ec. 10, 2011 - Making Lemonade: Building capacity in changing times

Well, this is interesting: the ever-optimistic NAR economist Lawrence Yun recently observed that 2012 won't see a robust recovery in the housing market. In fact, Yun says that as rents climb in the multi-family housing market and as the stigma of renting is disappearing, it will be the commercial real estate sector which will see the greatest increase in activity.

And noted economic commentator Barry Ritholtz states that the slow motion crash in housing will continue for another 5-10 years and predicts that the US are only in the 5th inning of a 9 inning game in which values may continue to drop. Additionally he says that"following a debt crisis, consumers spend a decade or more deleveraging, and tend to downgrade purchases that involve taking on more credit - like a mortgage."

What does this predicted trend indicate for real estate association managers? It's an uncomplicated answer: it simply means that our more aggressive members will go where the money is. And in turn, that means the association needs to provide those members with adequate support services to get them there.

Even the smallest real estate associations need to sit up and take note: if we are to remain relevant as trade organizations, we must understand that our membership no longer consists of 90% used home salespersons. In order to make a living in the real estate market, members need to respond to consumer trends-and according to the observations of Yun and Ritholtz, the markets are trending toward commercial real estate. That's where the action will be.

So how must real estate associations react? Most Realtors won't become full-fledged commercial specialists flashing their CCIM designations-a majority of US real estate market areas simply won't support many exclusively commercial specialists. What members will want to do is gain the skills and the tools to support an increase in their commercial activities, particularly in the rental property market for multi-family housing. And fortunately, there are some pretty robust existing programs that associations can use to build capacity to support these emerging member needs. Here are some suggestions for the association executive:

1. Encourage members to participate in a commercial overlay board. Many existing support services are already in place in these organizations-- you don't have to reinvent them and spend down your association resources. Becoming a secondary member in a commercial overlay board is a good answer for many Realtors who don't want to exclusively specialize but do want additional education and marketing networks.

2. Form a commercial marketing group in your own board. It could begin as an informal 'haves and wants' meeting over coffee and doughnuts. If the need is there, it will grow on its own-with the association acting the incubator.

3. Examine NAR's Commercial Services Accreditation program for local associations. While your association may not wish to pursue the actual accreditation (which may seem unnecessarily elaborate for your immediate purposes), this program does offer some very useful ideas on how to develop association support capacity in the commercial services area. Think about

a. A dedicated commercial page on your association website. It might feature member's commercial listings, statistics, and useful information about topics of interest-even some data from the local economic development organizations.

b. A website link to NAR's commercial home page, its commercial advocacy page, and the commercial education page. And don't forget NAR's commercial blog, "The Source.", as well as the Commercial Research department--members need easy access to this information.

4. Ask your commercial marketing group what kind of education programs its members need and develop an education series using local or regional experts-commercial developers, economic development corporation representatives, taxing authorities, and others. Again, remember that your target member market is probably not interested in becoming specialists in commercial real estate-but they do want information which will help them expand some specific skills in new areas. (There's a difference.)

a. Offering a regular (monthly?) commercial education program followed by an informal marketing session is one of the best ways to develop member awareness in the commercial area, assuming your association doesn't have the audience for anything more elaborate.

b. This activity might be one which could be shared with neighboring associations as well. Commercial real estate practitioners aren't always productively confined to geographical boundaries-a commercial program will possibly be more successful if your board can partner with other associations in this effort.

The take-away point here is that the changing real estate market is influencing member needs-and our associations must respond, even if only in a modest way. Most Realtors don't want the Commercial Member Golf Outing, or even a commercial ethics process or trade show (as the NAR Commercial Services certification application suggests). Reinventing the association model with the word "Commercial" attached to it is not what most of our members need or even care about-nor is that something that probably two-thirds of local Realtor associations have the resources to provide.

What members do want is practical, efficient access to the skills sets and useful information which the changing real estate marketplace is demanding. It's our job as AEs to start with what the member needs, and set about providing those tools.

(PS: How do you fund this stuff? Try charging the members to showcase their commercial listings on the association website, soliciting underwriting from developers of rental income properties, advertising sales, commercial affiliate member programs, to name a few ideas.…The opportunities are endless.)