The four ways to grow a commercial real estate business.

CRE Success Principle: Too many agency leaders set targets based on repeating last year’s performance or adding a modest 5%. But when inflation, market expansion, and rising costs are factored in, standing still actually means going backwards.

If your commercial real estate agency business is not growing, it is dying.

That might sound dramatic, but when you consider inflation, rising costs, and changing market conditions, simply repeating last year’s performance means you’re actually going backwards.

In commercial real estate, revenue growth is not optional. It is a requirement.

Over the years I have observed that there are only four real ways a commercial real estate business can grow.

1. Organic Growth

Organic growth happens inside the existing business.

This can come from improving your win rate, generating more leads, working with existing clients more often, or targeting higher value assets that generate larger fees.

Leaders can also create organic growth by improving the performance of their people.

2. Mergers and Acquisitions

Another way to grow is to buy growth.

Many commercial real estate agencies acquire rent rolls to secure recurring revenue. Others merge with or acquire competing businesses to expand their market share.

3. Recruitment and Retention

The people inside your business are a major growth lever.

Recruiting rainmakers can bring immediate revenue into the agency. At the same time, hiring junior talent or support staff can free senior producers to focus on revenue generating work.

Retention is equally important. Keeping your best people prevents contraction.

4. Expanding Sectors or Territory

The final growth lever is expansion into new markets.

This might involve moving into new sectors such as development sites, healthcare, childcare, hospitality, or data centres. It could also involve expanding into new geographic territories or opening additional offices.

Understanding these four growth levers helps leaders make more deliberate decisions about how their business can expand.

If you want to learn how to activate these growth drivers inside your agency, listen to episode 260 of Commercial Real Estate Leadership.

Episode transcript:

If you are not growing your business, your business is dying.

Does that sound a little bit extreme?

Well, it's actually true, and I'm going to show you why that statement is true and what you can do to stop your business from dying.

Lead better, grow faster, and stress less. That's what we are here to help you do. Commercial Real Estate Leadership is the show. Darren Krakowiak is my name.

We're up to episode 260, and I want to say thank you so much for taking the time to join us.

We have been making our way through a series of themed episodes, and we're up to the third theme of the year, which is leadership, leverage and agency growth. We've got the next four episodes, including this one, covering that theme.

And I'm going to kick it off with a great episode, which is all about the only four ways that exist to grow a commercial real estate business.

No one has been able to prove me wrong about this theory as yet. Maybe there'll be someone who's listening who can think of another way that doesn't fall under one of the four categories.

If you've got an idea of that, do send me an email, darren@cresuccess.co. I would love to hear from you.

This is an opportunity for me to talk about the theme in a meta way, because we're talking about leadership, leverage and agency growth.

And these best-of series of episodes is a form of leverage, right?

It's me taking our library of over 250 past episodes and repurposing them, repackaging them as a best-of series.

And do you know what? I didn't think that this would happen, but somehow our downloads are up by about 40% as we've been basically doing reruns. Isn't that funny?

So, I was trying to figure out why. Is it because maybe I'd run out of ideas? I was getting a little bit sort of stale? I'm not sure. But what I have figured out is the ones that we've picked are obviously resonating.

So, if you are new, joining us here for the first time, you've discovered us during this best-of series, really appreciate you being here. Thank you so much for joining us.

If you want to do something to help us, because this show is helping you, one thing you can do is just pass on an episode to somebody who you think it will resonate with, someone who doesn't know about the program.

If you pass on this episode, or one of the episodes that you've heard that might be relevant for them, then you'll be doing the show an absolute massive favor. So, if you can do that, I'd appreciate it.

For now, let's kick off this special series, our first of four, talking about leadership leverage and agency growth.

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I wanted to do an episode today to specifically speak to commercial real estate leaders about what you can do to activate the levers that exist inside a business to help it grow.

So, if you aspire to be a leader, somebody who can really make the needle move in a business, or you want to own your own business one day, or if you already do, then a lot of what I'm going to talk about today is going to be of interest to you.

So, as I said at the top of the episode, if you are not growing your business, your business is dying.

And the mistake that I see a lot of people making when they think about what their business should be doing, or what they should be doing with their own production, is they just base it on what has happened in previous years.

And they think that if I can do what I did last year, then that's great. I'm doing what I need to do. Or maybe they look at what they did last year and they add 5%.

And when they're working with somebody like me and I suggest to them, “Hey, what about if we did what we did last year plus 20%?” Then they come up with a lot of excuses as to why that's not feasible.

But the truth is that if your business is not growing, it's dying.

And you really do need to be doing at least more than 10% growth in business. Otherwise, your business is just treading water.

Look at inflation nowadays. You're sitting at, I think, over 5% in Australia, or more in many other places. The market growth, that pricing going up, giving you more fees, is going to naturally give you more revenue in your business.

And the economy is growing as well. So that's going to give you five or 10% growth anyway.

So, if you're not at least hitting that as a marker, then your business actually is, in real terms, getting smaller.

And growth is so important to the leaders of businesses.

If you've ever worked for a big corporate, they're all about growth, and that's what they want. And if you're a small business owner, that's what you should want as well.

And as an individual working inside one of these businesses, I think one thing that you can do if you are an employee or if you're an individual contributor is just to understand why growth is important and the role that you play in helping the business grow.

But what I want to do today is give you four ways that a business should be growing in commercial real estate.

And these are four levers that you can activate and lean on to create more growth in a commercial real estate business.

And the first one is organic growth.

I mentioned before that growth will naturally come inside a business, but these are things that you can do to make that growth a little bit bigger in some organic ways.

So, one thing that you can do is to do more work with existing clients.

You can also increase your win rate. So, if you've got the same number of opportunities coming into your business, but the win rate increases, that's going to lead to more revenue.

You can find more prospects or get more leads coming into the business. A great way to do that is through referrals.

You can start working on higher-value assets. Higher-value assets typically attract higher fees because they're worth more.

You can reverse fee compression. Rather than be a victim of fee compression, you can look for ways to actually demonstrate your value so you are not experiencing the same levels of fee compression that are going on in the market.

Of course, I've already mentioned market growth. As a leader, you can also get more juice from the same oranges.

And by that, I mean helping your people improve their performance. That is creating the environment where people can be the best that they can be and are able to succeed and contribute to the growth of the business.

So, there's just a few ways that you can increase the organic growth of your business. And that's just one lever.

The second lever in commercial real estate is M&A (mergers and acquisitions). And this is where you buy growth.

Very common in commercial real estate in Australia for agencies is to purchase a rent roll and acquire some recurring revenue.

But also, there are some downstream revenue opportunities that come from that and potentially can also create margin from some of the economies of scale that come from the existing resources you have in the business that don't need to be duplicated to manage a larger portfolio.

You can also merge with another company or you can acquire another company. These are some ways that mergers and acquisitions can help your business grow.

Now the third lever I want to talk to you about is recruitment. And that includes not only getting new people to come to your business, but I'll add to it retention.

So, making sure that your competitors aren't recruiting your best people. So, we want to stop contraction by retaining the best people in our business.

And there are a few ways to look at recruitment.

One is to acquire rainmakers who can have an instant impact.

We can also take a slightly longer-term view, which is to acquire people who are less experienced who, in time, can become productive members of the team.

But in the time that it takes them to be very significant contributors to fees inside the business, there are things that they can do to free up the resources of the existing people in the business.

If you go back and you listen to episode 60 of the show, which is "That's Below My Pay Grade," I talk about how sometimes in commercial real estate people are working on lower-order tasks than they should be.

And if you get an additional resource into the business, whether it's a junior analyst or even support staff, that can help free up the time of the higher fee earners in the business so they can focus more on bringing more revenue into the business.

And if you're doing it with support staff who can become producers in the future, then you are also contributing to the future growth of the business.

The final growth driver that I want to put to you today is moving into new sectors or expanding your territory.

When it comes to moving into new sectors, if you are currently in one of the traditional three sectors of commercial real estate — office, industrial, or retail — then you may want to push into development sites, which is quite a common one.

Higher-density residential. We can look at the care sector, so that's seniors care, looking at childcare or healthcare.

We can look at the hospitality sector, data centers. There are many different areas of commercial real estate beyond the typical three.

And I think looking at the area where you work and where there are opportunities to provide some specialization that perhaps doesn't exist in the market could be a real opportunity to activate some growth in your business.

And when it comes to expanded territory, well that's just opening up a new office or expanding the territory, or the patch in which you cover.

I think once you've actually reached a certain level of market dominance, or a certain sort of capability in one market, then you can start to push out into new areas.

That could be just servicing a greater area from an existing office, or you could actually replicate what you've achieved and what you've learned in one business and open a new business.

That does require some systems and processes if you're going to open up a new business rather than just expand the reach of an existing business or office.

But it's something which will allow you to replicate the revenue and hopefully the profits of an existing enterprise.

So, there are four different levers — the four most common that I thought of before today's episode — that I wanted to share with you when it comes to activating growth in a commercial real estate business.

If you would like some help with activating those growth levers, then this is exactly the work that I do with leaders in commercial real estate.

You can email hello@cresuccess.co if you want to know more. We'll ask you a few questions to see if you are a good fit for the program.

And if you determine that you believe what we offer is something that can help your business grow and help you get the most out of your people, then we'll tell you how we can work together over the following 12 months.

So, send an email to hello@cresuccess.co for more details about agency solutions.

As always, appreciate you being there. Thank you so much for listening, and I will speak to you soon.