Greg Bell is a real estate veteran with a long-standing passion for property. More than thirty years ago and fresh out of high-school, Greg knocked on the doors of 19 different real estate businesses before finding at the 20th one a principal who finally agreed to employ him.
The rest is history.
Today, he and his brother Andrew Bell are co-principals of one of the largest and most successful real estate offices in the country. Ray White Surfers Paradise has been the number one office internationally in the Ray White network for the past 16 years, measured against almost 1000 businesses. With 220 staff on the team, the business turns over around $1 billion dollars annually and has approximately 27% market share in the local area.
Several factors have changed in their market since the pair originally made the decision to sell their inner city real estate business in Sydney and move to Queensland’s Gold Coast, almost 20 years ago. The area’s population was 200,000 when they first arrived and has since exploded, with the region now home to 550,000 people. And of course, there has been a corresponding boom in property prices.
But seeing and capitalising on the area’s growing opportunities has been the real driver of Greg and Andrew’s success; their commercial sales business is a key indicator of that talent. Ray White Commercial Gold Coast (RWCGC) now makes up a significant percentage of the turnover of their overall business. Employing 36 staff and with 520 commercial properties under management, RWCGC turns over more than $160 Million annually.
Greg and Andrew first started dabbling in commercial real estate 18 years ago, just two years after opening the Surfers Paradise residential office. It wasn’t until 6 years ago, though, that commercial became a significant focus.
“We just decided it was time to separate the commercial business from the residential business and get serious about it. In late 2003, we picked a date for our first serious commercial auction event - late January the following year. In November we started prospecting, determined to succeed. We just wouldn’t take no for an answer.”
“It worked. From then on, we had regular commercial auctions every six weeks. We had made a plan and we stuck to it” Greg says.
There are significant differences between operating a commercial and a residential real estate business and Greg believes keeping the two businesses separate is critical. He now specialises solely in commercial, while Andrew manages the residential side of the business.
“You can’t have the same staff switching between the two - it just doesn’t work. As with everything real estate related, good people are critical. Our commercial team are mostly in their 20’s or 30’s and full of energy.”
“We have a separate brand, separate offices and dedicated resources. Although there’s plenty of opportunity to cross-refer business and even utilise the same database, everything else is run separately” Greg says.
An attractive factor in a commercial real estate business is the opportunity to generate healthy margins. Both residential and commercial real estate businesses incorporate property management and sales, but commercial also has a separate function called commercial leasing.
Commercial leasing is the process of finding and securing the right tenant for commercial premises. Lease terms are longer than residential, generally 3-5 years. The fee for securing the tenant is generally 15% of the annual rent, which is significantly more than the average residential fee, equivalent to only one week’s rent.
When it comes to property management, the commercial agent’s fee is often lower than the residential equivalent at around 5%, but the agent’s role is quite different. Generally the tenant is responsible for the cost of maintenance and outgoings and the agent’s responsibility is to ensure payment of rent and those other liabilities are being properly fulfilled by the tenant.
Looking at sales, the commercial commission fee is again generally higher, with the rate capping out at around 3%+GST as opposed to the residential maximum of around 2.5%, exclusive of GST. With vendors often able to claim the GST component of the agent’s fee, it is not factored into the net commission.
On top of that, the average commercial sale value is generally higher. In the Gold Coast region for example, the average residential sale price is around $400K, whereas the average commercial sale price is between $800K and $1 Million.
RWCGC is an auction-only business, with campaigns running on average six weeks. The business’ clearance rate averages out at 53% under the hammer, rising to 60% when properties sold in the two weeks subsequent to auction day are included.
Greg says the fundamentals in commercial sales are not dissimilar to residential real estate and the foundation is a good marketing strategy. RWCGC utilizes print, on-line, signboard and database strategies to lift clearance rates and sales results.
Greg also says he believes there’s significant opportunity for principals in all areas to add commercial as another dimension to their residential businesses.
“There’s commercial everywhere - in every suburb and every area. I think people get intimidated by the prospect of operating in the commercial sphere, but the reality is it’s no harder than residential and there’s often a lot less competition, particularly in the suburbs.”
“We now dominate the market up to $10million in our area - we have found the big commercial brands are not that interested in that part of the market.’
“My advice to anyone contemplating going into commercial is, don’t do it half-heartedly. Dedicate resources to it and run it completely separately to your residential business. Do it properly and don’t be distracted. To succeed, you have to be focused and determined” Greg says.
“If you do it well, the results are well worth the effort.”
