The Value of Specialization

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.