You don't have to be a market analyst to know commercial real estate sectors are hurting. Just drive through any business park or down any major street and you'll see the empty buildings.
With transaction volumes down in the dumps, these are tough times for the commercial real estate brokers who make their living off commissions.
But savvy brokers aren't just sitting around. They're providing extra feedback for clients to navigate the tricky market, networking to find new business leads, and laying the groundwork for when things finally turn around in Nevada.
"You have to do a little bit more of everything," says broker Carole Brill, vice president of Miller Industrial Properties. "We're busy."
Vacancy rates hit record highs in Reno and Sparks in 2009, and this year isn't expected to get a whole lot better with unemployment remaining high. Last year ended with industrial vacancies at 15.3 percent, office vacancies at 20.5 percent and retail vacancies at about 15 percent.
Dean Krieger, managing partner of Lee & Associates Commercial Real Estate Services, has been in the business 24 years, including here and in Orange County, Calif., and has seen his share of ups and downs.
"To say this is the most severe downturn I've seen is certainly an understatement," he says. "I wouldn't categorize this as cyclical as much as a dramatic reset."
For new brokers, the downturn has been an eye opener. James Lowey, an industrial and commercial broker with Morrissey Realty, has been a broker for six years.
"I'm 31, and most people my age have never seen anything but a boom economy," he says.
Brokers learn early to save their money during good times to make it through lean times, and today brokers are cutting back on vacations and other extras like everybody else. Lowey says when he grew up his dad emphasized the importance of living within one's means, and he's glad he heeded that advice.
Usually it takes about three years for brokers to build up a base of business. Lowey had good years in 2007 and 2008, and then felt the effects of the recession in 2009.
"The first half of last year I had my first deer-in-the-headlights moment. One deal after another fell apart. That forced me to get back to basics," the young broker says.
Lowey says he's making lots of calls, staying in close touch with clients and focusing on the projects that are most likely to come to fruition.
"I stay positive and motivated because challenging times like these make me better at my craft," he says. "In the end this will produce a better crop of commercial real estate brokers."
Prioritizing is critical in a down market.
"Smaller sure-thing deals are better than big deals that are long shots," Krieger says.
Krieger has increased his business development efforts and is watching trends in other markets that might affect Nevada. A bad economy forces brokers to be more proactive.
"I view challenges in front of us as opportunities to outdistance the competition and come up with something creative," he says. "I'm not just trying to make a deal but to improve the position of the client I'm representing."
Although business is slow, it hasn't come to a standstill.
Sue Smith, broker owner of Argent Commercial Real Estate, says she's worked on three transactions in the last six months involving companies that moved to northern Nevada.
There's also some movement among local companies. Some businesses are consolidating space or taking advantage of the tenants' market and moving to nicer spaces for the same prices or even cheaper rents. Others are expanding their office or industrial spaces while rents are low so they they're ready to ramp up when the economy improves.
And commercial brokerages aren't standing still either. Miller Industrial Properties, for instance, rebranded with new marketing materials and eye-catching signage, and expanded its staff, adding 2.5 administrative positions to assist brokers. Landlords these days need lots of information and feedback to compete in the difficult market, and deals take longer to come through because financing is tough and everyone is cautious.
"Having these additional hands to support clients makes a difference," Brill says.
Like other brokers, Smith has increased her focus on networking, both with local organizations and national professional organizations, and she's taking the time to attend more conferences.
The current state of affairs is similar to the depressed real estate market of the early 1990s when she became a broker, she says. "The difference is there weren't as many brokers back then."
But this market isn't impossible, and no market is perfect, Smith notes.
"There seems to always be something missing. Either you have too many buyers or too many builders or not enough money. There's always something that makes it a challenge," she says. "I've never found it to be a slam dunk."
