Real Estate Industry Reorganization Affects Networks

Article excerpt

As corporate America downsizes and looks for outside suppliers for non-core operations like property management, the real estate industry is reorganizing itself as well, consolidating into fewer, but bigger, companies that can take over the jettisoned corporate departments.

This is having an impact on real estate networks, those far- flung associations of usually independent companies that seek to have a means of referring to affiliates in other regions on a fee- splitting basis.

It is also leading to the development of new types of organizations, including at least one group that emphasizes offering a broad variety of services, rather than the traditional referrals. Local real estate sales and service operations have long sought to broaden their ability to hold on to clients and increase revenues by affiliating in some fashion with companies in other cities. Some, such as Cushman & Wakefield, Grubb & Ellis and CB Commercial, have done so by acquiring or establishing corporately owned offices in major cities. Cushman & Wakefield, for instance, employs over 1,500 people in 40 offices nationally. But others say this is an overly expensive approach that does not guarantee a uniform level of quality, despite having the same brand name over the door. These companies have joined with others in a variety of networks, which range from licensing operations with a central corporate staff to voluntary associations governed by membership boards. With these national -- and increasingly international -- affiliations, a company that handles a corporation's business in New York can maintain the relationship, even if the corporation wants to expand to California, Georgia or Hong Kong. "It is important to provide one-stop shopping," said James D. Kuhn, the president of Newmark & Co. Real Estate. "If I have a client in New York who wants space in Hong Kong, I'd go there with him, meet with an affiliate and do the transaction." Without this ability to provide service in remote markets, real estate executives say, they may put their New York business at risk if a client decides to shifts all its activities to another agency. Recently, networking was in the news as Newmark cut its 10-year relationship with the New America Network and announced it would be joining The Commercial Network. And executives of the old Edward S. Gordon Co., now Insignia/ESG, said they planned to acquire real estate companies in other cities, despite being a founder of Oncor International, a membership organization. Kuhn said Newmark made the shift from New America, which is a privately owned company that supplies services to brokers, to TCN for two major reasons: to gain access to more international markets and to gain a greater measure of control of its own operations. "It is extremely important to be represented internationally today and TCN is in Tokyo, Hong Kong, Beijing and all over Europe," Kuhn said. "The other thing is that New America is owned by Gerry and Jeff Finn and we think it is important that we control our own destiny. We don't want outside individuals making decisions that affect our business." TCN, he noted, is owned by its member firms. Jeffrey M. Finn, the president and chief operating officer of New America, said the purpose of his company was to provide research, communications and other services to brokers, many of them in smaller markets. "We have a staff of over 50 people to provide services, including sophisticated technology to link over 200 offices in North America," he said. John Powers, an executive managing director at Insignia/ESG, acknowledged that a company on the prowl for acquisitions may not fit comfortably with the collegial style of Oncor. The network was founded in 1977 at least partially to offset the growing influence of corporate real estate service providers. "There was a feeling among members that there was still a place for strong regional firms," Powers said. …