Why is this important? Because it allows us to engage and be in the flow of real-time conversations in ways that our old-school brethren simply cannot. We are engaged, we listen, we understand, we get it…

I’ll climb down off my soap-box for now and give you a few updates…We are doing some great things with the redevelopment of our Digi award winning Online Publisher product (the web based tool that SVN Advisors use to create content rich proposals, brochures, property websites, etc.).  The single point of entry design that SVN pioneered in 2000 is being rebuilt with Web 2.0 technology. The rebuilt product features content syndication capabilities, enabling our Advisors to seamlessly interact with various social media portals. Here, SVN Advisors will be able to push their newly listed inventory to Twitter, Facebook, LinkedIn, and YouTube, right from OnlinePublisher. Further, SVN will remain one of only a handful of firms/portals whose listing data LoopNet accepts through an automated data feed.

OnlinePublisher has always done what no 3rd party application to this day does: Manage people and revenue.  In our new release, we’re incorporating various components of our unique culture into the application –  at SVN, our culture of collaboration serves as the foundation of our brand. The no “locked doors, locked drawers” culture is now being digitized, and the new OnlinePublisher includes a priv. social network which allows our Advisors to collaborate on projects in real time, listen to and learn from one another, and through a knowledge base, to discover valuable information from past discussions even if the Advisor wasn’t part of the conversation. Perhaps most exciting is that all of the above will be mobile ready. We are rapidly embracing mobile technology at Sperry Van Ness and to prove it, our new iPhone application is in development.

Stay tuned for more updates in the near future, and in the meantime, if you have any suggestions for me please leave a comment below…

My question today is a simple one: What’s your vision for the future and what are you doing about it? Much has been written about surviving the downturn – what to do now, the “new normal” and other tips for how to navigate current market conditions. And while I certainly have no gripes about being in the moment from a tactical perspective, I’m concerned that as an industry we don’t lose sight of the value of looking forward. In today’s post I’ll share my thoughts on the importance of looking forward.

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.

Are you a commercial real estate specialist or generalist? As the CEO of one of the country’s largest commercial real estate firms, I’ll share with you that your answer to the aforementioned question is very telling to your peers, clients and employers alike.  Your answer will have a direct impact on your credibility, earning power and your ability to survive market volatility over the long-term.  In today’s post, I’ll weigh-in with my opinion on the age old debate of “generalist vs. specialist.”

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 I don’t normally share specific company performance information in this venue, I thought many of you might enjoy the opportunity to learn more about the company I lead.  The above video highlights some of my comments from the recent Sperry Van Ness State of the Company address. Those of you familiar with, or who have interest in the commercial real estate industry will find our company performance over the last year to be nothing short of remarkable.  I’m truly honored to lead such a wonderful and talented group of Advisors, whose differentiated, “Client’s Interests First,” operating philosophy has created amazing benefits for our clients and for the Sperry Van Ness brand. I would invite you to read a press release further describing our plans for the future. Given the recent market dislocation, and the current commercial real estate industry landscape, a focus on growth, driven by smart and creative acquisitions, is an initiative that we feel will yield strong returns for all of our constituencies.

By now it should be no secret that I’m a big fan of social media. The statistics validating social media’s ability to positively impact performance more than serve as adequate evidence that commercial real estate professionals should be actively engaged in social media marketing. That said, not a week passes where the naysayers and apathetic scoff at social media as if were just a waste of time. If today’s post seems like a bit of a rant, it’s because it is…In the text that follows I’ll share a few brief thoughts in an attempt to reason with those still not switched-on to the many benefits of social media.

I want to begin by addressing the three most common objections (translation: cop-outs) that I encounter from the unimpassioned or uninitiated:

1.       Real business people don’t use social media: The inference with this excuse is that social media is somehow not worthy of their attention – that “real businesses” simply don’t market using social media. Nothing could be farther from the truth. In fact, if you do a bit of digging you’ll quickly see that the category dominant personal and corporate brands in virtually every sector are engaged at some level with social media. Moreover, most of them are dramatically increasing their investments into social media while cutting back on investments into traditional media.  On a global level, marketers report an increase of 30% in digital expenditures in the last 12 months alone.  While this “social media is for teenagers and college students” excuse may make for a nice sound bite in your mind, in reality the only thing you accomplish with this position is to demonstrate outdated thinking to those in the know.  In fact, according to Neilson, the over 35 age category is embracing social media faster than any other demographic, while growth among teens and college aged users has been flat to negative.

2.       I don’t have time to use social media: This statement smacks of naiveté at best, or of arrogance at its worst. Since when doesn’t a person have time to engage people in a way that builds trust, engenders confidence, and accelerates the efficiency of communication. Saying that you don’t have time to engage your prospects and clients where they want to be engaged is nothing short of flawed thinking. What many fail to understand until they experience it first hand is that social media doesn’t replace real relationships, it enhances and accelerates them. You simply don’t have time not to be involved in social media. Learn how to leverage social media to increase the frequency of quality, live, business development meetings, and your productivity will increase.  Learn that social media serves to enhance all of the activities that you are otherwise too busy focusing on, and you will run a commercial real estate practice which features greater profits and efficiencies. Fail to understand this and you’ll fail to maximize your potential.

3.       It doesn’t work for commercial real estate: News flash – as much as you may want to think differently, our business is not any different from other businesses. Believing that certain immutable business principals don’t exist for commercial real estate professionals is very dangerous thinking. Not only have I personally benefited from social media on several levels, but I am also aware of numerous examples of both service providers and end-users alike that have received benefit from their investments into social media. Commercial real estate almost always lags behind other industries in terms of adopting new technologies and means of information sharing.  We will see a repeat of this trend as the number of social media naysayers is reduced to a scant few within the next 24 months.  As an aside, as of April 2009, more people spend time on Twitter, Facebook, etc., than they do on email.  Do you really believe that our industry is so unique that we are immune to these revolutionary changes?  If you haven’t benefited from social media yet, my guess is that you’re either 1.) not participating in social media; 2.) new to social media, and/or; 3.) not committed to doing what it takes to be successful with social media.

If you’re still not buying-in to my logic, I’m going to cut right to the chase and outline a few representative examples below of the benefits of social media for commercial real estate professionals:

Benefits for Practitioners

Social media increases your presence and visibility on the search engines, your exposure to deals, prospects and information, your ability to engage in meaningful conversations, the ability to shorten selling cycles and improve relationships, the ability to improve your position relative to competition, the ability to demonstrate subject matter expertise by expanding distribution for your thoughts and ideas, the ability to reach more people with greater velocity, and the list could go on and on…The bottom line is this: It has been said that as high as 80% of all purchasing decisions and diligence efforts begin with an internet search. What possible reason would you have for not wanting to be found where your prospects and clients are looking?  Put another way, and as if our business couldn’t be any more difficult right now, why would you want to add to the existing set of new business challenges by having a poor Internet/social media presence?

Benefits for Clients

Clients and end-users are turning to social media in increasingly larger numbers when looking for information, advice, properties and professional expertise. Clients looking for increased transparency and accountability from their professional advisors will be looking for social proofing that is easily found online in reviewing a professionals social media presence. Clients looking to buy, sell or lease property will turn to and value the professionals that have the greatest visibility online and access to the toolsets and platforms most likely to benefit them.

Regardless of where you are in the commercial real estate value chain, you won’t be able to ignore social media and remain competitive in today’s marketplace. I would offer my strongest encouragement to anyone not actively involved in social media to develop a strategy for implementation.

As the first few weeks of 2010 pass, business owners, executives, employees, and consumers alike are watching for emerging trends, which will test the accuracy of the 2010 prognostications posited by various industry experts.  While it may be too early to tell, there have been some signs, signals and even M&A transactions which point to industry consolidation and corporate restructuring among brokerages in the commercial real estate industry.  This is likely to continue throughout the year.

So my question is this – which CRE brokerage business model is better, brick & mortar or franchise/network? The current prevailing strategy associated with M&A transactions is for buyers and investors to disenfranchise independently owned, network member, CRE brokerages and covert them to wholly owned, corporate store entities, which are often dubbed “brick & mortar” brands.  The parties on the buy-side of these “deals” cite greater control and therefore better client service as two of their reasons for buying.

From my perspective, the current thinking outlined above incorrectly implies that “corporate store” CRE brands are better suited to service their clients than franchises and networks.  In today’s post, I will share with you why the CRE, brick & mortar brand model of old is broken, uncreative and non-scalable, while franchises and strong networks foster innovation, creativity, scalability and are positioned to deliver greater results for their clients.

There currently exist some great CRE brokerage brands.  Talented leaders stand atop sharp, seasoned, and knowledgeable industry experts who collectively make-up some well run brick & mortar brokerage brands.  It is the model in which these firms operate that is broken, and not necessarily the firms themselves.

Brick & mortar brands employ a model that operates with high fixed costs in a cyclical and unpredictable commercial real estate market.  Brokers who work for these firms often feel that they are giving too much (in commission split) for what they are receiving in return, the firm’s management team’s struggle to eke out profits in poor and mediocre markets, management’s focus steers toward survivability and earnings vs. client’s interests, and all stakeholders suffer – even the client.  CRE franchise organizations, and well run networks, by contrast, are not boot strapped by high fixed costs, can turn profits with regularity in varying market conditions, and this allows their focus and energy to be heavily weighted towards the client.  Additional benefits afforded to CRE networks and franchises, as compared to brick & mortar brands are as follows:

• Cost Structure & Focus:  Take into consideration the cost of running a national brick & mortar business with multiple leasehold obligations, high labor costs, the expense of creating brand recognition at the local, regional and national level, high IT costs, etc., and one can easily draw the conclusion that a predominant focus on size, breadth and volume is a survivability requirement.  History has shown that this frequently forces some national CRE brands to focus on recapitalization for survival.  Undistracted by high fixed costs, Franchisors and networks are, more often than not, run with inexpensive, variable, scalable, but effective cost structures, and their emphasis can be placed on innovation, creativity, marketing, and delivering results for their clients.
• Client’s Interests: In light of the high fixed costs mentioned above, it becomes cost prohibitive for some brick & mortar modeled brands to encourage fee sharing with competitive brokers.  The result is a preponderance of “double-ended” investment sales transactions, where the focus of a broker is more on finding the buyer independently vs. utilizing the brokerage community to assist – the result is nothing less than an effort on the broker’s part to earn a higher fee.  Franchisees and network members, whose businesses are independently owned and operated, on the other hand, operate with higher margins, can “afford” to put the client’s interests first, engage competitive brokers to shop listings to their buyers, split fees (some as high as 50% as we do at SVN as a matter or policy), generate organized competition, and ultimately a higher price for the client.  The latter approach is clearly in the best interest of the seller or client.
• Innovation: While franchisees and network members are both tied to strict brand standards, and some with codes of ethics, both are usually afforded tremendous, healthy independence with utilizing and developing technology, and processes, testing and identifying key vendors and developing the creative edge that client’s continually demand.

Bottom line – While large brick & motor CRE business models may look dominant at first glance, when you look under the hood, some represent organizations that cannibalize themselves from the inside out. Their constant need for investment capital requires them to be focused on short-term financial objectives which doesn’t afford them the ability to focus on the creation of long-term value through an efficient, client-centric business model. When all the dust settles, it will be the well run franchisors and networks who demonstrate the consistent ability to generate profits, and the ability to scale regardless of the economy that will prove to have the better business model.

While commercial real estate markets are not static, I’m always surprised by the number of so-called “professionals” that operate as if they were. As the landscape around them changes, rather than understanding and adapting to new market drivers, many just prefer to pretend as if it’s business as usual. It is those practitioners that adapt to the fluidity of the market that become innovative market leaders, and who thrive during even the toughest of market conditions. Likewise, it is those practitioners who refuse to change with the times that push themselves into irrelevancy, and eventually become self-inflicted casualties of the weeding-out process.

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.

As 2009 draws to a close I thought this an appropriate time to not only sum up my thoughts on what has been a tough year, but also to share my feelings on what I believe will be a better 2010. I would also be remiss if I didn’t use this opportunity to thank our stakeholders for their continued support, without which, we would not have fared as well as we did. The contributions of our clients, employees, investors and partners have been truly remarkable, and I can’t imagine having to navigate 2009 without their steadfast commitment to the Sperry Van Ness brand. Please accept my wishes for a very happy and safe Holiday Season as well as a prosperous New Year.

The Year Ahead | December 2009
The last year’s upheavals in the economy and credit markets have presented commercial real estate market participants with unprecedented challenges. The ablest and the most innovative have survived the year and, in some cases, have been able to seize upon change to flourish amidst the disarray. The industry’s ranks have been thinned somewhat, but those of us who now look forward to 2010 are better positioned to shape the market than any group that has preceded us.

The next year will not be an easy one – the recovery will come in fits and starts, at least at first – but the outlook is brighter than was originally forecast.  While certainly good news, I would remind you that good brokers find ways to succeed in any market.  Given our high level of specialization and encyclopedic market knowledge, our rare and collaborative culture, the industry’s only true “client’s interests first” philosophy, and a focus on the $500 thousand to $5 million segment of the market, I see few firms capitalizing on 2010 opportunities as well as SVN. In the text that follows, I will share my thoughts on the economy, the commercial real estate market, the profile of the 2010 buyer, and will issue some predictions for the future.

The Economy
At the year’s close, it is apparent that our worst fears for the economy and our industry have thankfully not been realized. Instead of a protracted period of economic malaise, the weight of evidence now shows that the economy returned to modest growth in the third quarter. Temporary employment numbers (a leading indicator of permanent employment conditions) have improved and job losses have eased substantially, narrowing to a small fraction of the cuts reported at the beginning of the year. As anxiety over record job losses has subsided, consumer and business confidence has improved.

Looking forward, the consensus amongst economists and industry leaders calls for measured growth over the next year. Lagging the stabilization in the health of businesses, and barring any unexpected shocks, sustainable job growth is anticipated towards the end of the 2010. This is, of course, welcome news for the commercial real estate industry, since improvements in demand for space depend critically on new jobs replacing the millions that have been lost.

Investment Activity
It was a mind-numbingly slow year in the investment sales market.  From a low-point in the first half of 2009, investment activity has been improving in the second half of the year.  Sales volume increased to $12.4 billion in third quarter, according to data from Real Capital Analytics, up 27 percent from the second quarter and 35 percent from the first quarter.  Annualized sales volume to date is at the astonishingly low level of $40 billion.

What will 2010 look like?  Some economists predict that volume will rise to just over $70 billion next year. Sales volume in Q4 will be in the $15 billion range, which suggests an annualized run rate of $60 billion, and a modest increase of 20% certainly support this 2010 estimate.

Who is buying?  Growing from a small base, equity funds reported an increase in acquisitions of nearly 50 percent between the second and third quarters. While equity investors remain a relatively small share of overall activity, they will capture a larger share of total activity in the next year. Public REITs also reported large increases in asset purchases, supported by capital-raising earlier this year, and will pay a larger role in 2010.  The trading “action,” however, will continue to be on the smaller end of the spectrum.  Properties in the $500 thousand to $2million range, purchased by private investors, will dominate the year.  Brokers, buyers, and sellers of properties in this category can expect to be the busiest in 2010, relative to all other price points.  This too, is welcome news for SVN Advisors whose focus has long been on properties in this price class.

On the supply side of the investment equation, distressed asset sales have clearly fallen short of equity and opportunistic investors’ hopes thus far, yet some of the impediments to this market are expected to ease over the next few quarters.  In particular, banks that have been unwilling or unable to offload problem loans because of large anticipated losses will be better able to do so as other aspects of their business normalize. The inevitable deterioration in cash flow that is resulting from current lease rollovers is also increasing pressure on less-able property owners who are increasingly inclined to see their assets in the hands of best-in-class operators.  Distressed asset sales activity will pick-up markedly in 2010, but we will not see a repeat of the early 90’s, nor will we see a return of the RTC.

While the market has been slow to develop momentum, the underlying signals point to further improvement. MIT’s Transaction-Based Index shows a 12 percent spike in its measure of demand in the third quarter, and the bid/ask spread, or “cap gap” is narrowing, in part, because of further concessions on the part of sellers.

2010 Transactions
The adage, “Seller’s sell based on pain or opportunity,” can be applied to any commercial real estate market, even that of 2009/10.  Certainly, a high percentage of sellers in the next 12 months will be in some sort of distress, others whose need to sell, while not immediate but must occur within the next few years, will capitalize on the lack of properly priced supply and will find opportunity by selling in a low competitive, Q1, 2010 environment vs. a market which will feature an increasing amount of listings and more competition as the year progresses.   It’s a simple function of supply and demand.

In examining the profile of the 2010 buyer, I could start and stop by commenting on the incredible buying opportunities that this emerging market will present, discuss the massive exchange of wealth, but those topics are old news by now, so I’ll offer the following as reasons that buyers will strike deals in 2010:

• Buying real estate as a hedge against inflation: And inflation is coming…While CRE as a hedge against inflation is an invalid strategy when significant supply and demand imbalances exist (as they do today), long-term holds of properties in “A” markets can compensate investors for an inflation premium.  Conversely, inflation will lead to higher interest rates, which can be disruptive to the market and negatively impact property values.  Views on the subject differ, yet buyers will re-enter the commercial real estate market in 2010, citing hedges against inflation as their reasons for buying.
• Low interest rates: Clearly, interest rates are not the issue today, and credit availability is hindering sales volume.  Fact remains that interest rates are at historically low levels, will remain low for most of 2010, and a bevy of investors will capitalize on this opportunity over the next 12 months.  Group buying and seller financing will bring private investors to the low LTV table, cash rich equity funds and REITs will also benefit from the low interest rate environment.
• Investors have to do something with their money: You can buy in to the investment grade bond market and earn a whopping 3.75%, or you can buy NNN leased, credit tenant real estate and more than double your return.  As Bill Gross of PIMCO points out as a cost of capital sitting on the sidelines: “an effective zero percent interest rate, as a price for hiding in a foxhole, is prohibitive.”  In 2010, buyers will exit the payless funds earning close to 0% in search of manageable risk.  Quality commercial real estate will receive considerable attention in this context.

Because problems with debt structure will motivate a large number of sales, pricing will remain in flux in the next year.  As a result, headline measures of cap rates will fail as indicators of the underlying variation in property trades.  Rather, buyers and sellers alike will be depending on their Advisor’s knowledge of the market and of the emerging mechanisms of exchange – such as auctions ­– to guide their investment strategy.  Investors with strong operational capabilities who are seeking to acquire assets over the next year are in an ideal position.  This group will be able to purchase assets during a period of dislocation, before asset prices normalize and while long-term yields are at the their peak.

Advisors that anticipate and master the new models of engagement will lead the pack in the months and years to come.  Advisors, and not brokers, are poised to have a productive 2010, as clients demand encyclopedic knowledge of the real estate markets, capital markets, and consultative service from practitioners who possess creative, problem solving skill sets.  “Matchmaking” brokers will be forced to leave the business as they are squeezed out by more talented Advisors.

Call to Action
My suggestion as you move forward in 2010 is to take what’s written above, couple it with the valuable knowledge you’ve gained during the last year and reach out to your clients and prospects. Offer to help them refine their investment strategy to reflect what will be happening in the year ahead, and help them not to be blinded by what happened in the year we’re leaving behind.

Today’s post may be short in length, but I hope you’ll agree that it is powerful in terms of content. I’m not going to pontificate about the state of the current market, nor am I going to prognosticate on where I believe the market will trend in 2010. What I am going to do is pose the following question: “What will YOU do differently in 2010?” You cannot simply repeat your 2009 performance in 2010 and expect the outcome to be any different. The message today is a simple one…The market doesn’t matter, but YOU do!

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.

As a former commercial real estate practitioner, and the current leader of a national firm, I have been exposed to thousands of transactions and have witnessed countless examples of professionals doing the wrong thing for their clients, and what they consider to be the right thing for their pockets. There is a huge difference between doing the right thing and doing things right. A bigger problem is that there seem to be fewer people who recognize this difference. In today’s post I’ll share my thoughts about these two similar sounding, yet often very different positions.

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.