The Cushman & Wakefield/DTZ merger has dominated international commercial real estate headlines since its announcement on May 11th. During that time, debates around the water cooler have centered on its impact and relevance to competitive firms and individual practitioners. My staff and I have understandably been asked questions like, “What does this mean?” and “Does this matter to us?”
While the dust is far from settling on this massive merger, and while there exists a multitude of differing opinions on the topic, in the post that follows, I’ll clarify my position on the deal and share what I think it means for the SVN brand and its Advisors.
First, this consolidation is following the “Rule of 3” – over the past several years, the world economy (particularly in the developed, free market economies of Europe and North America), has been characterized by a unique economic phenomena of mergers & acquisitions at unprecedented levels. As a result, the landscape of just about every major industry has changed in a significant way, moving inexorably toward a block of three companies that enjoy a large market presence, while still leaving a great deal of opportunity for smaller, more nimble and more client focused organizations to continue profiting in the market. This is now in play in the business of servicing commercial real estate and comes as no surprise to many.
Second, it matters. It matters because while the CRE brokerage industry remains remarkably fragmented, there are now fewer, bigger players. This can prove to be tremendously advantageous to those outside of this circle, but will also send a wake-up call to many:
- The Big 3 are increasing their revenue & profitability through market share growth and by providing a generalized “one stop shop” offering. The growth models of the Big 3 are rooted in geographic-based market share growth and are backed by private equity or public equity giants. This can make for a disadvantage when compared to smaller firms in their ability to innovate. Much like trying to turn an aircraft carrier, these mega firms are not as nimble and swift as their smaller competitors.
- The multi-layered firms who comprise the Big 3 will stand in sharp contrast to the more entrepreneurial firms outside of the ring. As an SVN Managing Director said to me “Remember the commercial brokerage business when YOU determined how much you could earn; not a corporation, public entity or the stockholders?” “That’s SVN!” I agree – and while SVN is certainly not the only beneficiary of this dynamic, our point of differentiation just got more distinct.
- As many have already opined, there will be considerable fallout. Given the above, meshing the two firm’s corporate cultures is a formidable challenge for the executives involved and a strong recruiting opportunity for competitors. You will see people moving around and significant attrition within the industry. This is proving to be the case at SVN with our Managing Directors reporting a flurry of meeting requests from the players involved.
- The day of the generalist is over. These larger firms are better positioned to provide more highly specialized services in every market they serve. Regional firm and independent generalists best take heed of their better-resourced, specialized competitors. Now is the time to focus.
- The industry just became even more opaque. Collaborating and cooperating on investment sales and leasing transactions has not exactly been a hallmark of the big nationals. Look for their percentage of “double-ended” deals to increase in the year ahead.
This merger matters to companies and brokerages and at both the local and national levels. Here at home, it makes the SVN Difference more stark — and even more important. And while the opportunities stemming from the above are significant to us, what’s even more significant is that our clients need the SVN Difference more than ever.
I’ll close by sharing excerpts from an email I sent to the SVN corporate team late last week:
Our industry just went from X firms that don’t collaborate with each other to do the best for their clients to X minus one. If you’re a seller looking to get the best price — or a tenant looking to be shown everyone’s inventory to find the right site — you won’t get better service than at SVN.
There is still only one firm that practices compensated cooperation – 50% of the fee, 100% of the time. Only one firm that opens up all of their listings on their website and on an internationally known Monday National Sales Call — SVN. They might have gotten bigger. But, when it comes to representing our clients’ interests, we’re still better.
You can experience an alternate SVN Difference. With the mergers and the movements towards more corporate firms answering to stock markets and large equity investors, entrepreneurs are finding it harder and harder to control their own destinies in Commercial Real Estate. Here at SVN, remember that as an Advisor, you can rise as far as your talent and determination can take you with no one to stop you.
I congratulate DTZ and Cushman on their merger. But I’m even happier for our clients and for all of us.