Aaron Strauss: You're listening to The Dealmakers' Edge with A.Y. Strauss diving deep into stories behind commercial real estate leaders.

Hello, everyone, and welcome to The Dealmakers’ Edge. Today, we are really excited to be joined by the one and only Bob Knakal, who pretty much everyone knows in commercial real estate. He's been a broker in New York City since 1984. Over that time, he has brokered the sale of over 2,339 buildings, having a market value of approximately $22 billion.

For 26 of those years, he owned and ran Massey Knakal, and he focused on building a culture of servant leadership, training his people, dominating the market, ultimately selling to Cushman & Wakefield in 2014 for $100 million. The legacy of Massey Knakal continues with 29 companies or divisions of companies that are either owned by or run by people who learn the business at Massey Knakal.

Bob's a prominent thought leader in the commercial real estate business, always appearing on podcasts, on TV, writing about the market, lecturing at universities, and most recently Bob started BKREA, an investment sales and capital markets brokerage firm in New York City, which blends best in class data sets with artificial intelligence.

Bob's very active on social media, which we'll talk about in this episode. We're going to talk about servant leadership, and we're even going to talk about AI even though people are tired of hearing AI. Finally, we are going to talk about what it takes to be successful in commercial brokerage today and just generally to be successful in sales. Hope you enjoy the episode.

Bob, welcome to the show. We're really, really excited you're here. You're pretty famous, as you probably are aware at this point in your career, and there's so much to cover, and we're going to try to hit a lot of high topics because I know time is short, but thank you for being on.

You've just celebrated about 40 years of real estate, have done amazing things, you're so much fun to follow on social, and even on your website, you have kind of a biopic. In the decades, what you've done, I think the career highlight has to have been 1981, walking to Coldwell Banker thinking that it's a bank and applying for an internship. That was just the highlight, but all kidding aside, welcome here.

I think everyone probably knows you, listening to this, it's a real estate podcast, but we'll certainly have your bio in detail. Maybe you can start with forward where we are today and then we'll sort of build in the Knakal nuggets sort of retrospectively. I think for most people, we go forward, but for you, I think I'd like to go back.

You're currently running your own firm and you're doing fantastic. You're focusing on the development side of New York City. You've known every block. You've developed a map room. What's most exciting for you today as you build this firm out?

Bob Knakal: Sure. Well, Aaron, first of all, thank you so much for having me. A pleasure to be with you today. Hello, everybody out there listening. I think the thing that's most exciting for me today, still it's the love of the deal. You got to love being a broker in the commercial real estate business. Every day is different, everybody is different.

There's such an eclectic group of people that we deal with from the proverbial little old lady to titans of industry like Marc Holliday and then Steve Roth and everybody in between. It's a great, fun business. Like you said at the top, got into it by accident. I feel so blessed that that happened because not only did I find a career, but I found a hobby also. I absolutely love it. I think that's the thing that is most impactful on me today is how much I truly enjoy doing what I do.

Aaron Strauss: 100%. It's very clear. It comes through everything you bring and your passion, your enthusiasm, the people you've inspired to launch subsequent careers. It goes on and on. One of the things I want to ask you about, because we can go on forever, obviously within real estate, the depth is certainly there, maybe servant leadership. I think that's like a lost art.

From the days when you've built Massey Knakal, from the time you partnered with Paul earlier on, a lot of people talk about it. Maybe it's not so well-defined, but you've really built a tremendous amount of leaders in your career and you yourself are a leader. Maybe you can talk about that a little bit. That'd be great to hear.

Bob Knakal: Sure. Sure. I love the topic. I particularly think that it's one of those things everybody talks about servant leadership, every company but very few actually implement it, at least implement it the way it should be implemented. We started our careers at CB, a big, big company, biggest in the country at that time back in the 80s and the bosses were worried about getting their reports done, reporting to headquarters, and making sure a lot of the stuff, nuts and bolts, got accomplished.

But real estate is a people business. I always say that real estate, real estate business is not about real estate, it's about information and people and relationships. I think as part of a brokerage business, it's important to realize that your clients really are the brokers. If you own the company, the people who work at your company are your clients. To disregard them, to not give them any feedback, to not show them that you care about them is completely counterintuitive.

Paul and I studied Robert Greenleaf's Servant Leadership approach to management right from the beginning. There would be days where we had over 100 employees, 150 employees, at one point had 250 employees, but we had 100, 150, sometimes we'd be sitting at our desks and we were always the first ones in the office. We'd always occasionally look at each other and say, “What happens if nobody shows up today?” And just really magnified the point that in the brokerage business, your assets are your people.

I think Servant Leadership has a couple of basic fundamental things. One, you have to make people feel good about themselves. You have to make them build up their self-esteem and have them believe that they can do better than even they think they can do. You have to show them that you're there for them, you're supporting them, you care about them, how do you do that? By training them, constant training.

We had a very, very robust and rigorous initial success training program that folks had to go through before they could even talk to one potential client on the phone. Then there was continuing success that was held every week with guest speakers. We had outside professionals and experts come in and talk about a variety of topics. We'd have senior people in the firm get up and talk about time management or overcoming objections or prospecting or something.

But we made our people feel as if we supported them. We trained them. We believed in them that they should believe in themselves. It's really remarkable when somebody feels confident in what they do and they feel like they're being supported in what they do, they can achieve unbelievable things. This went from supporting our top producers right down to the people who worked in the mail room.

We had a guy at Massey Knakal and before email became popular, we were sending out about three million pieces of mail a year. We had this guy, Harold, who ran the mail room for us. This guy would go to the post office every week and talk about new things they were working on and how to do this, how to save on bulk mailings that we did. If we could save two cents on a piece of mail, that was great. That amounted to thousands of dollars, and he took such pride in what he did.

We'd occasionally go down and say, “Hey, Harold, we just want you to know what a great job you're doing and it really shows you really care about what you're doing and how you're doing it. We really appreciate it and it means a tremendous amount to the firm.” I'll tell you for the next two months, that guy walked around with his chest puffed out and he wanted to make sure everything was perfect, everything was lined up perfectly, and was done in the correct way.

That's the kind of thing that inspires people to do an even better job than they think they can do. In looking back at the Massey Knakal story, there are a lot of things to be proud of, and I am proud of a lot of things. From 2001 to 2014, when we sold the company, CoStar had tracked the market starting in '01, and from '01 to '14, the number two company in New York City, and we were competing with all the big national and global firms.

Number two firm, which was a national firm that sold about 1,300 buildings, our little popcorn stand in New York sold over 4,000, lapping the field by more than three times. Proud of that. We sold the business for $100 million to Cushman. I'm proud of that. But the thing I'm most proud of is that this servant leadership style of management produced such great, great real estate professionals that today in the New York City capital market space, there are 31 companies or divisions of companies that are either owned by or run by people who learned the real estate business at Massey Knakal.

Aaron Strauss: Amazing.

Bob Knakal: I think that's a very rare thing and that is the thing I'm most proud of is how we profoundly and tangibly made a positive impact in the lives of people that work with us.

Aaron Strauss: Amazing and well-articulated as usual. You really built those individual and collective legacies who were trained under that model who invariably will go influence the next generation. You should be very proud of that.

Not to get too jumpy, but I know a lot of the things you're posting are tied to technology. Everyone's talking about AI. It's actually exhausting to hear it in the market because I think people throw it out constantly, and not to give away any trade secrets, but in many ways, it's the people business and information business, and people will never change, they'll continue to be who they are, and information gets sliced and diced in different ways.

I know you were pioneering it back in the neighborhood system, back in Massey Knakal days. Can you talk about some of the unique ways you're using data today versus maybe even three to five years ago, or other firms maybe using it?

Bob Knakal: Sure, happy to do that. A broker has two main assets, their knowledge and their time. AI and technology can help you create better quality market knowledge by data interpretation. That's one of the three main ways we're using AI, but it also can save a lot of time. That's the other two main ways we're using AI, is that if you think about the prospecting process and the deal execution process, they're both nothing more than funneling processes.

You go from having thousands and thousands of people break it down to hundreds, to dozens, to a few, and then ultimately, you get hired to sell a building or you sign a contract to sell a building. We're using a number of different tools in AI to effectuate the first two of those things, the prospecting and deal execution part.

What's remarkable to me, Aaron, is that things are changing so rapidly. I go back 40 years when I started in the business in '84. No computer on my desk, no cell phone, no fax machine. You look at how things have changed over the last 40 years, I think things are going to change a lot more in the next five years than they changed in the last 40.

Because we use some AI tools that came out two months ago and think that’s the greatest thing in the world and all of a sudden something brand new comes out that replaces that thing that's two months old, that's bigger, stronger, broader, faster, more powerful, and the old thing’s a dinosaur and it's only two months old. That is happening regularly, and it's hard to keep up with it.

So prospecting and deal execution are two ways, we're using AI, the third way, which is potentially the most powerful, but also is going to be the most difficult for the real estate industry to use is in data interpretation. AI can do millions of calculations a second. But in order for it to really be effective, you have to be using good data sets, and data sets in real estate are not very good.

Unfortunately, that's why if you follow me on social media, I'm such a big proponent of proprietary data, and data that you source, that you know is accurate, you know how it was derived, there's inconsistent methodology for determining data over the course of a data set and it's the relationship between numbers in a data set that matter. Are they going up? Are they going down? How much are they going up? How much are they going down year-to-year, that really matter.

But if the data is not really clean, the integrity within the numbers within that data set kind of loses everything. We have some data sets that are pretty robust that go back 40 years using the same exact methodology and we're applying AI models to those data sets and coming up with some really interesting stuff.

Aaron Strauss: Very cool.

Bob Knakal: The AI is very, very powerful but it has to be used in the proper way.

Aaron Strauss: Fair. Very well said and I think also you've really combined two themes well in that last point as well. Besides the data, you hit on social, which it's really fun to follow you. I got to tell you, my favorite post was I don't always wear a suit and tie. That's got to go down for the best real estate skid video all time put on social media. That's ingenious. If they give out Ingenious Deals of the Year Award, I think I'm going to give you an Ingenious Marketing Idea of the Year Award. That was fantastic.

Bob Knakal: Thanks. I appreciate that. I think I was very reluctant for many years to become really active on social media, and when I decided to take the plunge, I said, "All right, how do I do this a little bit differently than other folks?" So I looked at a lot of what the brokerage traffic looked like on LinkedIn and X and everything, and a lot of it, “Hey, we just listed this, we just sold that,” without a lot of details. And I said, "You know what? The thing that I'm always most interested in hearing about, it's what happened behind behind-the-scenes.”

Yeah, the building sold for that, but why did it sell for that? There are always things that happen in deals. Deals always die two or three times before they happen. How do you overcome the impasses? What were the personalities like? All that kind of stuff. I try to share deal stories frequently on social media. I also try to provide, for many years, I wrote motivational emails to our troops at MK so I try to share some of that stuff.

Then I've kept the boxes and boxes of old stuff over the years and now I have all of that information scanned and it's on bobknakal.com. You can find old newsletters we have from the 80s and 90s and all kinds of stuff but I thought it would be fun to do a throwback Thursday. Every Thursday, we take a look back at something. Then on Friday, I have my lessons learned.

I gave a speech at Columbia many years ago, and the professor said, "Hey, Bob, it really would be great if you could think about what were some of the lessons that you learned in the 26 years that you owned and ran Massey Knakal." And I said, "You know, that's a great idea. I've never done it. I'll only put that together." So, initially, I put together a list of 26 different lessons learned over the 26 years and 46 days of owning and running Massey Knakal.

Over the years I've expanded that and now I'm closing in on a hundred nuggets, but every Friday, I post a nugget of a lesson learned over time. The most interesting thing about it, Aaron, is if you look at these, there's a very small subset that pertains just to real estate brokerage. Most of them pertain to any sales business, and there are a lot of things that are just general life lessons as well. I'm happy to share that stuff with people. I wish I had learned a lot of those things along the way.

Unfortunately, as I say a lot at the beginning, Paul and I did everything by trial and error, and consequently made thousands of mistakes. We didn't make a lot of those mistakes twice, but thousands of mistakes and learned a lot from them. So, if I can help folks avoid making some of the mistakes that I've made over the years, I'm happy to do that.

Aaron Strauss: It's incredible. You're almost a real estate historian academic within the brokerage world because you've been archiving it and saving it and just almost waiting for social to come out and now you're sharing it. So, it's amazing. People talk about your approach generally. I mean, you have obviously a tremendous track record for selling land. There are obviously a million buildings that have been sold, but your approach, your focus seems to be more seeing through the eyes of the developer.

Literally the map room is scoping out every city block and developing rights, everything else. But the fact is a lot of brokers just say, “Oh, here's a building. Let me call the owner. Do you want to sell?” That's more the rudimentary approach, maybe you can talk about how you morphed from a younger broker who does the traditional route to evolving, more difficult assemblage deals, to finally now literally controlling the data, marketing, and developing that map room, and tying it all together where you can be at your personal highest and best use in the industry.

Bob Knakal: Sure. Well, I guess it comes back to the theme similar to the way I approach social media, trying to be different. There are hundreds, if not thousands of people trying to do what we all do. You have to stand out. How do you stand out? When we started Massey Knakal, we said, "You know what? Let's do this geographic territory specialization and put a broker in each neighborhood and have them be a market expert and that expertise will allow us to differentiate ourselves and that differentiation will lead to a competitive advantage.

That worked well then. This time around, JLL fired me in February, and figuring out what to do, decided I want to start my own firm. But I'm like, “All right, how do I do this different this time?” At this point, I've got 31 companies that have been founded on the principles of my old firm, so now it really becomes challenging, it's funny, sometimes I see the proposals that other brokers have submitted and they're all like the same proposal.

We all are using the old Massey Knakal formula. Slight change here or there, but basically it's the same thing. So I'm like, “How do I iterate this time around to be different?” What occurred to me was that there was so much pending legislation and talking about zoning changes and new tax abatements and things that were going to be changing in the city. I said, "You know what? I really like selling land the most." This morning, actually, I closed deal number 2,347.

Aaron Strauss: Congrats.

Bob Knakal: Thanks, most of them have been apartment buildings, because there are mostly apartment buildings in the city. But due to legislative changes, the apartment building market's not a lot of fun anymore. I really, really enjoy selling land, putting assemblages together. In New York City, we don't have rolling pastures of land that you can buy so you have to put a bunch of little buildings together, knock them down, and create a piece of land on which to build a building.

I love doing that. It's fun. It's like putting a jigsaw puzzle together and Monopoly and a whole bunch of things. I really enjoy it. But I said, “If I really want to do this effectively, I have to do brokerage the way a developer would do brokerage, not the way a broker would do brokerage. If I'm going to create a competitive advantage, let me think about how to do this. I need to really understand policy. I need to understand zoning. I need to understand massing studies and how to transfer air rights and what these new tax abatement programs are going to mean and how to use them most effectively.”

So we formed an in-house policy and zoning SWAT team. I have a zoning attorney. I have an architect, I have a data scientist, I have a policy guru. I have folks, we can take a look at a very complex scenario and understand everything you can and can’t do there, how to maximize the value and size of the property. With zoning in the city, it's very, very complicated to figure out the bulk that you are able to build is generally an as-of-right jurisdiction, so you can figure out what it is, but it's very complicated where you can get air rights and how you can transfer them and how you can build.

There’s something in zoning called contextual aspects of zoning that the shape the building can have. I put this SWAT team together and it's remarkable. We've been open nine months now, closed three transactions, have two under contract. I have 26 exclusive listings for about $2.2 billion, most of that is land, and we just got awarded an assignment the other day on 44th Street in the West Side.

The three other brokers went in and said that it was 60,000 buildable feet, and we went in and used a very complicated twist in the zoning code, found out through what's called a compensating recess how to make that a 74,000-foot site as opposed to a 60,000-foot site. Clearly, we were rewarded that business and that's just one of the examples of how utilizing expertise and knowledge is a differentiator and is helping us get new business.

Increasingly, clients are telling us, "Wow, you guys are really dominating this market. You're at the forefront of it." It's rewarding because you want to be a little different, being like everybody else doesn't really get you anywhere.

Aaron Strauss: Well said. Seeing you around those corners is very hard to do and typically, it's a herd mentality. Why break it if everyone does it a certain way? And always thinking outside that box, progressively thinking what's coming next, and making those investments. How many startup brokerage, first, your firms are going to hire all those experts, that's a big investment knowing that the payoff will be on the back end.

I want to talk about something else too. This podcast is The Dealmakers’ Edge. We profile leaders in commercial real estate, but we also try to hit the edge part. We're talking about the edge in business, but as you know, 99% of what we do, it's all up here in our mind. You have to see it and feel it before it happens.

You have to be the eternal optimist to be in sales. You have to always believe there's another bus coming, you ride cycles, there's ups and downs. Even in the later stages of your career, you just talked about the exit from JLL and whatnot. Following you on social, you talk about the early days of Massey Knakal and using the credit cards and way to go up and down.

A lot of the listeners here may be of another generation who are just getting started. Maybe they're buying their first few buildings. They're starting in brokerage. Maybe they're the people you're leading today. So how do you help people sort of get on their own way from a mental perspective and how have you ridden the waves of adversity, ups and downs, and what do you keep telling yourself when you go through those rocky periods?

Bob Knakal: You know, Aaron, that is a great, great question and I'm glad you asked it because I think it's very important. There's a big difference between being confident and believing in yourself and having courage, all of which are very, very important, but you have to layer on a reasonable expectation of what success looks like.

What I mean by that is, for instance, let's use Manhattan as a microcosm, because Manhattan is where I've sold most of the properties that I've sold. South at 96th Street, which is prime Manhattan, there's 27,649 buildings. The average turnover of that stock of buildings in any one year over 40 years is average 2.6%.

I would say that probably half the stuff that goes on the market actually trades. That means that any one time, about 5% of the total building stock is on the market for sale. That tells you a couple of things. One, it tells you that there's not a lot of sales going on. Number two, it tells you that on average, that 2.6% turnover rate transfers into the fact that when someone buys a building in Manhattan, on average they own it for 40 years before they sell it.

When you're making your cold calls, if you know that about 5% of the people are going to say, "Yeah, I'm interested in selling my building," that means 19 out of 20 people that you're calling are going to say no to you. If you understand that that is what success looks like, then it's much easier to deal with it, absorb it, and not get down when the first 19 people you call hang up on you.

You have to say, "Oh, this is awesome. The chances the next one is going to be a yes is so high." It's like if you were a baseball player and you're anticipating, you're going to get eight hits out of every 10 times it bad. You're going to be miserable. You could hit 600, you're going to be miserable. You have to understand that, “Hey, if I'm doing great, three out of 10 is what I'm going to hit.”

I think it's understanding what success looks like, what's a reasonable expectation for success. Then it also is understanding that, we have this saying in our office, we say you gotta pound the rock, pound the rock. That's The Stonecutters Creed. The Stonecutters Creed basically says, “You have to continue to do things over and over and over again, even though you may not see results. If those are fundamentally sound things to do, you have to keep doing them.”

The Stonecutters comes into the shop in the morning, sits in front of a big piece of stone, takes his mallet, and whacks the thing. Fifty times, seventy-five times, ninety-nine times, nothing has happened. Hundredth one, boom, rock splits in half. Somebody from across the room looks at that and says, "Oh, that hundredth one must have been different. He must have hit it harder, or it must have been a different mallet, or it must have been a different angle."

But the stone cutter knows, "No, that's not it. It's the ninety-nine blows that came before it that allowed that hundredth one to work." That's the mentality you have to have. You have to understand that things are cumulative. You have to know the right things to do. You have to know the things that are fundamentally sound and are directed in the right way.

But if you understand the probability of success so that your expectation is reasonable and you keep doing these fundamental things over and over and over and over again, ultimately they're going to work and you're going to be successful. It just requires tremendous discipline.

I always say the three characteristics I always see in the people who achieve the very highest level of success in commercial real estate are people who, number one, are an expert at something, very, very narrow band of the market, but big enough they can make a good living, but small enough they can know every single thing about it.

Two, passion for the business, you have to love it. No matter how good you are at it, the business is fundamentally cyclical. There are going to be tough times. There are going to be things that are out of your control. The love for the business will keep you around for those good times that will inevitably return. Then you have to be able to use discipline well, to sit there and hit the rock 99 times and not get discouraged and realize that what you're doing is the right thing and eventually, it'll work. If you're able to do that, this is a business that you can achieve great success in.

Aaron Strauss: Amazing, and hearing you talk about that Stonecutters Creed, all I could keep thinking about was that famous quote from Michelangelo. He said, “If you knew how much work was involved, you wouldn't call it art.” I think your embodiment of that principle, there is so much that happens on the surface and you only see that iceberg, you only see the big closings. But for every deal you've done, for every swing of the pitch, for all those analogies, you've put in enormous work over those 40 years.

Bob, I think I've learned a lot from this conversation. You could educate people for hours, which you're doing on social, when people go on your website. Anything else I didn't ask you that you'd love to share about and then maybe we'll wrap up from here? But again, I just really want to thank you for the time. It's been a lot of fun.

Bob Knakal: Yeah, my pleasure. I appreciate it. I just love the business and if any of you have any questions and want to reach out to me directly, always feel free to email me at bk@bkrea.com. You can go to bkrea.com and check out our company website or go to bobknakal.com for the 40 years of all the stuff that was sitting in 22 boxes in my attic for a long, long time, but now is online. Happy to answer any questions that you might have.

Aaron Strauss: Fantastic, well, Bob, thank you again. I'm really appreciative. I know our listeners will have learned a ton. With that, we'll conclude. I can't wait to see the next closing and the closing thereafter and the continued line of success go forward. Thank you again so much for the time.

Bob Knakal: Appreciate it, Aaron. Thanks so much.

Aaron Strauss: Thank you for joining The Dealmakers' Edge. Don't forget to follow us on your favorite podcast platform. Please, give us a five-star rating so more people can follow the conversation.