My name is Richard Sexton. After an eight-year career in London and Europe with Knight Frank, I moved within the firm to New York, where I’ve been for the past 12 years.
This is my new monthly blog looking at US real estate & life generally, through the eyes of a British expatriate.
New York is visited by many Brits each year and many, like me, love the energy, buzz and pace of Manhattan, a genuine 24/7 city. Considering such an environment, many people ask me, "How do I get into working in 'Property' (commercial real estate) in New York?" Naturally it is a very different workplace which contrasts greatly with the Chartered Surveyor environment in the UK. Below I outline what I find are key differences between the UK and US property industries.
The emphasis in New York commercial real estate is on sales and the brokers are paid by commission only. You need a broker’s license to legally receive a commission, which is considerably different from the five-year path to becoming MRICS. In New York, the requirements for a license are the same for residential and commercial brokers: you must complete an NY Department of State (DOS) approved 75-hour qualifying course costing approximately $300 and pass a qualifying written 75-question multiple-choice examination administered by the DOS.
There are roles with salaries such as corporate real estate account managers, property management and appraisers, but transaction roles such as investment, landlord and tenant representation are all commission only. This naturally provides a very clear barrier to entry. To come here, learn a new market and compete with experienced and knowledgeable brokers without any income or network of contacts, is simply a mountain most will not climb. It's hard enough for an American, and I've seen many people of various ages and backgrounds try the profession and move on after 12-24 months – almost every time, to a salaried alternative.
You may wonder how anyone makes it in such an environment. Well, first of all, the upside can be tempting. Most brokers will split their commission for each transaction approx 60/40 with “the house” - the common term that refers to the firm at which the broker “hangs his license.” Let's take a tenant representation example, where a broker represents a law firm in Midtown Manhattan to acquire 10,000 square feet in a Class B+ office building for $55/sf on a 10-year term. Fees are paid by the landlord in the US. In New York, they will pay their own representative half a fee and the “procuring broker” a full fee. There are no joint agencies. Typically a full fee equates to approximately 3% a year. A 10-year lease equates to 32% of one year’s rent. As Americans like to say, "You do the math!"
10,000 sf x $55/mo x 12mos = $660,000
$660,000 @ 32% = $211,200
60% = $126,720 commission
In contrast to the UK, tenant representation fees are 4 to 5 times bigger here. Capital market transactions, on the other hand, have a fee structure very similar to that in the UK. As a result, most brokers in New York are attracted to tenant representation. The same can't be said of Chartered Surveyors in firms in the UK, where it's still a specialization reserved for the few.
From my observations; the key to entry in the profession is to join a good team with a good mentor. Some brokers act alone but many work with teams, share the roles and responsibility of a deal and split commissions depending on their input, such as sourcing, winning and execution. The emphasis for new brokers is to make “sales calls” (telephone cold calls) and set up meetings to take their more experienced colleagues to. Selling is considered a skill, something one can get better at, and there is a lot of emphasis on how to improve selling and cold calling. Equally important is your “rolodex” (address book) and who you can call on to get those meetings. You will be expected to call on friends and family friends to facilitate meetings – something I find Brits are less comfortable with.
The commission-only model dictates the personality and character of the industry. Offices are cellular, and size and location is typically based on revenue production. The juniors usually sit in a “bull pen” configuration (cubes in the centre of the office). There is a healthy internal competition between brokers and teams, and information on pursuits and pitches has to be managed with systems and procedures to avoid internal conflicts.
However, here there's also a strong collaborative attitude. The smart brokers know to include colleagues with better experience in a particular sector, such as a law or finance firm specialist. The mantra being "better to share something than to have all of nothing."
Socially, however, the business is very different here. There tends not to be as much social interaction between brokers across different firms such as there is in London. There is social interaction within the firm but again nothing close to the degree in the UK. When you're commission only, you need to be moving in circles which introduce you to new opportunities; hanging out with colleagues and other brokers won’t cut it.
For me, it has definitely been a process adapting to working with brokers, but I like the can-do attitude of America. Anything seems possible and for every hard luck story there's the one about a cold call or a first-year broker earning a million dollar commission.
High-risk, high-return awaits those who take on the commission-only model here.
Richard Sexton, MBE, MRICS, is a UK partner with Knight Frank, based full-time in Newmark Grubb Knight Frank's New York headquarters. Richard’s role is to help facilitate business from the US to EMEAR & Asia Pac and vice versa.