Louisiana Commercial Realty has been working for 15 years to lift the standards of the commercial real estate industry and this week we are presenting an idea to the Louisiana Real Estate Commission to allow a commercial real estate designation. The idea would require the state legislature to pass a law allowing it.
A commercial designation would simply require additional training in the business of commercial real estate. It would not be a license but would set a standard for the 20,000 Louisiana real estate agents who often dabble in commercial listings but have gone without any training from their brokers, the National Association of Realtors or continuing education vendors.
Our research shows most of the 9,000 listings for Louisiana commercial property are associated with real estate agents who do not work primarily with commercial property. The result is a disaster. The residential agents get involved with issues for which they have no knowledge, causing problems for buyers, sellers, brokers and tenants. In addition, brokers who hold the real estate licenses for agents do not provide any training for their agents that gives them the knowledge they need to conduct even simple commercial transactions. On top of that, the trade associations that represent the real estate agents do not provide any training on how to conduct commercial property transactions.
We have a solution. After 15 years of working in strictly commercial real estate and negotiating hundreds of transactions totaling over $100,000,000, we have created a workshop for real estate agents that gives them the knowledge required to be proficient in securing commercial property clients, managing the transaction, overcoming obstacles and bringing the transaction to a successful completion.
Our idea for a commercial designation that is authorized by the Real Estate Commission is based on a workshop we created specifically for real estate agents. The workshop details all aspects of a commercial real estate transaction and teaches agents how to successfully navigate the nuances of commercial real estate.
Chapters of our workshop teach commercial real estate agents what they need to know about the 6 major types of commercial property. The core focus dives deep into the driving factors for buyers, sellers, landlords and tenants. Each of these 4 stakeholders has a different objective so a commercial real estate agent must quarterback all the various entities and tactfully guide the decision-makers, government authorities, bankers, appraisers and property owners, who often conflict when interacting with each other.
Commercial real estate agents need to be proficient in using technology to solve their client's problems. One example is how agents can help a retail client determine the best location for their business. Normally agents only know how to provide demographics that include population, income and age; however, finding successful locations requires knowledge about how nearby residents spend their money.
For example, our research for a listing at 5501 Crowder in New Orleans showed within a 5 minute drive time that residents spent $5,591,611 on sporting goods-but there is no sporting goods store in the area. That means residents are traveling to outside the area to spend their money; therefore, a sporting goods store in that location would do very well.
This research helps commercial agents discuss with sellers and landlords how they will go about finding buyers and tenants. It also helps agents show prospective tenants that their business, such as a sporting goods store, can capture $5,591,611 of revenues from day one. This information is easily available but few agents know how to access and utilize it. We show them how.
One of the most elusive chapters in the "how to" workshop is valuing commercial real estate. We spent years writing appraisals for two of the top firms in New Orleans: Truax & Robles Appraisers and also Argote & Derbes, so we understand appraisals are meant for a bank committee to justify loaning money but have little to do with a price at which a property can be sold.
The most common method of determining a market price for commercial properties that produce rent income is to apply a Capitalization Rate to the Net Operating Income. For example, if a property produces $85,159 in income (revenues less expenses) you would divide that by a 7% Capitalization Rate. This means a buyer should, at most, be willing to pay $1.2 million for that commercial property.
We have 20 other chapters in the commercial real estate workshop for agents who want to be proficient in commercial transaction.
We hope our presentation to the Louisiana Real Estate Commission will encourage them to adopt our workshop as a template for authorizing a designation of commercial agent, raising the standards for the practice of commercial real estate in Louisiana and making the 20,000 real estate agents powerfully knowledgeable about commercial property.
If you would like more information on the technology available for commercial real estate, we have hundreds of articles on the commercial real estate industry, including popular topics such as prices, zoning, reading flood maps and inflation. Check out two of our popular blogs:
