Effects from the real estate debacle of the late '80s, the trend toward corporate downsizing and new technology advances are all shaking up the way real estate brokerage businesses operate.
"We all know think the '80s were a great period of time," says Arthur H. Lerner vice chairman of Newmark & Co. Real Estate Inc., New York. "Even the brokers who didn't know anything about real estate made a lot of money." But, he says, after the trouble in the late 1980s, only the knowledgeable brokers survived, and the business of being a broker has changed. Deals are still negotiated today; however, says Lerner, when he started in the business, leases were about five pages and it took a few days to work out. Now leases are between 40 and 100 pages, and they include many more terms.
One thing that has added a lot of new terms to those 40- to 100-page deals is the advancements in technology. Most will agree that technology has had one of the largest impacts on the brokerage business, and on real estate in general.
Jerry Fults, president of Fults Cos., Dallas, says that automation is taking over in the real estate business and has had more impact on brokerage than any other source in the industry's entire history.
Taking the forefront in this brokerage technological revolution is computers. Many brokers say their job would be near impossible without the use of their trusty computer.
"For an agent today without a computer, he's going to be a dinosaur," says Steven M. Ekovich, regional sales manager at the Atlanta office of Marcus & Millichap, the first company to put all of its listings on the Internet. "And we know what happened to the dinosaur."
"Basically, brokers need to be more efficient, more technological," says Kathie Sammons, director of information services and marketing of Follman Properties in St. Louis. "They have to be on computers; they have to know how to work the computers. You have to work harder and you have to work smarter."
Not only is technology necessary, but it is also changing client relations throughout the business. "The computer has enhanced and helped speed up the relationship between brokers, clients and landlords," says Cheryl Stein, vice president of Frain Camins & Swartchild* Oncor International in Chicago.
"Now you're looking at Lotus Notes and being online with clients - that's a whole different world and we're still kind of in the beginning stages of that," says Chuck McNary, senior vice president of Colliers International in Carlsbad, Calif.
Clients demand the speed of technology in receiving services. They expect brokers to not only use computers but understand the results as well.
"Just as everybody has evolved, people want to do business with people who are on the cutting edge and changing and understand technology and are utilizing it, because it's a faster way; it's a more efficient way," says Kathy Schloessman, senior vice president at CB Commercial, Los Angeles.
"Technology has made brokers more efficient," says Rick Carduner, senior vice president and district manager of Grubb & Ellis in San Antonio. "They spend more time with their customers rather than doing paperwork."
Clients are demanding information immediately, according to Henry J. Knapek, president Bradford Cos., Dallas. "We are expected to have, at our fingertips, knowledge about all the buildings in the area."
Of course, all of the access that is possible is "putting an increasing premium on professionalism," says James B. O'Brien, executive vice president with Smithy Braedon* Oncor International, Fairfax, Va. He says technology is "raising the level of quality service that must be provided. With everyone having all this information, it gets back to the personal side, competition increases. It puts everyone on a level playing field."
Phil Royster, regional president of Grubb & Ellis in Annaheim, Calif., agrees, "I think what has happened with technology is that it's kind of raised the bar of competing for opportunities."
In the '80s, only the brokers had the market knowledge. Now companies can buy that, says L. Frederick Glass Jr., executive vice president and partner at Carter* Oncor International, Atlanta, and in order to compete "they've got to find another way to differentiate themselves."
Eric Zimmermann, vice president/investment sales at Ben Carter Associates of Atlanta, agrees that advancing technology forces brokers to separate themselves from each other causing a reverse effect on the brokerage business. "The playing field has become so level - the ability is the same - now we're back to the service providing relationship."
If technology leveled the playing field, then it has also made that field easier to run around. It has added ease to a broker's workday and has lessened travel and time to communicate with their clients.
"We can get there in the mornings; you talk to your client over the Internet, and you send information back and forth to them. You really are becoming a partner - it's like they're in the office right next to you as opposed to being in New York or San Francisco," says Todd Lippman, senior vice president at Goldie Wolfe Co., Chicago.
"Technology has created more flexibility so you can operate effectively away from the office," agrees Hal Ulvestad, executive vice president of CB Commercial in Chicago. "It has improved communications, and it has improved the ability to manage business assignments more effectively."
Robert Salsberry, principal at Trerice Tosto in Detroit, adds that new technology allows more frequent and "real time" reporting, and mastering this technology is a key ingredient in successfully handling corporate business.
"The main thing that I see that it has changed is on our national business or business where we really become more of a partner, not just a vendor. We can communicate electronically with those folks, and the technology enhancements help us do that everyday," says Elysia Holt, Southwest regional president/corporate services division, The Staubach Co., Dallas.
Technology has also changed the look of presentations, and it reduces the time and inaccuracy of complicated calculations.
"The business continues to be process-oriented and obviously, computer technology has enhanced the way we portray or display our analysis," says Gerald O'Malley, senior vice president of Draper & Kramer in Chicago. "The information is better, probably more accurate than years ago."
Executive vice president Jacque Ducharme of Julien J. Studley Inc. in Chicago goes a step further to say that technology made the tenant representa-business because, "with computers being able to calculate present value, we are then able to compare, in a reasonable time period of calculations, all the various scenarios of all the different buildings, so technology made tenant rep. and brokerage possible."
With this extended use of computers has come a new source of information. The most recent technological change would have to be the emergence of the Information Highway, according to Darren Casey, president of Baxter Southwest Corp. Realty Services, San Antonio. "Now a real estate broker can list his or her property to brokers worldwide for a fraction of the cost of advertising dollars."
However, there is another side to the technological revolution in the brokerage business. Problems can arise when brokerage firms try to maintain up-to-date information and equipment.
"This (technology) is the biggest change and the hardest to keep up with," says David R. Binswanger, president of Binswanger, Philadelphia. "It's more than just e-mail with customers. It means shared data bases and shared systems while at the same time maintaining some proprietary value on the information that is being shared."
It is also creating more responsibility for brokers in dealing with clients. John E. (Jock) Howland, senior vice president of Tanguay-Burke-Stratton in Chicago, says technology has changed brokering by demanding greater technical evaluation in order to understand the specific technological needs of the clients.
Along with added responsibilities, brokerage firms must spend large amounts of money in order to keep up with new technology. J. Fernando Barrueta, chairman of Washington D.C.-based Barrueta and Associates, points out that the cost of running a brokerage business is higher now. "Equipment, maintenance costs, software and training add up to a significant cost," says Barrueta.
Others believe there may be too much technology, and that the excess may lead to some negative effects on the business.
"You can get so much information now that you can get information overload," says Harvey E. Green, executive vice president of Marcus & Millichap in San Francisco. "You have to he careful of what information you do get."
"Things are more readily available, which sometimes is good and bad. It's available to everybody and that might be dangerous, because a little bit of information in somebody's hands might be dangerous - that information sometimes needs an explanation," says Peter Krombach, president Nooney Krombach, St. Louis.
In all the hub-bub of technological advances is another issue. "Too much human effort has been replaced by computer software," says Charles Goldenberg, who is president and CEO of Sylvan Lawrence Co. Inc. of New York. "The human effort, which is the heart of real estate, is lost. I don't see any proper replacement to selling real estate. It's a human transaction; it's the personal touch that matters."
Though these negative effects of technology maybe strong and everlasting, technology is here to stay. Dealing with computers and massive amounts of information is now an almost mandatory part of a broker's life.
"If you don't have financial analysis or technical support capabilities, you won't be a player in the future," says Barry Beitler, president Beitler Cos., San Francisco.
Matt Khourie, CEO of Trammell Crow Co.'s Houston region, agrees. "Technology has changed the business to the extent that if you don't have great access to and a working knowledge of technology, you're going to be left far behind."
"With the passage of time, increasingly sophisticated systems, data analysis and accessibility, and other application will become a standard in our business," says Lloyd Kapp, senior vice president at Edens & Avant Inc., Columbia, S.C. "While you may not need these technologies to survive today, we believe they will be essential to a successful brokerage operation by the turn of the century."
And where will all the advances in technology lead us? Dick Spinell, principal with MidAmerica Real Estate in Chicago, says, "We have some clients that don't let us give them any paper, and the only way we are able to correspond with them is through computers online. We are definitely going to a paperless system."
National vs. local
The answer to the question of whether national or local brokerage companies have the advantage seems to depend on who's doing the talking. There are pros and cons to being a national or a local brokerage firm.
With corporate downsizing, companies seem to be concentrating on their core business and looking to outsource their real estate task, says James Connor, senior managing director of client services of Cushman & Wakefield in Chicago. "As they do this, they can't outsource those to local, niche boutique companies or even regional companies; they're looking to outsource that to national, full-service companies where they can turn over all or a major portion of their portfolio."
"With a trend toward institutional ownership, professionals and public companies will own more and more real estate," says Nathan Isikoff, chairman of the board at Carey Winston in Chevy Chase, Md. "Smaller companies will have a harder time dealing with the institutions; they're perceived as a risk."
Jon Silberman, senior vice president of Lewis Cos. in Houston, agrees that small companies are finding it hard to compete. "The big national companies have all decided that they don't want to deal with one broker in each city; they want to deal with one, two or three national firms or national affiliations."
"Thus, the small local boutique firms still have a place in the market, but the majority of users are finding that it's easier to deal with a full-service firm, where they can deal with industrial, office, research, retail and investment on a one-stop approach to things," says John Boyd, executive vice president of Signature Associates in Detroit.
Also, the cost of keeping up technologically and competitively can cause problems for smaller firms. "The complexity of the real estate market is changing on the brokerage side, and it's taking more and more expense, especially on the technological side, to keep up," says Tom McCormick, SIOR, senior vice president of Colliers International in Sacramento, Calif. "The technology and what it costs is relatively expensive for a brokerage firm and, unless you have some size, I don't think you can keep up with the latest technological changes as quickly as you need to."
But, says Andrew L. Ghertner, executive director at Cushman & Wakefield of Georgia Inc., Atlanta, national firms are still very dependent on their local abilities. "National firms are only as good as their local offices. We fight the battle every day trying to convince people that our size and local capabilities are strong."
"It's easier to establish a relationship if there is a positive name recognition of a person being with a national firm," says Randy Evans, vice president/investment sales at Ben Carter Associates. "But after that, it comes down to the team's ability to execute."
Sometimes, national firms look to the local companies to provide help in certain markets. "There's a lot of partnering," says Bob DeLaney, principal at Fallon Hines & O'Connor Inc. in Boston. "National firms still hook up with local firms." He says there's a trend for national firms to have an advantage. "To counteract that, we try to be in a position to partner with national firms."
On the other side of the coin, however, there are many local firms that are flourishing in their own areas, usually thanks to market knowledge and a good reputation.
Michael B. Sherman, who is president of Whittier Partners Group, Boston, points out the importance of regional +firms, "which we think is better in this market. There's such a big dose of local knowledge important to real estate. The product is a very local product in that it doesn't move."
"At the end of the day, I think commercial real estate is still done at the local level," says Mary Ann Tighe, executive managing director at Edward S. Gordon Co., New York. She says companies always look to the local market for real in-depth understanding of marketplace. "It's truly a case where the most successful brokers know their region in exhaustive detail."
One part of being a successful local broker may be finding and excelling in a specific niche. "The local firms that are specialized are doing better than the local firms that are trying to be all things to all people," says Khourie of Trammell Crow.
"The key factor to their (local firms) success is having quality brokers," says Jack Koon, president of the Southern division of PM Realty Group in Houston, "preferably with vast product knowledge and key contacts developed over the years that leads to quality assignments for that particular brokerage house."
To battle the power of the big national companies, local companies adapted a way of their own to reach out and cover the nation. "The real estate business has historically been a regionally local business," says Robert L. Freedman, vice chairman of the board at Williams Real Estate Co. Inc., New York. "The concept of networks evolved to compete with national firms."
"Most local brokerage firms generally are concerned with how they address the requirements of their clients in other markets," says Stewart Forbes, president of Colliers International in Boston."Therefore, they are looking to get into some sort network affiliations, if for no other reason than to be able to promote that capacity."
"Networks have continued to gain market share and with that have taken business away from local, unaligned brokers," says Jeffrey M. Finn, president and COO of New America Network Inc. in Highstown, N.J. "This trend has forced local brokerage firms to seek national alignment with a network. It is very difficult today for a local brokerage firm without a national affiliation to compete for local projects or national accounts."
Edens & Avant Inc. has a partnership with New America Network. "We believe that this alliance gives to us the best of both worlds," says Kapp. "It provides us an opportunity to very effectively compete and perform nationally as well as to bring the local expertise and knowledge gained from 30 years of business activity within the Southeast. It seems that many clients now require national affiliation for those firms with which they deal."
Spaulding and Slye is an owner/member of Colliers International network. "While we're all independent firms, what it gives to a firm like Spaulding and Slye is the confidence," says James B. Karman, president at Spaulding and Slye, Boston, and treasurer of Colliers. "Technology is critical. Are we competing with Cushman & Wakefield? Of course we are. As a Colliers firm, we do compete with the nationals."
Some in the brokerage business are seeing both sides of the coin. In certain areas of the country, both national and local firms are equally represented. From a competitive standpoint, "we all get our fair share around here," says Robert L. Cohen, who is CEO and chairman of the board of Barnes, Morris, Pardoe & Foster Inc. in Washington, D.C. He says that by sheer numbers and by providing a range of services, all firms in the D.C. area are getting their market share.
The brokerage business today is more a competition between specialization - tenant-representation firms, leasing firms, full-service firms - and less a competition between national and local. "There's plenty of room for all types," says Bill Magner, who is senior vice president/principal at Spaulding and Slye. Magner works in the company's Washington, D.C., office.
Whether you're in a national or a local firm, Robert S. Carter of Charlotte, N.C.-based Lat Purser & Associates Inc., says, "It really comes down to what relationships you have with the particular institutions."
"It used to be that people thought that largest firms were the best," says Bradford's Knapek. "Today, brokerage firms are concentrating more on the quality of the people than on the quantity of people."
It's a relationship business vs. a transaction business like it was in the past, says Stephen H. Jaggard president and CEO of Oncor International Houston. He says what really makes someone good is market knowledge, not merely market information. Being in the market for years, knowing the ins and outs and knowing where the deals are is key to market knowledge. "The true opportunities today don't have flashing neon signs on them," he says.
J. Richard Jones, president and CEO at Jackson Cross*Oncor International, Philadelphia, agrees that market knowledge is critical. "Market knowledge is knowing how to interpret the data. That's what separates the brokers and makes the big difference."
"What it comes down to is people, and what kind of chemistry your people can create with the clients," says Jay Noddle, president of Pacific Realty Group Inc. in Omaha, Neb.
"Brokerage companies are nothing but the base from which independent brokers work, so I don't see a difference," says Sam Kartalis, president and COO of Miller Commercial in Dallas. "Strong brokers will always do well, I don't care if they're with a national company or with a local company."
Clients' changing expectations
"There is no question that corporate outsourcing and strategic alliances remain the `buzzwords' for the '90s," says Beitler. "The ability to possess qualified specialists in multimarket representation certainly gives one an advantage over its competitors."
"Clients expect more service, faster service, better service and cheaper service," says Connor.
With the higher expectations of clients, brokerage firms have had to shoulder a lot more responsibilities than just handling the deal. "Now clients are expecting a larger menu of services," says Dan Granot, vice president of office properties at Richard Bowers & Co., Atlanta. He mentions leasing, consulting and financing. "We brought all these in-house to be ahead of the game. It's more and more competitive. With outsourcing, brokers are expected to do more than any other time in history."
"For a very long time it's seemed to me that space is not all we deal with," says Edward S. Gordon's Tighe. "We're in the business of housing corporate tenants." She says that includes meeting cash/financial projections, technology needs and all the questions companies need to face.
"Anyone who wants to compete with the big boys must provide a tremendous amount of service, and you have to add value. Everything today is bottom line-oriented," says Pamela Rose, president of Rose & Associates in Chicago.
"In-house research departments are becoming standard," says Salsberry, "and more and more clients expect `real time' reporting, more sophisticated graphical presentations and elaborate marketing materials."
What do clients expect? "In a word, integrity - doing what you said you were going to do - period," says Philip R. Utigard, principal with The John Buck Co. in Chicago.
"They have to bring strong intellectual credentials to the table and also strong integrity to the table," says Burt Follman, president and CEO of Follman Properties. "Integrity needs to be re-emphasized again and again."
In addition, clients are looking for consistency, proactive approach and the ability to implement quickly. "Creativity and business judgment don't hurt either," says Utigard.
"I think they are expecting what they deserve - superior service," says Lippman of Goldie Wolfe. "They are expecting the vendor to know about the corporation and how it works, how a deal will affect the profit and loan statement, what tax implications it will have on it. Those are things a good broker should know and should be able to talk their language."
Bruce E. Mosler, vice chairman and regional president of The Galbreath Co., New York, thinks that partnerships formed between clients and brokerage companies tend to be different from the way they used to be. "I think they (clients) are looking for us to change the way we think about doing business with them."
The new broker
"The day of the broker just working from deal to deal is going away. I think it's relationship, high level of service; it's repeat business; it's adding value throughout the process," says Bill Cawley, chairman, founder and CEO of Cawley International in Dallas. "It's adding value and adding value and adding value. You constantly have to continue to prove yourself to build the relationship."
"Outsourcing is no longer a phenomenon, it's a given real estate practice," says Magner of Spaulding and Slye. "The good ones don't work on a fee schedule. The objective is fewer clients and more opportunities vs. high transaction; you've got to be more relationship focused or you won't be around long. In the '80s, the most successful were doing more transactions. There are fewer transactions today, but now we have a more diverse competitive market. You have to think much more long-term. Transaction brokers, if there are any left, are a dying breed."
Tighe points out that Edward S. Gordon now has more salaried personnel than commission personnel.
So does Whittier Partners, with 26 partners and 110 professionals. This is so "when a client comes and says we have these different types of problems, we have the experts on hand. The clients ask complicated questions so we need specialists to answer them," says Sherman. "Full-service brokerage companies are a better thing to be in a business like this than to be a one product company."
With all of the added responsibilities thrust upon the brokerage company, Julien Studley, chairman and president of Julien J. Studley Inc., New York, points out the importance in today's market of good management of the brokerage companies to be able to compete effectively. "Most of the companies are run by successful brokers, not managers. Management of brokerage companies becomes a very important skill."
"We have gone from being brokers to being consultants," says Binswanger. "That means drastic refocus in training, in personnel and in what constitutes an equitable fee structure. We are trying to do all of this while trying to digest rapid technology changes and the effect of globalization. Other than that, we have it down pat."
Most brokers say the future will be an extension of the trends that are starting to emerge today. "I really see a continuum of service rather than the old way where someone would do a transaction, a 15-year lease and wouldn't worry about it," says Lippman. "Once you're working with a client, you keep working with them making sure of their growth."
Boyd of Signature Associates agrees that today's trends will continue. "It's going to continue the revolution of full-service, larger brokers to be able to accommodate and service customers."
"I think tomorrow's broker is going to have to have a lot more skills," says Silberman. "They are going to have to know how to do financial analysis, know how to review leases; they're going to have to have a broader market knowledge than just one city - they're going to have to know about other markets in other parts of the country. It's a big challenge."
Another trend in the future that is relative to the skills and capabilities a broker brings with him is that experience will sell. "Gray hair and maturity sells," says Dave McKenney, president of commercial brokerage with Voit Cos. in Los Angeles. "There have been a lot of people who have left the business in the last five years and not a lot of people are running in to replace them, so what you have is a better quality broker who has greater demands on his time."
Newmark's Lerner sees the trends today in technology and increasing expectations bringing increasing challenges in the future. His prediction as to what's in store for tomorrow's broker: "Get into work a little earlier, work a little harder, get home a lot later and, if you're lucky, you'll get a hole in one."