Becoming a commercial real estate broker is, in and of itself, a pretty cut-and-dried process. You pass a state licensing exam after taking the required number of courses, and then you’re a broker. However, there are many considerations, including the pros and cons of obtaining a commercial real estate license and what you’ll do as a licensed commercial broker.
In this article, we’ve provided a primer on the process of obtaining a commercial real estate brokerage license and launching a career. Included are the licensing requirements, which vary state by state, and tips on advancing yourself professionally once you’ve gotten your license.
Although single-family homes, individual apartments, office buildings and shopping centers are all real estate, commercial real estate transactions tend to be more complex than residential. In addition, they may involve more parties to the transaction, and those parties may have conflicting agendas that the broker has to reconcile, therefore requiring the broker to have excellent interpersonal and negotiating skills.
Frequently there’s more specialized knowledge involved, depending on the commercial broker’s specialty. This may include local tax and zoning laws, property-level and market-level demand for leased space, and structured finance.
Because of this, commercial real estate brokers tend to be paid better. Glassdoor.com reported in 2020 that the average salary for commercial brokers was nearly $91,000, while for residential real estate agents, it was about $51,000.
That higher salary is feasible in part because as a licensed broker, rather than an agent, you can actually go into business for yourself if you choose. Alternately, you may choose to work for a commercial real estate brokerage firm or employ a team of agents—and earn commissions from their transactions. That freedom to determine how you want to work is another point in favor of getting a commercial broker’s license.
As a licensed broker at a commercial brokerage firm, you may continue in the role of a broker-salesperson. You may choose to become a managing broker, focusing more on administration rather than direct negotiation of transactions. Or you may choose to become a designated broker, overseeing a team of brokers and agents.
Licensed commercial real estate brokers generally have greater credibility with potential clients. Obtaining that license means you’re committed to a career in real estate. It also implies that you have more knowledge to draw upon. You’ll be regarded as an authority in your market and in the property type you specialize in.
Clients will trust you not only to negotiate the lease or sale of a commercial property, but also to help evaluate their long-term business plans. In comparison to residential real estate, which often consists of one-off sales or rentals, commercial real estate entails long-term relationships with clients who may call upon your services again and again.
Fulfill A State’s Real Estate Work Requirements
While it may seem intuitive that in order to obtain a job at a commercial real estate brokerage you’ll need a license first, in fact the opposite is true. States require that you work for a real estate firm for at least one to three years (the actual length of time varies by state) before you can apply for the license.
Study and Pass the Exam
Next comes state-required real estate licensing courses, which cover real estate fundamentals along with national and state-specific subject matter. Here again, the course load varies by state: Massachusetts requires 40 hours of courses, for example, while Texas requires 180.
Real Estate Requirements vary from state to state with each having their own licensing requirements, and there are no national norms. Some states have reciprocal licensing agreements in place if a broker wishes to practice in more than one state, although most don’t. Some states combine residential and commercial broker licensing, while in others, residential and commercial brokers require separate licenses.
After completing the required courses, the would-be broker is then eligible to take the exam. The exams are usually multiple choice with between 75 and 150 questions; applicants are often quizzed about federal and state laws pertaining to commercial real estate.
Those who pass the exam—generally it’s about 50% to 60% of candidates—are then certified as commercial real estate brokers. That’s not the end of the educational requirements, though.
In order to continue holding the license, a commercial broker must take relevant continuing education courses every two to four years, depending on the requirements of the individual state. Brokers who operate in more than one state are advised to follow the continuing education requirements of the strictest state. Popular continuing real estate education subjects include mortgage loan brokering, appraisal and real estate law.
Get a Job at a Real Estate Brokerage Firm
Getting the license is only part of the story, though. From there, the next step is getting a job with a brokerage firm that handles commercial real estate. According to PropertyShark, the two best options are a brokerage that works in both residential and commercial, or a commercial specialist.
If your license covers both residential and commercial brokerage (as it does in some states), “the potential for steadier income is in residential transactions, which are easier to obtain and faster to close whether your client is renting, buying or selling,” says PropertyShark.
Also, as a new real estate agent, you’ll likely also find it more difficult to source commercial deals with little experience, according to Property Shark. In the meantime, you can learn from the commercial deals of other agents and build a client base of your own as you work toward becoming a commercial real estate agent.
The downside is that few brokerages have deals divided evenly between commercial and residential agents. As a result, you may have less exposure to commercial transactions than you would in a brokerage specific to commercial real estate.
A brokerage that focuses strictly on commercial real estate transactions often provides salaried training programs for new associates. “These programs can last a year or more and, therefore, allow trainees to focus solely on CRE and not rely on residential deals for income while learning the ropes,” PropertyShark says.
However, the disadvantage is that brokerages with training programs are also harder to get into because the competition is greater. Conversely, paid trainees can expect to earn about $25,000 to $45,000 per year before making their first commercial transactions.
In addition to the two methods mentioned above, PropertyShark says another way to jumpstart your career into commercial real estate is by interning at a commercial brokerage before becoming licensed or by working in its marketing department.
Either way, it’s helpful to find a mentor or multiple mentors, both inside your company and in professional associations. Mentors can provide advice, insight and guidance that come from years of experience that you won’t have yet at that point your career.
Many commercial real estate firms require their agents to join a national or state-level professional association, like the National Association of Realtors, the Urban Land Institute or, more locally, the Real Estate Board of New York. PropertyShark calls this one of the most important steps in becoming a successful commercial real estate agent because these associations offer continuing education, networking opportunities, and supply and service discounts (such as manuals, software, etc.)
Regardless of whether it’s required by your employer, seeking a designation such as SIOR (Society of Industrial and Office Realtors) or CCIM (Certified Commercial Investment Member) can help you differentiate yourself in the marketplace. These designations must be earned; to become a CCIM, for example, you’ll need to complete a curriculum of required courses as well as two credits from an elective, submit a portfolio of qualifying experience and pass the final exam.
Offsetting the rigorous process of earning the designation are the benefits it provides. These include greater credibility with clients and networking opportunities at these professional associations’ regional and national meetings.
Focus On Specialization
With so many types of commercial properties, from medical office to net-leased industrial, PropertyShark advises specializing to help narrow your focus and develop a deeper understanding about your niche. Specialization also helps you better target your intended clients and build your reputation in your chosen
field. You can select one of the “five food groups” of commercial properties—office, industrial, retail, hotel and multifamily—and then further sub-specialize in specific uses.
While mentorship and professional organization allow you to learn the local commercial real estate market, it’s also important to create a marketing strategy, PropertyShark advises. This should identify the type of properties you want to focus on, how you plan to target clients, a unique selling point (USP), a budget, marketing formats, and success benchmarks. You can also expand on this further by referencing general marketing plan guidelines for a roadmap to generate leads.
As a commercial agent, you can also work in several areas besides sales of property. These may include development, arranging financing at various stages of a property’s life cycle, negotiating tenant leases, or a salaried position in property management. As commercial real estate becomes increasingly specialized, the options for you to find a niche that fits you are also increasing.
Potential Disadvantages of Getting a Commercial Real Estate License
There are disadvantages to obtaining your real estate license. One is that licenses don’t come for free. Neither does opening an office.
Along with incurring expenses you may not have had to meet before, there’s also greater responsibility. The success or failure of your brokerage operation ultimately falls on your shoulders. If you hire brokers to work for you, you’re responsible for their professional conduct as well as their livelihoods.
In addition to higher expenses and more responsibilities, there’s also a greater need to juggle multiple duties. Whether on an individual transaction or in relation to having multiple employees, there’s more paperwork to keep track of. You may be required to recruit and train new brokers. You may be expected to lead your team in terms of keeping up with changes in laws and regulations that affect your clients’ business.
If you decide that commercial brokerage is a career path you want to pursue, it’s important to remember that like any journey, it starts at the beginning. The most basic educational requirement to become a real estate broker is a high school diploma or its equivalent. However, many brokers have already gotten undergraduate or graduate degrees in business, finance or real estate by the time they set out on that path.
Becoming a commercial real estate professional is not a quick process; nor is it a path to overnight success. However, the rewards, both financial and personal, can make the process worthwhile in the long term. Some brokers find this career path so fulfilling that they continue working into their seventies or eighties.