ST. LOUIS—One of the presenters at the 2014 CORFAC Spring conference in San Francisco was Ken Sandstad, principal with Dallas-based the Sandstad Group LLC. The former executive of a global real estate brokerage firm turned strategic advisor to a diverse mix of commercial real estate companies gave a high-level overview of the brokerage services industry and where he thought the industry was headed. According to Scott Savacool, 2015 president of CORFAC International, one of the most memorable things from Sandstad's talk was a quote from Bill Gates: “The inefficient middleman is doomed.”
According to Savacool—who serves as an associate with the Sansone Group/CORFAC International in St. Louis, where he specializes in office and retail agency leasing and tenant advisory services—Sandstad went on to say that there are many forces operating in the commercial real estate service business, among them are technology, growing sophistication in understanding and serving client needs, growing transparency of information markets and property availability. “I don't recall if Ken used the word 'disruption' in his presentation, yet the word has been used frequently to describe some of the latest business trends and it aptly applies to the CRE industry today.”
Savacool tells GlobeSt.com that the proposed DTZ/Cushman merger is the latest “disruption” to the commercial real estate services industry and reflects the ongoing trend toward consolidation, which is leading toward the creation of a smaller group of very large brokerage companies that offer similar services.
“Invariably and based on history, post mergers create movement among the professional staff with brokers departing the newly merged firms (for a variety of reasons) and taking their book of business to other brokerage firms—if they can,” he says. “Mergers of this scale often create a recruiting frenzy, with most of the market participants actively engaged in trying to recruit successful brokers to their respective firms and platforms; the brokerage models include other large national companies, branded franchises and networks as well as successful and local independent firms.”
In past cycles, mergers of this scale have created newly minted boutique firms with a small group of professionals “breaking away” from the larger firm to form their own brokerage businesses; it will probably happen again in this cycle, he explains.
But Savacool notes that these changes and movements differ greatly from sub-market to sub-market and there are many variables to them. “As it relates to DTZ's acquisition of Cushman & Wakefield, some of the submarkets may see highly successful integration rates into the newly merged firm while other submarkets may experience a higher degree of movement from the brokerage ranks.”
Savacool points out that the old adage in this business remains true: “the assets go home every night.”
Stay tuned for part 2 of this piece where we take a close look at and expand on why we have become a bifurcated industry.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
