CRE's Next Generation: Transwestern's Katy Gragg On How Better Training And Technology Will Guide The Future Of CRE
This series asks rising stars in commercial real estate about their thoughts on some of the biggest issues facing the industry, including inequality, climate change and technology.
Katy Gragg knows how much a good training program can shape the experience of newcomers in commercial real estate. She went through one herself just five years ago, and she reaped the benefits of supportive senior leaders and camaraderie with fellow new hires.
Not all junior experiences in CRE are positive, owing to the persistence of traditional sink-or-swim attitudes at some firms. But as the industry continues to look for ways to attract and retain top-tier candidates, Gragg told Bisnow that she sees leadership-involved training programs as the best way to invest in the next generation of brokers.
The combination of robust junior training programs and greater emphasis on brokers at all levels learning to use data and analytics to spot new trends could make a huge difference in how successfully CRE firms get through the coronavirus pandemic and beyond.
“Having that organization-wide buy-in, specifically from leadership, is really important to making a program successful, because it sets the tone throughout the hierarchy that training the up-and-comers is critical to the future of the company,” Gragg said.
Gragg didn’t always want to be in commercial real estate. After high school, she spent her college years at Washington and Lee University in Lexington, Virginia, studying business journalism while interning at multiple publications.
It wasn’t until Gragg was working in her first full-time journalism role out of college that it began to dawn on her: She wanted to be one of the people she was writing about.
That realization came at the Houston Business Journal while interviewing one of the publication’s “40 under 40” honorees in late 2014. During the interview, the person spoke about how being close to deals helped him grow his career, and Gragg found that the comment resonated with her.
“That just kind of clicked with me and where I saw myself going in my career trajectory, and I liked hearing about [deals] — I really wanted to be a part of them,” Gragg said.
Her interest led her to consult her parents, who both had connections to the sector. Gragg’s father worked in banking, while her mother worked for a small real estate developer.
Their feedback, along with advice from commercial real estate connections she had made via her reporting role, convinced her that the industry was a good match for her mix of skills and interests. Gragg interviewed with Stream Realty Partners and entered the company’s analyst training program in January 2015.
Many of the skills Gragg learned in journalism came in handy, like asking tough questions and feeling comfortable enough to pick up the phone and call people all day. Some of the classes Gragg took in college were in the business school, which also gave her helpful grounding.
“There was a learning curve, but luckily, most of the analysts came to Stream's analyst program also right out of school. So maybe while they had taken real estate classes in college or something, I didn't feel like I was behind the pack necessarily,” Gragg said.
Stream’s training program allowed Gragg to rotate across the different teams, providing a well-rounded view of the CRE sector. Because it was an analyst training program, there was also an emphasis on developing analytical skills and an appreciation for data-driven decision-making.
Since her own early days in the analyst training program at Stream, Gragg has taken an interest in helping other new entrants to the industry. The company’s training program was not entirely formalized when Gragg first started, but evolved as she moved through it and afterward. Even as she finished the program and took on an associate role, Gragg said she was involved in recruiting new analysts and, based on her own experiences, helped to develop the formalized training program at the company.
Financial, legal and market knowledge became focus areas of the training, and Gragg said eventually, more benchmarks and guidelines were introduced to make everybody involved more accountable.
After about a year of formal rotations, Gragg spent five or six months slowly phasing into working with Stream’s office leasing team as an associate, focusing on landlord representation.
In August 2017, Gragg moved over to Transwestern’s Houston office as a senior associate, where she continued to represent landlords in office leasing deals. Notably, in 2019, Gragg’s team provided Spear Street Capital with leasing services for a 171K SF office deal at Energy Center 1, taking the building from functionally vacant to 52% leased. That year, she was the recipient of the Houston Office Leasing Brokers Association’s Landlord Representative – Rising Star award, recognizing her success and growth within the industry and within her company.
Gragg has continued her efforts to help new entrants to commercial real estate. At Transwestern, she has been helping to ensure that the entry-level training program is beneficial, speaking on panels and one-on-one with new hires and allowing them to shadow her. Gragg also helped create the training manual and guidelines for Transwestern's training program.
She said one of the best ways to ensure the growth and retention of new hires coming in through training programs is to have the involvement of senior leadership. She points to Transwestern, where senior leaders are especially active in speaking with young people in the entry-level training program and staying in contact with them.
Not all CRE firms have a formalized training program with rotations and in-depth training. It is still common for some brokerages to bring in junior hires and throw them in the deep end, with success often dependent on the goodwill of senior brokers who opt to bring them into deals.
Gragg said that sink-or-swim mentality is starting to be replaced with greater investment by companies into their junior brokers and recruits, to the benefit of the industry.
“I think it's become increasingly clear that sink-or-swim doesn't always work for young people,” Gragg said. “There's a lot to be learned [from] that experience. But that's just one side or one approach to it. And that doesn't work for everyone. I would say that Transwestern recognized that a more thoughtful, programmatic, organized system lent itself to recruiting good talent and then keeping those people.”
Entry-level training programs at large CRE firms are a helpful way to bring new graduates into the sector, as there’s often a base salary involved. For many young people who have shouldered hefty student loans, it offers a buffer compared with the riskier prospect of immediately opting for a job where earnings are commission-based only.
Gragg said that more CRE firms are now taking those issues into consideration when recruiting graduates, especially because that kind of financial stress could be deterring top-tier candidates from entering the sector.
Fundamentally, CRE remains a very white, male industry. To change that, Gragg said it is vital that firms be active on college campuses to recruit more diverse candidates. For those who are already in the sector, it is heartening for younger generations of professionals to actually see people like themselves in senior roles.
“Speaking from a woman's perspective, I know how much it is appreciated when I could start envisioning, 'Oh, this is a seasoned woman, she's done what I want to do, she has a life that I see myself enjoying,' and just being able to visualize that has been really helpful for me from that standpoint,” Gragg said.
New entrants to office brokerage will have a particularly tough time in Houston right now, but Gragg said a focus on technology in training could make things easier.
Houston’s office market never fully recovered from the economic shock of the 2014-2016 downturn in crude oil prices. During that period, the energy industry shed more than 90,000 jobs, and vacancy rates across different submarkets soared. Now things are getting even worse. The combined negative effect of the pandemic and low crude oil prices has significantly hurt office leasing activity this year, and vacancy is climbing. Houston's office direct vacancy rate rose 70 basis points to 19% during Q3, according to Transwestern’s latest market report. The total availability rate rose 80 basis points to 25%.
In a market facing an extended recovery, competition for tenants is fierce, and Gragg said it will be imperative for CRE firms to make the most of technology to utilize data and analyze trends to find an edge. Even more crucially, the sector will need to get better at figuring out how to spot new trends in order to help clients make decisions.
“Knowing what the data is, is one thing, but knowing the history of the data enough to see what might be coming or what you can mine for — like, what even should we be looking at in the plethora of data — that's a whole other skill set, I think,” Gragg said.
Gragg is adamant that brokers should receive training and be able to directly access the data their firms have, so they can analyze that information on their own without needing to rely on the research team. She also said the use of qualitative data, or anecdotal feedback from clients and colleagues, can be useful. If several prospects start mentioning a particular need or motivation, that could signal a new trend.
“If I was just in the silo, or closed my office door and took those calls by myself, it wouldn't be as impactful as if I compared notes with my partners on my team,” Gragg said. “That's why we are constantly in communication and sharing those anecdotes so that we can leverage the power that we all have from all of our conversations, too.”
Because the office market is so difficult in Houston right now, Gragg anticipates it will be challenging to recruit young, talented people to office leasing until the economy begins to recover.
“I don't think one could really get into leasing very easily right now, just because it's so cyclical, and ebbs and flows,” Gragg said. “So I think that that's going to translate to a natural lull right now, which you've seen in other periods.”
Technology has become a critical part of how CRE firms are continuing to do business during the pandemic. For younger brokers, there is a high comfort level with using advanced technology, and many of those features are likely to persist after the pandemic has subsided.
However, virtual tours will never replace the value and connection of a physical tour, according to Gragg.
“There's just certain things that are really important to our business that technology helps, but doesn't take the place of,” she said.