Part 1: M&A Activity is Transforming the CRE Brokerage Industry

Part 1: M&A Activity is Transforming the CRE Brokerage Industry

For those working in the commercial real estate brokerage industry, the past decade certainly hasn’t been dull. A major recession and aggressive M&A activity, along with a wave of other innovations related to technology, data and processes, are some of the factors driving a sea change for brokerage firms. An exclusive NREI brokerage survey captures a snapshot of industry views on the pros and cons of those key trends, as well as provides further insight into the changes—and challenges—still to come.

One of the key focal points for the industry in recent years has been consolidation as the top firms continue to grow ever bigger, expanding their service platforms, talent pools and global presence. Yet respondents were evenly split on their views on whether the net consolidation that has occurred among commercial real estate firms is a positive or a negative for the industry. An equal percentage of 28 percent said they believe the consolidation is either positive, negative or neither, while 16 percent was unsure of the impact on the commercial real estate services industry.

One of the biggest deals of the year is DTZ’s plan to acquire Cushman & Wakefield for $2 billion. Although many are still waiting to see how that mega-merger will play out, there are numerous examples of M&A deals large and small across the industry, both in the U.S. and around the globe. Some view that consolidation as a “natural evolution” with many more positives than negatives.

“It is positive for the client because they get a much broader range of services, a deeper resource talent pool and the comfort of knowing that they are working with strong, global powerhouse entities,” says Mitchell Steir, chairman and CEO of Savills Studley. A year ago, London-based Savills acquired Studley for $260 million. Savills Studley currently has 27 offices in the U.S., and as part of the Savills network, also has access to resources at over 600 offices around the world.

“I wouldn’t say it’s positive or negative. I would use the term inevitable,” says Jack Durburg, global president, brokerage services, at CBRE. “If you’re in this business, consolidation is our reality. We are in the service business to serve our clients, and you have to put a firm together that can create a good outcome for your client and win that business.” For many firms, that means acquiring firms with a geographic market presence or business specialty that complements or strengthens the existing company.

CBRE has acquired and integrated more than 100 firms over the past decade. In fact, the firm has been on pace over the past two years to execute and integrate an M&A with a new firm about once a month. “We continue to have an active pipeline and look for those opportunities,” says Durburg. One of CBRE’s notable deals this year was the March announcement that it would acquire the Global WorkPlace Solutions (GWS) business of Johnson Controls Inc. for about $1.47 billion. GWS is a leading provider of integrated facilities management solutions, and the company will now operate as part of CBRE’s Global Corporate Services business.

“That is a large deal. It’s very strategic and we’re excited about it,” says Durburg. Yet it is difficult to single out any one acquisition as more or less important, because they are all strategically important in their own way, he adds. For example, other deals CBRE has announced this year include the acquisition of United Commercial Realty, a Dallas-based firm specializing in retail services, as well as Environmental Systems Inc., a leading provider of energy management services in the U.S.

TAGS: Brokerage
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