Where did all the good people in commercial real estate go?Dec 21, 2022
The economic outlook may have become more uncertain, but unemployment remains low and most businesses are still facing labour shortages.
Some commercial real estate leaders are finding it difficult to recruit the people that they need to grow their businesses. And retention is also harder, as employees are more willing to switch jobs in search of the right environment, greater flexibility and – of course – higher pay.
Recently, Tom Wallace and I had an in-depth discussion about how commercial real estate agencies can attract and keep good-quality people. Tom is the Founder of commercial property management software company firm Re-Leased – so he knows a thing or two about growing a business quickly.
I invite you to have a listen in to our conversation (recorded on Tom’s podcast, ‘The ChangeMakers in CRE’) in episode 119 of CRE Success: The Podcast.
You can also read a transcript of the show below.
Tom Wallace: Hi, everyone, and welcome to The Change Makers in CRE. I am Tom Wallace. I'm the founder of Re-Leased Commercial Property Management Software. And I'm here with Darren Krakowiak from CRE Success. Hi, Darren, how are you?
Darren Krakowiak: Hey, Tom. I'm doing good.
Tom Wallace: Awesome. Did I pronounce your last name correctly?
Darren Krakowiak: You nailed it. It was awesome.
Tom Wallace: Thank you for being here. Thank you for making the time to join us today. I thought it'd be great to just crack on straight into it. If you could just give us a little bit of a background on yourself, on CRE Success, on your journey in commercial real estate today.
Darren Krakowiak: I started in commercial real estate in 2001, here in Australia, where I'm from in Melbourne. But I had a little bit of a detour, on my way to where I am now in the form of 11 and half years living in and working in Seoul, South Korea. So, I was sent over there in 2007 by JLL. I was recruited by CBI to run their business in 2015. So, I was exposed to a lot of different opportunities, culture and all sorts of different aspects that I wouldn't have been given the opportunity to have if I'd stayed in Australia. So that was wonderful, and picked up a wife along the way, and came back to Australia in 2019. And after a year back in Australia, I launched this business, which is CRE Success, where I work with commercial real estate leaders to develop their people and to grow their business.
Tom Wallace: And to say, oh, we'll dive a bit more into CRE Success. But it's just a fascinating background, I don't think there won't be a huge pool of people who have worked in Seoul, as well as throughout Australia. So just on the surface there, what are the some of the major differences in the way that those real estate industry or the cultures work between the two regions.
Darren Krakowiak: So, the commercial real estate market in Korea only really opened up to international investors after the IMF crisis, which was the Asian economic crisis. So one of the reforms was to allow international investors into that market. So that was a huge change in itself. And that's when the likes of you CBRE and JLL, started to come into the market. And one of the big differences there verses here that I would note is one, they still have very high deposits that are required for all tenants. So this is an old system, they had called a chance a system where the rent that you would pay would not actually be a rent, you just give a deposit to the landlord that you would then collect at the end of the lease term. And the landlord could then do whatever they want with that money. Now they do have more of a monthly system of rental payment now, but it's still, I feel like a relic of the past is this high deposit, and it doesn't matter if you're Re-Leased, if you're Samsung, or if you're just Mr. Kim's dental surgery, you must pay the big deposit because the landlord is very focused on making sure that big deposit is paid. So that was sort of one big difference that I guess in terms of more the cultural aspects, I would say, look, Korea is a very hierarchical culture. And so people are very focused on how old you are, and also what your title is. And within an organization, people do not call each other by their first name, they call each other by their title. So if your title is founder or CEO, that's what all of your colleagues would call you. They wouldn't call you Tom. You really notice when you're promoted, obviously, because people start calling you a different name. So another sort of little example I could give you about how important hierarchy and age is in Korea, one of the first things that people want to find out about you is how old you are. Because if we know who's older, then we know who has the the seniority in a conversation and in a relationship. So if there isn't a work relationship to determine who is more senior, then we'll want to know who's older to then determine how we act in certain social situations, and even the language that is used in Korean language with each other.
Tom Wallace: So it's just socially acceptable to ask how old you are? Or is it a little bit more round about way of given that information?
Darren Krakowiak: That can be pretty direct with certain things. In fact, that's another thing that I would say about Korea. So if you come into work and you're looking a little bit dusty, you will be told directly that you look like that. Or if you've put on a couple of kilos that you'll be told that you've put on a couple of kilos. It's quite directly that way, even though there are other parts of the culture which are quite indirect as you would expect more in Asian cultures where people sort of like relationships have to be really well developed before, we start talking about the sale, for example. So there's a lot of dichotomies in there. But yeah, asking people's ages is not a thing that's not done. It's acceptable, because that's just to determine how we can then interact with each other in a socially acceptable way.
Tom Wallace: Okay, that's the type of thing I can get around. I'm not sure, I'd like to be told I was fed every day coming into work. But I don't know, maybe it gives me the motivation I need to sharpen up. It's super interesting and it was the large deposit. I know that it's been a few startups, and some of them are a little bit more established businesses around the world. I'm not sure about in Korea. But now that number of businesses who do the sort of zero deposit so the tenant basically pays an insurance every month. So rather than fronting up with, say, $20,000 deposit, they pay 100 bucks a month, or whatever the number is. The landlord gets paid out by the company straightaway, and so they get the lump sum. So you'd think that's a business that would go pretty well in Korea, when you've obviously got like for new business going in, and fronting up with a whole bunch of cash upfront is going to be challenging to put down for deposits.
Darren Krakowiak: Boom, there you go. The going rate is 10 months rental as the deposit. So that's what the landlords are generally looking for.
Tom Wallace: Yeah, it's a lot of cash to stump up for a deposit, that's for sure. Let's roll forward. So back into Australia, with CRE solutions, just give us a little more background on what you did there and how you work with real estate leaders?
Darren Krakowiak: Yeah, so I started up CRE Success in 2020. And I really kind of, I guess, after being back in Australia for a year, I kind of noticed a couple of things. One was that there were a lot of people who were providing the type of service that I now provide to the residential sector, but not really doing it specifically to the commercial industry and commercials this huge industry, as you well know that I believe it's under service when it comes to training, speaking, leadership development. So there was sort of that opportunity. But also, I saw what I felt was some instances of poor leadership in the industry when I came back to Australia. And I thought that was an opportunity, not so much in terms of leadership coaching, I more just saw it as a way that people were looking for help. And I thought that was a gap that I could then fill. But what I've actually discovered is that where I can create the most impact in my business, is to actually focus on commercial real estate leaders, and particularly for leaders of independent commercial real estate service firms. And also, people who are running their own franchises under some of the franchised commercial real estate brands that exist, because I think those people who are also entrepreneurs are really committed to being the best leaders that they can be. And if I can put out content enough, I can share some ideas that I've got about leadership that resonates with them. And let them know that I've got a framework and a system that can help them grow their business, but also become better leaders for their people. Then that is something where a match is more readily identified than I think before where I was just trying to provide sort of general commercial real estate coaching, and it wasn't specific enough. So I think the riches are in the niches as they say. And when I focused a bit more and got clearer about what I was looking to do, and the problem I was trying to solve, you know, the business has started to perform more consistently since then.
Tom Wallace: Yeah, now your niche is what we say as well, that makes a lot of sense to narrow the focus increased the quality, that's great. And we've always thought like real estate itself is not as sounds like a good gap for you to fill, because now we bring people into the industry from all over, you know, into the software into the real estate industry. And often they'll ask, hey, what can I read? Or what can I learn? Or where's the resources online so I can upskill in commercial real estate before I start, or once I've started? There's not a lot out there, you know, it's something we've looked at a lot, there's just not a lot of great material. And so to someone that provides education, and training and coaching would be really valuable. And I guess one thing I wanted to touch on as well is, it's clearly a labor shortage. This isn't specific to this industry. Who knows if it'll change. Now there's a lot of layoffs happening and in different sectors, so that may bring some labor back into the market. But as it stands for the last sort of 12, 18, 24 months, it's been a real labor shortage and a lot of our customers in the real estate space when we talk to them when we train them, or ask us if we know anyone who's available because they're just so short staffed. Yeah, we're trying to do our bit by trying to automate some of those more manual tasks, so you can run a more efficient business. But obviously, you know, training people and bringing people who from outside the industry is really important. Just wonder if you can sort of share how you have been a part of that and I get to visit your customers who have transformed their business off the back of, you know, really investing in their staff and their leadership rather than just bringing people in and giving them a phone and a desk and saying, off you go.
Darren Krakowiak: Totally. So you've touched on a few things that I really do sort of focus on trying to help my clients with. Part of it is hiring for attributes and attitude not just for experience and expertise, and there are places that we can look. So for example, industries that are shrinking or that are in decline or places that we can look or industries which have a similar requirement in terms of what we're trying to achieve in terms of outcomes or results. So if we only focus on hiring people that have the experience or expertise that we're looking for, then it's going to be a very narrow pool of people that we're able to get. And what we're doing isn't rocket science. So if we can look more at the attributes, and the attitudes, and if we have really good systems and processes, then we're more confident to be able to bring people in and to be able to get them to where they need to be. So what you're doing in your business in terms of providing a lot more opportunities for automation, and outsourcing and just creating more process around what's happening in property management, I think is really valuable. Because if we've got more systems and processes, then we can be more definitive about the type of people who we want in our business. So I think right property management, that's where the real skill shortage is for most of my clients in the property management space. And some of them are hanging on to people who don't fit with the culture of the organization, because they're just worried about either losing that person's know how. And they're also worried that if they go, they can't replace them. Now, with more of the work that we're doing is automated, or if it's the process is documented, and we're able to outsource more, then we have a little bit more flexibility to let go of people who perhaps don't fit with our culture. And we can then also by the fact that we're automating, and outsourcing some of the more simplified and repetitive tasks, we can also elevate the role of the people who are staying within the organization, which allows him to think more strategically, and also makes them more engaged and adding more value to what we're doing. So what you mentioned before sort of struck a chord with me based on that. Another area that I think is a real opportunity for our industry is diversity, equity and inclusion. And when you speak to people, outside of probably the big firms, and I was speaking at a Commercial Real Estate National Network Conference last week, and we were talking about this topic, and I said, "This is an opportunity for you to grow your business". And I put up DE&I on the screen, and nobody in the room knew what it stood for. And then I said, "Look, this is diversity, equity and inclusion." This is an opportunity for our industry. Because if we look at our industry right now, it's it's pretty wide, it's pretty male, it's pretty private school background dominated when we're looking at agents. And if we can just cast a wider net and give more people an opportunity, not only will that help us grow our business, because we will have a wider pool of people to choose from, it's going to help us get a greater diversity of ideas, which will lead to more innovation inside our business, potential clients will see themselves reflected in the business. So they're more likely to want to do business with us if they can see our commitment to diversity, equity and inclusion in their business. Because either they see themselves reflected in the business, or, you know, some bigger companies, that's a checkbox for them when they're doing procurement to see that it's not just the old school, three guys coming up to pitch that we've got some diversity and some commitment to DE& I in the business.
Tom Wallace: On the journey, how do you think the industry has? Because it does seem we are interested in that, we are business sort of straddles two industries, where we are software company. So, you know, quite progressive. And as an industry in general, it's always been quite progressive. And then we're in the commercial real estate industry as well. And so that's where our customers are probably not as progressive. And it's been really interesting, just what to watch the difference? And basically, seeing real estate lag behind where do you see it on the journey?
Darren Krakowiak: Yeah, I would say that there's more work to be done. But I can see that, particularly some of the bigger firms to give them credit, they have tried, and, you know, they are deliberately looking to promote more women, for example, into positions of leadership. They talk a lot about these issues as well. Whereas previously, they weren't really, really talking about them. But I think that it is still a bit of a state industry in terms of the way it looks and feels and when you go to some of the functions, like I noticed, when I got back to Australia, just the gender imbalance when you'd go to conferences was huge. And I kind of thought that because I was in Korea, that was a Korean thing at the time because Korea is a quite a patriarchal society in itself. But when I got to Australia where it was the same here, even though people are talking about those issues. So, I guess though talking about it recognizing there is a problem is the first step to addressing it. But there's a long way to go. So I think we've got more work to do in that area. And it's not just about gender, of course. It's also about disability. It's about people's sexual orientation. It can even be around things like age. I mentioned before, you know, private schools, I think there is a tendency for people to hire people based on it's a big thing here in Melbourne actually about what school you went to. So, giving people opportunities that come from different social economic backgrounds. These are all ways that we can promote diversity, equity and inclusion. And I think that topic and that statement is really just about does the organization seem inviting to people that come from positions or identities, which aren't of privilege? And if you can see it, you can be it. So I think, if people can see themselves, like I said before, reflected in the organization, then it's more likely the same inviting to them.
Tom Wallace: Yeah, there's so many reasons to take that diversity and to take it seriously. So many advantages that would come from that. I mean, obviously, diversity of thought, being a big one. But also, in a very basic level, you're obviously expanding your talent pool massively, right? If you're not just looking in one small little area, but you can look everywhere. And you can bring remote work into that too, right? It's like that, it doesn't have to be your small little crew who is in your neighborhood or in your wider neighborhood, you can look anywhere. And if you open your mind up, you'll find fantastic talent and fantastic people everywhere who can add real value to what you're doing. You do have to embrace a new way. But you don't have to embrace it. But those that do embrace it are going to get the advantages, I think anyway, and then we believe that very deeply. You touched on something before, which I think is really interesting. You talked about culture, and not a good culture and the damage that can do. And I just want him to know a little bit more about how you work with leaders. How leaders think about it because it's a tricky one, when particularly in a tight hiring market, you've got someone that is not a good culture that clearly not great for the business. But they've got the key client relationships, they run a book of business, whatever it is. It's not always easy to take a call and say, "Actually, we're going to put culture first to hit of this one individual and what they bring." Can you just run us through, how a leader should think about that? And then what is the impact that could have from having someone who is a bad cultural fit and perhaps not moving on them?
Darren Krakowiak: Yeah, so culture, I think is just about the way things are done. It's about the values that we believe are important. And a lot of the time the leader is responsible for the values that are considered important in an organization. And we've got to remember that if we have our own business, that as the leader, the business is a reflection of you. So if we're going to have people come into the organization who aren't a good cultural fit, and that can then reflect poorly on us if we are pursuing business above the greater good of the culture. And I think that when leaders are very clear about what's important to them, and what they value, and when they talk about those things, and when they can communicate it clearly, it acts as a magnet to the people who are consistent with being able to contribute positively to their culture, and it will act as a repellent to people who are not able to be consistent with that culture. So it's really up to the leader to be very clear about who they are, what's important, and how things are done inside the organization. So people who aren't able to, I guess, rise to that are then not attracted to or likely to join that organization. And if everyone's very clear, but that leader then makes a decision to hire someone who doesn't fit with that cultural sort of nuance, then, you know, they're, they're compromising their values. And they're putting the culture that they've built at risk, which is very risky, because that can result in people leaving the organization. And the research nowadays shows that mobility in terms of people's willingness to leave an organization is the highest, it's been in 10 years. So people since COVID, have been more willing to leave for flexibility for how they feel about the values of the organization. And of course, culture is a big part of that. So if we're going to put our culture at risk for the sake of one higher than we actually placing a whole lot more at risk than the culture we're replacing at risk, the very thing that we've spent all these years building.
Tom Wallace: It's interesting. I mentioned in some industries, it would be the highest it's ever been. I would think the flexibility to move on the desire to move around. If things don't align, how have values driven do you see the companies you work with? I mean, I think the values of most real estate companies traditionally or many have been always be closing basically close the deal, and that was about it, but how about values driven you think the industry is moving, or has moved?
Darren Krakowiak: I think there's company values, but what I recommend that I do with my clients is yes, you can work for a brand. Or maybe if you're a franchisee, you might have the franchise values. But then you've got to have your own values as a leader, and you've got to be able to communicate those with your people. And quite often it can be something around you know, we want too just be the best. Well, what does that mean? And what does that look like? And why is that important? So I think, as long as we can communicate what it is and why it matters, and maybe even give us some sort of KPI to let us know that we're in the right direction to getting there to achieving that value and to implementing what it is that we're looking to achieve, then that's where we want to get to. And I think often people talk about something to do with the success of the business. And quite often I see people talking about something to do with integrity, or trustworthiness or respect. And also, something about the way people treats each other, and the way that we either value our staff or that we treat our clients or that we, we treat each other. And what I encourage my clients to do is, it's not just enough for you to have those values, what you need to do is communicate those values with your team. And when you communicate your values with your team, and when they have been communicated and understood, when people don't keep up their end of the bargain by being consistent with those values, we become a much clearer conversation. Because we can say, rather than "I didn't like what you did, because I don't like it," you can say, "that's not consistent with our values." And the conversation is much clearer, when you can tie it back to values, and those values have been clear to communicate with everyone. So I'm not worried if people say, you know what, one of our values is that we make 50 sales calls every day, we can turn that into something, which is whether it's persistence, or whether it's, you know, high standard, hustle culture, but entrepreneurial. But as long as we can turn that into a value, which can then be real, that people can understand and point to when they're looking for what is the right thing to do within the context of them going about their day, then that's what I encourage people to do and make sure that they're really communicating with people. If you just do it, and expect everyone to see what it is that you're doing, that's often not enough, you need to say it. So explain to people what your values are, also embody them with what you do. And then I think it's more reasonable for us to expect that people will be acting in a way consistent with those values.
Tom Wallace: We've covering up some big topics here, we've gone through diversity, inclusion values. What are the other big challenges that you're seeing? And having to coach, it feels like a time where I just think it's been a pretty crazy time for the last few years to run a business and in a leader business no matter what sector and you've got, obviously gone through COVID, potentially some sort of COVID recovery now, or at least hopefully, a new world. And then you have like a bit of a market crash off the back of that, housing crash potentially, who knows or a slowdown, economic slowdown recession being talked about? All sorts of new challenges, and then layer on top of that, flexible working, working from home, labor shortages? There's a lot. What are the biggest issues that you're working through on a daily basis.
Darren Krakowiak: I don't know if it's the biggest one. But based on the what you just sort of summarize there, I would say it's the importance of investing in people. And recognizing that if we don't invest in people, then there's a risk that either one of our competitors or even another industry will come in and develop those people. And I think when we're so busy and commercial real estate markets have been through, in spite of the fact of everything that's going on, I've been through another big upswing of obviously, the last couple of months, we're in a more uncertain environment due to interest rates. It's been go, go, go, go go. And I don't think that people have had as much opportunity to really make sure that we're giving our people everything that they need in order to perform at their best. So making sure that we spend the time to develop our people, not just when there is a downturn or when there is time to do it. But to make sure that something that we're continually doing. So we know that when markets do inevitably downturn, that we are not, if you like, waiting for the market to come up again, in order for us to be propped up, rather, we've done the work that will help us and help the business and help the people in the business be more consistent and be able to withstand those sort of peaks and troughs that come through. So people development, I think is something that people often do forget because they're too busy or because they think it's just not always top of mind.
Tom Wallace: Especially in a kind of hot market, right? And the hot market growth hides a lot of problems and hides a lot of sins. And it's when growth slows down, that people start looking around, going what are the core fundamentals that we built here that you know that we need to rely on when it's not quite as easy.
Darren Krakowiak: Record profits and record revenues, our report teacher. It papers over a lot of the cracks that can exist. And obviously when a market is hot, the business will often keep growing in spite of some of those cracks that exist and making sure that we're developing our people and giving them what they need to perform at their best. I think it’s something that all businesses should always focus on. If you think that you're too busy to invest the time in your people, then that's probably a really good indication that you need to be investing the time in investing in your people.
Tom Wallace: Yeah, I completely agree. Like it's a very expensive way to run a business if you have a lot of people who just aren't trained, who don't know which way to focus in and are consistently learning. I think the industry is moving so fast that it's not just about training at the start, either. It's about continued training and continued improvement throughout. Is there anything, we haven't really been able to correct this but is there any online resources or anything that you point to as well, that supplement what you do, that we can point people towards?
Darren Krakowiak: Online resources, in what regard do you mean?
Tom Wallace: Is there any sort of any way you would look at to say, if someone wanted to learn more about commercial real estate? They're relatively new into the industry, would you send them towards a podcast or YouTube video or is it just haven't covered? Like, we haven't come across anything fantastic, either, but even some books that you steer clients towards?
Darren Krakowiak: There are some leadership books that I do, but from a commercial real estate perspective. And the best book on commercial real estate in terms of how to be a good broker in disguise (he's not really a competitor of mine is 20 times bigger than my businesses), but he's probably the first specific commercial real estate coach there is. And that's Rod Santomassimo. And he's got a fantastic book, which is called 'Brokers who Dominate', and I think it's just coming up on its 10-year anniversary. And if you want to know about some of the core skills that a commercial real estate agent needs to know, then I read that book. It was a long time ago, maybe it was when it first came out maybe was 2012. And if there would be one book that I would recommend, from a brokerage standpoint, in order to be consistent, in order to be someone who's got a real great presence in the market, then that would be the book I would go to. I guess, my answer is that I need to write a book that I can direct people to. I can provide the resource but Rod has got, I think the best book ever written on commercial real estate.
Tom Wallace: He had the best book until you write yours. I've come across two new business opportunities on this call alone, this has been great. Also, Darren, it's been great to chat. I really appreciate it. And it's just fascinating learning what you're doing, spotting that gap in the market and bringing your experience from Asia, bring it back to Australia and in really going for it. So congratulations on that. It's been great to talk and appreciate your time today.
Darren Krakowiak: Thanks for having me, Tom. Appreciate it.
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