14A — March 27 - April 9, 2020 — M id A tlantic Real Estate Journal


M id A tlantic R eal E state J ournal

How to Make the Shift from "Expert" to . . .

Interest rates hit all-time low Marcus &Millichap presents Coronavirus Outbreak report

business or area of discussion) What do you want your busi- ness/this area to look like in two to three years? 2. What is the gap between the capabilities you have today and the ones you need to sup- port your aspirations? (What is getting in your way?) 3. What capabilities do you need now build to bridge this gap? Share what's working for others. "Come to meetings ready to share a few successful practices that other compa- nies in the same industry are using," said Sobel. "This is a great way to give added value and build your credibility with skeptical clients." Summarize your conver- sation and discuss next steps. During meetings, take five or ten minutes to summa - rize the discussion and then proactively suggest a next step. This could be another conversation to go deeper, or something else, like meeting other executives in the orga- nization. Sobel recommends offering something of value to encourage further dialogue. For example: "Would it be helpful if I put together a one- page outline of how I would approach this challenge? Then we could meet again next week to discuss it." Evoke their curiosity. This is your secret weapon. You can do this by mentioning new information and insights that you can subsequently share during your next meet- ing. Youmight suggest another client you'd like them to meet, or perhaps offer to interview other members of their team to in turn present a point of view on their challenge. If you don't make the shift from expert to advisor, you'll be a tradable commodity who is one of many solid "experts" or product salespeople clients can choose from. This will keep you thinking small, being reactive, and settling for a diet of what Sobel calls "little mice." "A lioness cannot live on mice alone—she simply can't catch enough of them each day to survive," he said. "Being an advisor allows you to make big catches: those longstanding, mutually prosperous client re- lationships that can keep you fed for years to come." AndrewSobel has written eight acclaimed, bestselling books on business relation- ships including Power Rela- tionships, Power Questions, All for One, and Clients for Life . 

"Show" by using engaging client examples. These should be very brief and conversation- al. Don't tell your prospect all the details. Instead, focus on three things: the original prob- lem the client wanted to solve; the approach you took (which ideally illustrates the unique- ness of your solution); and the results or impact. Hint: Make sure you have permission to give the name of the company and the executive you worked with. This adds heft and believ- ability to the example. If you don't have permission, then disguise the example. Have a conversation and use a whiteboard or flip- chart if appropriate. Don't rely on a slide deck or brochure to make yourself credible. If you have frameworks or diagrams you want to show, draw them on a flipchart or whiteboard. It's called "pencil selling" and it's far more engaging than projecting a slide. Use slides only as a leave-behind. Ask credibility-building questions. These are questions that inherently demonstrate your knowledge and experi- ence. You make a statement and then flip it into a question. For example: "It sounds like gaining more collaboration to serve your clients across or- ganizational silos is an issue for you. In looking at my other clients, the three most common barriers to collaboration I see are... (then list them). But I'm curious, in your organization what particular obstacles are getting in the way?" Ask implication questions. "This is a powerful way to bet- ter understand your client's agenda," said Sobel. "I recently met with a prospective client whose new strategy was quite public. My opening questions with the CLO were, 'I'm fa- miliar with your new strategy aimed at repositioning your firm in the large corporate seg - ment. How is this impacting your priorities in learning and development? What new capa- bilities and skills do your peo- ple need to develop to facilitate this shift?' Similarly, you could ask implication questions about external trends or competitive changes." Ask about their aspira- tions and the gap between the present and future state. This simple paradigm can help you understand the scope and gravity of virtually any issue. It goes like this: 1. What are your aspira- tions and goals for X? (X=the continued from page 2A


ncertainty drives in- terest rates to record low. The spread of the

coronavirus spawned inves- tor uncertainty that sparked the flight to safety. Investor fears, fueled by the limited in- sights available from leading health organizations as the new virus spread, continue to weigh on the market. As clarity emerges and actions are taken to mitigate the risks from the virus, financial mar - kets will likely begin to sta- bilize. Past pandemic events such as the swine flu, the bird flu and SARS also generated short term market volatility that stabilized within 90-180 days on average. While the trajectory of the coronavirus could certainly be different from past pan- demics, pharmaceutical firms have engaged in collaborative efforts to move a vaccine to trials as soon as April, offer- ing the prospect of a resolu- tion. Sound fundamentals sup- port steady performance. Real estate supply and demand generally remain in balance, supporting stable occupancy levels and a steady outlook. Assuming a worst-case pan- demic scenario is avoided, the pace of job creation and economic growth will likely taper but remain positive. This will sustain real estate fundamentals over the course of the year, delivering a rela- tively solid outlook. Investment Trends Despite the barrage of headlines focused on the COVID-19 and the impact this has had on financial mar - kets, real estate investment activity remains positive. The steep decline of interest rates to unheard of levels will support refinance and acqui - sition activity. Though many lenders have widened their spreads over the risk-free rates, investors have been able to lock in debt in the 3% range depending on the bor- rower’s credit, asset quality, location, etc. The reduced cost of capital has not translated to higher property valuations or lower cap rates as many sellers hoped because the new coronavirus does create additional uncertainty for many buyers. Barring a major economic disruption, commercial real estate yields and investment activity should remain stable. Potential coronavirus-related disruptions to the econo- my and investment market

would likely stem from pub- lic policies discouraging or restricting travel and public events. In addition, a major sustained drop in business and consumer confidence in reaction to the wave of nega- tive headlines could poten- tially restrain spending and spark an economic slowdown. The other substantive risk factor stems from financial and stock market volatility, which, if severe enough, could undermine confidence lev- els. Despite these downside risks, baseline forecasts still point to slower but positive economic growth that will sustain the expansion cycle and the underlying demand for real estate. Apartments: The apart- ment market will continue to deliver favorable performance as housing demand outpaces new supply. The coronavirus will have little direct impact on the demand for housing over the short term. Vacancy rates ended 2019 at 4.2% and are expected to rise modestly in 2020 as the market digests the addition of 300,000 new class A units. Class B and C apartments, with vacancy rates near historic record-low levels, will continue to deliver strong results. Hospitality: Hotels will likely face the most direct impact from the new corona- virus outbreak as businesses and tourists reconsider travel plans and restrictions are placed onmobility. Properties with a significant Asian cus - tomer base will face softening demand, but venues catering to conferences and major events could also be impacted if businesses and organiza- tions cancel these gatherings. The average 2019 occupancy rate was 66.2%, near a record high, so while the virus will likely weigh on performance, the sector should remain above the 30-year average occupancy of 62.5%. Office: Demand for office space should see little direct impact from the coronavirus outbreak over the short term as sturdy office-using job creation and the tight labor market support demand. The pace of office construction remains nominal in most markets, and absorption is expected to maintain paradoy with deliveries in 2020, keep- ing the national vacancy av- erage rate stable at 13.0 %. 

new coronavirus (COVID-19) beyond the borders of China quickly disrupted the financial markets. Investors, focusing on the downside risk potential of the outbreak, drove sig- nificant capital to the safety of the bond market, pushing the 10-year Treasury rate to an all-time low while driving the S&P 500 down by 11.5% in the last week of February, the largest one-week stock mar- ket drop since the financial crisis. Given the nature of this fast-paced correction financial markets will likely remain ex- tremely fluid until confidence is reestablished. Sturdy economy withstands headwinds. While the corona- virus will weigh on the U.S. economy in the first quarter, growth should be sustained. Expectations of weaker ex- ports, reduced tourism and supply chain-related shortfalls will moderate the pace of eco- nomic growth, but low unem- ployment and comparatively strong consumption levels should off set the headwinds unless the outbreak amplifies significantly or confidence levels drop dramatically. Em- powered by low inflation, the Federal Reserve delivered a surprise rate cut onMarch 3 in an effort to reinforce the econ- omy. Although Wall Street already expected a 50-basis- point cut at the Fed’s March 17 meeting, the Fed adjustment sparked an additional decline in the 10-year Treasury rate. Stock market volati l ity showcases real estate stabil- ity and yields. While the stock market was particularly ro- bust last year, with the S&P 500 delivering total returns exceeding 25%, equities re- corded a major correction that erased a significant portion of the gains. In the ensuing flight to safety, long-term Treasury rates dropped to a record low, offering real estate investors an exceptionally low cost of capital and some of the high- est levered returns in 30 years. Strong capital market liquid- ity and sound underlying real estate space demand remain pillars of support for commer- cial real estate. CRE Outlook Window for investor ac- tion could change rapidly. Uncertainty surrounding the expanse and impact of the

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