By Sheldon Gross
Having been in the real estate business for four decades, I have witnessed a great deal of consolidation amongst firms of all sizes. Today, we appear to be on the cusp of one of the most active periods of consolidation that the real estate industry has perhaps ever experienced. The news and rumor mills seem to be gaining traction on a daily basis, and the forces that are shaping these deals do not appear to be disappearing any time soon. Particularly in a period that is seeing the stock prices of the publicly-held commercial real estate brokerage firms suffer and overall revenues for most firms expected to weaken in this slow growth environment, it is safe to say that the landscape is bound to change rather dramatically.
When I founded my firm 47 years ago, I was confident that a local brokerage firm could occupy a very successful niche in this industry. Today, more so than any time in the past, I feel strongly that the future of independent firms are brighter than ever.
Let’s look at what is driving this consolidation in the brokerage industry. Is it because companies think it will better serve their clients? Clearly the answer is no. What, for the most part is forcing these companies to merge is their position as publicly traded companies. In an era of slower growth, some of these consolidation deals will be designed in an attempt to hopefully drive up their sagging stock price. In other cases, it is because investors and owners want to attempt to monetize their interest in a firm. Still, other mergers may come about because one of the companies is vulnerable to a takeover. Regardless, more consolidation deals are inevitably on the horizon and none of these are really designed to help service clients better, but geared toward enhancing their own bottom line.
Independent firms on the other hand have a competitive edge over regional and national firms because of their flexibility, responsiveness, and employees with a vested interest in the welfare of the company. Independent brokers typically tend to feel an acute sense of accountability, since their local reputation is everything, while a larger and/or franchised firm’s name is more closely tied to the fate of its parent company or national headquarters.
An independent firm also has the ability to be nimble, thus offering clients service and attention that is not bogged down by the bureaucracy that so often is the culture of larger companies. Decisions are streamlined at smaller firms because they are made locally rather than in a headquarters that might be two or three states away. Conflicts of interest are not as common in a smaller organization since they are able to offer clients exclusivity in a particular market segment and don’t have to be concerned with what their office is doing in another market that might pose a conflict to their client.
One of the biggest myths about our industry is that data provided from larger firms is somehow more valuable. Nothing could be further from the truth. Our firm’s data is compiled the old fashioned way - we walk every local building in the market, gather hands-on data and update it frequently. This type of market research does not rely on using other sources of data. Considering the lag time from larger firms, the data coming from a smaller, independent firm is more likely to provide the most accurate and up to date market intelligence you can have.
Finally, broker turnover at entrepreneurial organizations is at a lower rate compared to larger firms because they tend to share in the philosophy of the benefits of working at an independent firm. I would venture to say that if you looked at the average broker tenure at an independent firm it is much longer than that of the larger, national firms. This creates much more familiarity, trust and stability for clients and ensures a high level of consistency and deliverables.
For all of these reasons and more, I remain convinced that while our industry may see a wave of consolidation in the near future, there will always be a place for the local, entrepreneurial firms to survive and actually thrive. At the end of the day, the customer will always benefit from getting the localized and personalized attention to meet their needs. I am proud of my decision forty-seven years ago to start my firm and have never been more convinced that this strategy is the right one for my employees, clients and for myself.
With the tremendous advances in technology where there is no longer an imbalance with regard to data and market intelligence between large and small brokerage firms, with lower overhead costs and more hands-on activity by senior professionals on client matters, independent “boutique” firms are actually now in a position to grow and build marketshare in this environment.
About Sheldon Gross Realty
Sheldon Gross Realty, Inc. has built an outstanding reputation for integrity, performance and innovation for more than four decades. The firm is known for its long-term client relationships, high percentage of repeat business and 95 percent success rate in leasing up each property assignment it undertakes. Sheldon Gross Realty provides a full array of services including office, industrial and retail brokerage, tenant representation, property and asset management and consulting. The firm’s in-house research department is enhanced by Sheldon Gross Realty’s own trademarked market analysis system, Siteology. Through its two offices in West Orange and Wall Township, N.J. and its affiliation with The Society of Industrial and Office Realtors (SIOR) and The Counselors of Real Estate (CRE), Sheldon Gross Realty is able to service its clients’ needs on a local, regional and national scale. For more information on Sheldon Gross Realty, contact the Company’s West Orange, N.J., headquarters at (973) 325-6200 or visit www.sheldongrossrealty.com.
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