As the founder and president of what has evolved into the world’s largest commercial real estate broker/agent coaching organization, I not only have the privilege and pleasure of working with great coaches and team members — but most applicable to our readers, have the good fortune of working with hundreds of dedicated commercial real estate professionals who are focused on transforming their personal practices into sustainable, profitable, wealth building businesses.
As such, we regularly review transactional history of our coaching clients (our Massimo Members) and look for trends in the market, potential shifts in velocity and/or value/pricing in various sectors of the market.
For this blog post, the data was aggregated from transactions closed or completed by coaching clients of the Massimo Group. It is important to note this data includes clients that may have recently started with their coaching programs, as well as clients that have been working with us for several years. This includes clients in our group and individual coaching programs. These clients are located throughout North America, with a majority located within the United States. In no way is any confidential data being shared, nor was any confidential information, such as coaching client names, their prospect and client names project names used in the assembling of this data. All such data was purged from the population of data points prior to this analysis.
Additionally, to keep these numbers consistent with the marketplace, we excluded any individual coaching client whose gross commission income was over 3 million dollars annually. At the Massimo Group we have scores of coaching clients achieving these high levels of income, yet felt their inclusion would skew the data to incompatible market proportions.
Finally, it is important to reiterate that these numbers represent the data points selected from individual commercial real estate brokers and agents who have elected to invest in themselves and their individual practices — thus these will tend to be higher than market average fees. In fact, Massimo Group’s 1 to 1 coaching clients consistently out-earn their CRE peers by 7X.
Understanding that this data is a sample of all closings achieved by our coaching clients in June 2018, here are the 7 trends we have identified:
1. Massimo Members (our coaching clients) closed over $10 million in gross commissions during the month of June. When we compare this to the $120 million of total gross commissions earned by our members in 2017, this suggests a growth from last year. Again, this data is only a sample of all closings. Applying the same principals to the general brokerage market, this could suggest that brokerage fees over all will be higher in 2018 than in 2017. However, I would prefer to reserve such speculation until a more significant data set is explored.
2. With a little over 240 transactions closed in the month, that’s a national average gross commission fee of over $40,000 per transaction. Your average, and/or your company or firm average may vary significantly based on your transaction practice. For example, we would expect a firm focused on investment sales to potentially earn a higher average, as much as we would expect a firm focused on leases and located in a secondary or tertiary market — to have a significantly lower average commission.
3. The highest fee, based on this sample, was the sale of an industrial asset with a fee of over $500K in the Midwest. This was a nice shift regarding “highest fees”, as in most months we see highest fees generated from investment transactions, typically in the Northeast. Again, recognize this is a sampling of data, but as we will see — the industrial market velocity continues to remain strong regarding overall product velocity.
4. The highest lease fee was over $225,000 for an industrial deal in the Northeast. Like trend number 3, we have generally seen the highest fees to be generated in the multi-family or office market within the Northeast. Certainly, this can simply be an anomaly for the month — but it also reinforces the strength of the industrial market that we have seen within our analysis of YTD transactions.
5. 53% of the transactions were leases, 35% were sales, and the rest were consulting/mortgage brokerage and property management fees. Lease transaction value has always been significantly higher than investments sales for obvious reasons (more tenants than property owners). How is your or your firm’s segmentation of income streams? If you work in a major market, likely you only focus on sales or leases (or at least you should). But for secondary or tertiary markets, are you seeing a shift in velocity in one channel versus the next — and if so what are you doing about it?
6. Of the sales transactions closed in June – 2/3rd were seller representation fees, 20% buy-side and the remainder represented both sides. Comparatively, 48% of the fees generated on lease transactions were the result of representing the tenants, whereas 38% represented landlord, and the remainder — both sides. What is your representation segmentation, and is there an opportunity for you to expand or provide greater focus?
7. Motivations behind transacting real estate remain positive and are originating from a perspective of growth or opportunity. Of the leases completed, relocations were by far the most noted motivation, while there were several expansions noted as well. As importantly, space contractions were not identified as significant motivator in transacting. Of the sales completed, the overwhelming theme was owners capitalizing on high prices. While there were partner dissolutions, divorces, and trust issues — this was not a frequently categorized motivational element.
Simply based on these 240 closed transactions from across the United States, one can see signs continuing to point to an optimistic transaction market. It can certainly be argued that this sample size is not large enough to make any projections of the future, which is certainly not the intent of this post.
The key is to put yourself in position to secure more closings for your own. Whether this means revisiting your service offerings, revenue channels, or honing in on the motivations behind your historical transactions.
Just a reminder, our next free webinar is TOMORROW, July 25th at 4pm EST. This session, “Personal Tax Strategies for Commercial Real Estate Professionals” will give you the information you need to keep more of your hard-earned commission income. Click here to register and learn more!