Commercial real estate is a cyclical business. I wish that it wasn’t. I would prefer that it remain a little more steady, without all the ups and downs. I would really prefer that the market remain steady at 2008 levels; but unfortunately, that’s not the case. Real estate always has and always will have wild swings in market conditions.
If you’re going to thrive in this industry, you need to understand its up-and-down nature. Having been a broker for more than 25 years, I have lived through many cycles; in addition to trying to survive them, I have tried to learn from them.
When I started in the business as a retail broker in June of 1986, the wheels were already starting to fall off, but nobody yet realized it. By the end of that year, it was obvious to everyone. The entire nation was in a huge commercial real estate downturn caused by a slumping economy, failing banks, and significant changes in the tax laws dealing with active and passive gains on real estate investments.
To make matters worse, the Dallas-Fort Worth market was probably the hardest-hit market in the United States, with its primary industries of banking and energy particularly struggling.
In 1987, I had a retailer hang up on me when I called him about a space I had available in a shopping center I was leasing. I called him back and told him that I thought we might have gotten disconnected. He assured me that we were not disconnected; he had hung up on me. I asked him why he did that and he told me he would be fired if he brought in a deal from Texas. Ouch! We had become what Detroit is today.
Going through it, I saw a lot of different reactions to these very adverse business conditions and the down real estate market. A lot of people just seemed to get depressed and do nothing while things got worse—and worse for them personally. Some people moved into fee-based services within the industry, such as appraisal, to try to weather the storm. Some moved to other markets across the country that weren’t hit quite as hard. Others decided they did not have the stomach for the ups and downs and left the industry to do something entirely different.
There were still others who decided to just fight through it. They were willing to reinvent themselves. They were determined to see what would work and what would not, and do things differently. Almost everyone in the business had gotten a little “fat and happy.” In order to survive and possibly even thrive, people had to work harder and smarter.
Investment and land sales had come to a screeching halt. And although leasing had slowed down, especially in the upscale segment, there was still some money to be made in leasing, and there were fewer people that were focused on it. Targeting the discount segment and looking for new niches, such as mall tenants wanting to lower their occupancy costs by moving out of the shopping centers, were some of the strategies that I saw work for people, enabling them to work their way through the hard times.
Looking back at the people who truly thrived in those times, they were true visionaries who recognized opportunity and seized it. There was probably as much or more wealth created from purchasing properties from the Resolution Trust Corp. in the late 1980s and early 1990s than what has been created during the more recent upturn. Even those who were not able to take advantage of the RTC opportunities but worked harder, reinvented themselves, and discovered how to find new opportunities, emerged as better brokers.
Although no one likes or asks for adversity in life or in business, it seems that it is in the tough times that real character is developed, and truly great brokers are made. The good news is that we’re coming out of the current downturn and the future is looking better every day.
Let’s hope we emerge as better brokers who have learned to take advantage of new opportunities as they come.
John Zikos, a partner at Venture Commercial Real Estate, specializes in landlord and tenant representation, leasing, income property sales, disposition, and new development consulting. Contact him at email@example.com.