The world of real state brokerage is rapidly changing and evolving. A new game of musical market share has begun and when it ends we'll have some real winners and very sad losers.
For almost a century the business of property brokerage had an unwritten rule: Don't cross the street! On one side of the street were the happy-go-lucky residential brokers peddling homes.
On the other side of the street were the staid, old fashion, autocratic commercial brokerage firms with roots deep in the banking and manufacturing and retail worlds. The commercial firms handled all the major property transactions from factories to office buildings.
Today both sides of the street are facing "shrinking market share" compounded with increasing operating costs. Both, I believe, are more than just eyeing the other's turf!
Macro events occurred totally out-of-nowhere and caught both sides sound asleep. This was not suppose to happen, this was not in the time honored real estate brokerage text books.
Both were bushwhacked by the Internet and commercial brokerage was hit hard with the negative effects of industrial globalization which took away most of their industrial property cheese.
Today, because of the Internet, the rise of residential brokerage discount firms, wise and market savvy home buyers and sellers, residential brokerage firms have seen their market share sliding down faster than a cat on frozen ice on Beacon Hill on a cold day.
With the advent of the Internet, the democratization of MLS and the rapid rise of the discount brokers all is not well in Realtor-world.
Commission income is dropping while expenses are rising. The flat current residential market is making a bad situation simply intolerable.
Simultaneously, commercial brokers woke up on moring, facing the after effects of globalization as moany manufacturing firms relocated overseas leaving a glut of vacant R&D and manufacturng facilities behind with little demand.
The dotcom boom did not last long enough!
The major, national residential brokerage giants ( Coldwell Banker, Century 21 and ERA). several years ago, began to slowly and steadily intrude on the once highly sacred turf of the commercial giants. For the first time in a century mergers of large commercial brokerage firms became part of their vocabulary.
Several years ago, with no fanfare, Cendent Corporation, owner of CB, C21, ERA, etc., began encouraging their residential brands to enter into the "lucrative" commercial real estate market.
Soon were born CB Commercial, Century21 Commercial. Cendent, now known as Realogy, invested heavily in national blanket and institutional marketing and advertising in such expensive publications as The Wall street Journal, NY Times, Franchise Times and other costly publications.
But the didn't make a dent in the "big boy's" commercial business.
In my opinion, less than 7% of all commercial real estate sales and leasing in the US, is generated via MLS which is the mainstay and lifeline of the residential brokerage mindset.
Residential agents are tethered to the MLS and for years it was their armor and today it has come their Achilles heel.
Commercial firms never used MLS!
However the residential firms did succeed in waking-up the commercial side of the street that the residential real estate commission market is a fat $60 billion dollar industry!
Now that is worth fighting for!
National Association of Realtors (NAR)has also complicated this situation when it established what they call the "Commercial Alliance?"
From what I can gather, this is a rather loose organization under the Realtor umbrella, in which any card carring member can join. No test, no qualifications and no commercial real estate brokerage sales of leasing experience seems to be required.
This appears to be in direct contradiction with NAR's Code of Ethics ( Article Eleven) "Realtors shall not undertake to provide specialized services concerning a type of property that is outside their field of competence unless they engage the assistance of one who is competent on such type of property, or services and these facts are disclosed to the client."
Making the waters even less clear is that some local state run Realtor associations maintain a separate entity known as the Commercial-Investment Division( CID) which charges substantial annual dues in addition to the normal Realtor dues.
Commercial real estate is highly complex field because of the nature of the diverse properties and various types of highly complicated transactions. This field requires highly specialized educational courses, years of hand-on experience and constant training and supervision.
Twenty years ago, in the old days, the real estate industry saw the advent of requiring real estate appraisers to be state licensed. This was after the S&L banking scandal. The Appraisal Institute, and other valuation organizations, were instrumental in establishing one license requirement for residential appraisers and another, with more stringent requirements, for commercial appraisers.
Today, no such division, or separation, exits in the real estate brokerage and agency state licensing. One state real estate license ( agent or broker) is good and valid for all types of property. No differentiation is made by individual states.
These same states do require a different vehcile driver's license for cars and trucks.
With the shrinking markets I see a major turf battle looming. Both sides of the street now have a dire need to increase commission income. The residential side also has the pressing headache of the DOJ.
Diversification is not a dirty word in the corporate world.
I believe that some larger national and regional commercial brokerage firms will jump into the residential brokerage market and will do so probably via the acquisition route.
A well known,century old Boston commercial brokerage firm, which in the not to distant past, was a commercial brokerage giant in Massachusetts, now successfully handles substantial residential sales in the affluent section's of Boston's Beacon Hill and Back Bay and the highly affluent suburb of Wellesly, MA.
I think the major firms will focus first on very high-end communities as these commercial firms generally have wide name and brand recognition with many well established banking, financing, business, university, government and professional executives. It's still an old school and country-club world!
Will the residential firms, with national logos, or the national and regional commercial brokerage behemoths win?
My bet is on the commercial shops both national and regional. They are generally much more business orientated, extremely well organized, professionally managed and well financed.
The older commercial shops have a long tied and true tradition and record of being well versed and educated in valuation, advisory services and they have always invested heavily in real estate research.
Their trump card ( no pun intended) is that they have a lock on "brains" plus experience and they do have the best and most educated real estate agents.
Bill McInerney
!
For almost a century the business of property brokerage had an unwritten rule: Don't cross the street! On one side of the street were the happy-go-lucky residential brokers peddling homes.
On the other side of the street were the staid, old fashion, autocratic commercial brokerage firms with roots deep in the banking and manufacturing and retail worlds. The commercial firms handled all the major property transactions from factories to office buildings.
Today both sides of the street are facing "shrinking market share" compounded with increasing operating costs. Both, I believe, are more than just eyeing the other's turf!
Macro events occurred totally out-of-nowhere and caught both sides sound asleep. This was not suppose to happen, this was not in the time honored real estate brokerage text books.
Both were bushwhacked by the Internet and commercial brokerage was hit hard with the negative effects of industrial globalization which took away most of their industrial property cheese.
Today, because of the Internet, the rise of residential brokerage discount firms, wise and market savvy home buyers and sellers, residential brokerage firms have seen their market share sliding down faster than a cat on frozen ice on Beacon Hill on a cold day.
With the advent of the Internet, the democratization of MLS and the rapid rise of the discount brokers all is not well in Realtor-world.
Commission income is dropping while expenses are rising. The flat current residential market is making a bad situation simply intolerable.
Simultaneously, commercial brokers woke up on moring, facing the after effects of globalization as moany manufacturing firms relocated overseas leaving a glut of vacant R&D and manufacturng facilities behind with little demand.
The dotcom boom did not last long enough!
The major, national residential brokerage giants ( Coldwell Banker, Century 21 and ERA). several years ago, began to slowly and steadily intrude on the once highly sacred turf of the commercial giants. For the first time in a century mergers of large commercial brokerage firms became part of their vocabulary.
Several years ago, with no fanfare, Cendent Corporation, owner of CB, C21, ERA, etc., began encouraging their residential brands to enter into the "lucrative" commercial real estate market.
Soon were born CB Commercial, Century21 Commercial. Cendent, now known as Realogy, invested heavily in national blanket and institutional marketing and advertising in such expensive publications as The Wall street Journal, NY Times, Franchise Times and other costly publications.
But the didn't make a dent in the "big boy's" commercial business.
In my opinion, less than 7% of all commercial real estate sales and leasing in the US, is generated via MLS which is the mainstay and lifeline of the residential brokerage mindset.
Residential agents are tethered to the MLS and for years it was their armor and today it has come their Achilles heel.
Commercial firms never used MLS!
However the residential firms did succeed in waking-up the commercial side of the street that the residential real estate commission market is a fat $60 billion dollar industry!
Now that is worth fighting for!
National Association of Realtors (NAR)has also complicated this situation when it established what they call the "Commercial Alliance?"
From what I can gather, this is a rather loose organization under the Realtor umbrella, in which any card carring member can join. No test, no qualifications and no commercial real estate brokerage sales of leasing experience seems to be required.
This appears to be in direct contradiction with NAR's Code of Ethics ( Article Eleven) "Realtors shall not undertake to provide specialized services concerning a type of property that is outside their field of competence unless they engage the assistance of one who is competent on such type of property, or services and these facts are disclosed to the client."
Making the waters even less clear is that some local state run Realtor associations maintain a separate entity known as the Commercial-Investment Division( CID) which charges substantial annual dues in addition to the normal Realtor dues.
Commercial real estate is highly complex field because of the nature of the diverse properties and various types of highly complicated transactions. This field requires highly specialized educational courses, years of hand-on experience and constant training and supervision.
Twenty years ago, in the old days, the real estate industry saw the advent of requiring real estate appraisers to be state licensed. This was after the S&L banking scandal. The Appraisal Institute, and other valuation organizations, were instrumental in establishing one license requirement for residential appraisers and another, with more stringent requirements, for commercial appraisers.
Today, no such division, or separation, exits in the real estate brokerage and agency state licensing. One state real estate license ( agent or broker) is good and valid for all types of property. No differentiation is made by individual states.
These same states do require a different vehcile driver's license for cars and trucks.
With the shrinking markets I see a major turf battle looming. Both sides of the street now have a dire need to increase commission income. The residential side also has the pressing headache of the DOJ.
Diversification is not a dirty word in the corporate world.
I believe that some larger national and regional commercial brokerage firms will jump into the residential brokerage market and will do so probably via the acquisition route.
A well known,century old Boston commercial brokerage firm, which in the not to distant past, was a commercial brokerage giant in Massachusetts, now successfully handles substantial residential sales in the affluent section's of Boston's Beacon Hill and Back Bay and the highly affluent suburb of Wellesly, MA.
I think the major firms will focus first on very high-end communities as these commercial firms generally have wide name and brand recognition with many well established banking, financing, business, university, government and professional executives. It's still an old school and country-club world!
Will the residential firms, with national logos, or the national and regional commercial brokerage behemoths win?
My bet is on the commercial shops both national and regional. They are generally much more business orientated, extremely well organized, professionally managed and well financed.
The older commercial shops have a long tied and true tradition and record of being well versed and educated in valuation, advisory services and they have always invested heavily in real estate research.
Their trump card ( no pun intended) is that they have a lock on "brains" plus experience and they do have the best and most educated real estate agents.
Bill McInerney
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