Continuing our discussion from yesterday…
Real estate brokerage firms are trying different strategies to compete for market share in the post-boom world. Some are weighing options for infusions of capital, while others are aggressively hiring or consolidating far-flung affiliates.
Glenn Rufrano, Cushman & Wakefield’s new chief executive, is preparing the firm for a possible stock offering. See our Blog post for more in depth look at Cushman & Wakefield.Is Cushman & Wakefield Poised For a Rebound?
One of the biggest brokerage question marks is the future of Cushman & Wakefield, the world’s third-largest commercial real estate brokerage.
After losing $127 million in 2009, Cushman & Wakefield recently installed a new chief executive, Glenn Rufrano, whose specialty is turning around troubled real estate firms.
Jones, Lang , LaSalle based in Chicago and ranked fourth in the world, recently posted a profit after several losing quarters and began a four-year plan in January to increase its New York-area revenue by 50 percent.
Colliers International, which has a global presence but is less well known in the United States, is hoping that a recent move to consolidate its many separate franchises under a single name will help it gain market share and a reputation as a major player.
Cushman, faces an uphill battle. While the slowdown in the economy has affected brokerage firms across the board, the firm has been hit particularly hard. In 2009, for example, when Cushman posted a loss — which it attributed partly to one-time charges like the relocation of its worldwide headquarters in New York — CB Richard Ellis, the largest global brokerage firm, posted a $33 million profit.
One main reason for Cushman’s troubles may be a lack of top-down management, those familiar with the firm said. Bruce E. Mosler, who stepped down as chief executive in January, was a powerful broker in his own right and the firm is largely organized into teams that are focused around successful deal makers. These teams may compete with one another for commissions.
In comparison, firms like CB Richard Ellis and Colliers International favor grouping brokers together on an ad hoc basis. While there are independent brokerage teams at Jones Lang LaSalle, employees there were compensated with salaries and bonuses instead of commissions until seven years ago, helping establish a more unified culture, the firm says.
Having individual teams is constraining,” said Mitchell E. Rudin, of CB Richard Ellis. “Instead, we select teams for a particular assignment, mixing and matching to bring together the best resources.” While this model serves the clients, it also cuts down on friction between brokers, he said.
“The problem with Cushman is that they are not as big as CB Richard Ellis or Jones Lang LaSalle globally, but they aren’t small either,” said Brandon Dobell, a principal at the investment firm William Blair & Company in Chicago. An I.P.O. is the most likely possibility for the firm, said Mr. Dobell, because private financing is hard to come by and a merger is unlikely as there are few players in the market with whom it would make sense.
As Cushman determines its future, Jones Lang LaSalle, which posted a profit of $200,000 in the first quarter of this year compared with a $61 million loss in the same period last year, is focused on increasing revenue.
When I joined seven years ago,” said Peter G. Riguardi, president of the firm’s New York operations, area revenue “was below $20 million and it is now more than $120 million. We plan to grow this by another 50 percent over the next four years to bring it to $200 million through a combination of improving market conditions and strategic hiring.”
Another firm that is undergoing a major shift is Colliers International. The second-largest global brokerage firm, it is largely unknown in the United States. This is partly because of its structure as a loose network of franchises that operate largely independently. Through acquisitions and management changes, the publicly traded First Service Corporation in Toronto, which owns a number of the Colliers franchises, is consolidating these firms under the Colliers International brand. Firms that decline to join will be forced to drop the Colliers moniker.
“We are in a position where we can’t lose any more market share,” said Mark A. Jaccom, of Colliers “We can only gain. And we plan to take our competitors’ market share out from under them.”
Mr. Jaccom and his team are building up a consulting group and plan to hire 25 or so additional brokers. “We want our brokers to mine their relationships, to hold our clients’ hands throughout the entire process,” he said. “Our business is going to be much more sophisticated, where we do an entire playbook and work on everything from workplace solutions to I.T.”
So far a consolidated Colliers has received mixed reviews. David Gold, a senior equity analyst at Sidoti & Company, said he believed “it will be the firm to watch over the next three years. They used the downturn wisely to grow, and I wouldn’t bet against them.”
Others dismiss the move as nothing more than a name change: “It takes years to build a brand,” said Mitchell S. Steir, chief executive officer of Studley, a brokerage firm that specializes in representing tenants and is a competitor. “It can’t be invented overnight by slapping a new name on a collection of different firms with different philosophies.”
Whatever the chances of success, industry insiders say it is clear that changes are afoot that could lead to power shifts in the industry. “Times of turmoil often lead to consolidation and strategy shifts,” Mr. Dobell said. “It will be interesting to see how it all plays out. (credit j satow ny times)