Network membership allows companies to enhance competitiveness

Network membership is growing in popularity among independent commercial real estate services companies. By banding together in organizations that promote cooperation, information sharing and, last but not least, transaction referrals among their membership, entrepreneurial companies can expand their presence in an increasingly global marketplace provide a broader range of services to their clients, exchange ideas on optimizing internal operations with like-minded firms and, in many cases, increase their revenues.

What is a network?

In a generic sense, a network can be de, scribed as a group of firms that enhance their competitive positions by banding together to pool resources and information, and collaborating to expand their market penetration and array of services. Commercial real estate networks emerged in the 1970s and were viewed many as platforms for referring transactions. In the 1980s, growth of the national real estate services firms changed this emphasis somewhat, putting a new focus on a network's ability to enable affiliate companies to compete in effectively serving the needs of clients whose real estate requirements were multimarket in nature.

Today, deal referrals and multimarket transaction flow still are seen as important benefits of network affiliation. But, judging by the comments of network affiliates, many independent firms are recognizing that networks also provide a structure to help them improve the way they operate internally, enhancing their competitiveness in the real estate services marketplace of the 1990s.

Network membership provides three major benefits for independent real estate firms, according to Fernando Barrueta, chairman and director of commercial leasing of Barrueta & Associates, Washington, D.C., which Network in 1993. Information sharing is at the top of his list.

"We find that having network partners in other parts of the country, firms that are not competing with us, generates information that helps every one of us run our companies better."

The multimarket coverage afforded by network membership is another plus, he says, and was a major factor in his firm's ability to establish a strategic alliance (in conjunction with the New America Network) with Bell Atlantic Network Services Inc. "Since the New America Network covers more markets than any other network in the country, Bell Atlantic found us an excellent fit," Barrueta explains. "With the network, we have brokers who can cover smaller, isolated markets, such as mountain tops in West Virginia - places where Bell Atlantic owns facilities. That kind of coverage is very important to an organization like Bell Atlantic, which has a multitude of facilities, many in out-of-the-way areas," he says.

Enhanced revenues are a primary benefit, notes Barrueta. "Network membership gives us the opportunity to conclude transactions, and be paid for them, in areas outside our immediate market," he says. "We have approximately 65 transactions working through New America at this time - and that is a lot of transactions."

Charlie King, of Atlanta-based King Industrial Realty Inc., which is a member of King Co. CORFAC International, also accentuates the positive aspects of belonging to a network. He says that in the early days of network formation, some companies thought that if they stayed independent, they would get a lot of leads. "But with the great expansion of networks, they felt like they were being left out," he adds. King says he has recently gained some deals from affiliate members. "We haven't found a downside yet (of belonging to a network), but you never know what business you're missing."

Membership has benefits

Other independent real estate companies that comprise the major networks say that a structure for cross-market transaction flow and referrals is one of the main benefits of network membership.

Robert Baraf, managing director of New York's Edward S. Gordon Co. and Oncor International manager for the firm, previously served as CEO of Oncor, the Houston-based network. "Oncor-membership gives us a national and international reach," he notes. "It allows us to do transactions with our New York clients in other marketplaces, combining our expertise with that of the local Oncor affiliate."

"We've had a considerable increase in company activity since we joined Oncor International nearly six years ago," says John Wyss Jr., vice president of Phoenix-based CBS Investment Realty(*)Oncor International, a full-service regional firm. "Not only have a considerable number transactions come to us through Oncor, but we also have had the opportunity to refer business to other Oncor members, and make money that way," he notes.

Oncor membership was instrumental in enabling CBS to broker the largest industrial build-to-suit in Phoenix during 1993, a deal for a 300,000 sq. ft. distribution building for household products manufacturer Reckett and Coleman that was referred by the New jersey office of fellow Oncor member Edward S. Gordon Co., according to Wyss. Although no transactions of quite that magnitude have come to CBS through the network pipeline since then, he notes, the company is "now working on five retail tenant-representation assignments that have come to us through Oncor, involving national and regional retail operators that require locations in the Phoenix marketplace."

Chicago-based Tanguay-burke-stratton Comprehensive Real Estate Services is a member of Realty Resources, a network focusing on retail real estate. According to company president Mark H. Tanguay, network membership allows a company like his "to effectively serve retail tenants, especially those that are expanding nationally." Under the Realty Resources umbrella, a member company can make referrals to other network members as client retailers seek to establish themselves in new markets, he says, although "there can always be ongoing involvement by the referring firm, depending on the size and scope of the retailer's requirements."

A new network is created

Tanguay-burke-stratton is a founding member of the Corporate Real Estate Services Alliance (CRESA), officially established in january 1994. Why a new network? According to chairman of the board Bill Goade, who is president of Boston's Avalon Partners, "We had been approached by several of the existing networks - but their membership was made up largely of listing firms, while we are 100% tenant representation," he explains. "We found a lot of interest among like-minded firms that were interested in creating a new network of corporate services providers, providing real estate services on either an outsourced basis or through working with existing real estate departments," says Goade.

CRESA currently has "more than 50 national or regional accounts," according to Goade. This new network, which now includes 23 members in 28 markets across the nation, does not deal in referrals, he notes, "Whoever initially controls the client does so from start to finish - we don't just hand clients off to one another." Instead, says Goade, "We use the network for the purposes of exchanging market information and landlord contacts."

Atlanta's Brannen/Goddard Co. joined New America Network in early 1994. "In our first nine months Of membership, we did about $6 million in direct business that wouldn't have been done otherwise, according to company principal Mitchell Brannen. He says he sees "tremendous value" in network membership. "New America has corporate representatives that call on national companies, which means that not only can deals be referred to us from other network members, but also that the network's home office is sending business from FORTUNE 1000 companies."

This network benefit is of great importance to local independent companies that compete with national firms for corporate business, adds Brannen.

"The national companies have more overhead than most of the independents to do this kind of business development," he says, adding that "membership in a recognized network helps the corporate real estate officer feel more comfortable in choosing you to handle multimarket requirements."

Tooman Collins Associates, Tulsa, Okla., joined The Commercial Network, based in Los Gatos, Calif., in 1992. "As one of the largest independent firms in our market, we felt like membership in a national network would benefit us in a number of ways," says company principal Ken Tooman, SIOR, CSM. "We saw network membership as a means to enable us to represent our clients in regional and national markets, along with the ability to refer clients from outside our market to other leading, solid commercial real estate firms," he explains. "We also felt that network membership would serve as an additional platform for referrals from outside our market."

David Zeve, of Pittsburgh-based David Zeve Associates, says his company has benefitted from membership in the International Tenant Representation Alliance (ITRA), a self-run network of 28 independent tenant rep firms, by being able to provide a higher level of service. Zeve says: "I had a client in Pittsburgh Who bad a problem in east Pennsylvania. I called the network contact in that area who helped solve my client's problem." Zeve adds that network membership enables his company to acquire market information immediately through information sharing, both over the phone and on a computer bulletin board. "Our clients believe in independent tenant representation and want to continue to take advantage of those services," he says.

Although transaction flow always will be an important selling point for networks, other benefits can have an impact on individual members' bottom lines. The training opportunities for sales personnel is a key benefit, according to David Goodrich, president of Indianapolis-based F.C. Tucker a member of Boston-based Colliers International. "Through the mechanism of Colliers' annual sales meeting, our sales associates interact, grow and gain from the experiences of associates from other member firms," he says. "Plus, our pooled resources help us afford high-powered trainers and speakers who can address important issues."

Even more important, from the standpoint of a real estate company owner, "No one in the network competes with me," adds Goodrich. "I can call another owner in the Colliers network about operational concerns I'm having and open up my books completely. I'm able to ask questions such as 'Is my advertising spending out of line?' and get an answer from one of my peers in the business. Information exchange among peers is a huge benefit of network membership - and the operational give-and-take among owners in the Colliers network is superb."

CBS Investment Realty's Wyss agrees. "The companies that comprise Oncor almost are universally willing to share of themselves with other network members," he says. When you have member companies doing business successfully in a multitude of marketplaces, he explains, "chances are good that they are doing some things differently from us - and also that some will be more advanced in some areas than us, or vice versa. We can all learn from each other and improve the way we do business ourselves."

"Experience exchange and information-sharing helps everyone in running their individual companies," adds Brannen. "At (New America Network) national conventions, we meet face-to-face with people from other companies, and everyone involved picks up a lot of tips on how to better run their businesses. It's this willingness to share among member companies that leads to everybody learning from each other."

Affiliates enjoy recognition

Realty Resources network membership has other benefits, says Mark Tanguay. "At the annual ICSC (International Council of Shopping Centers) convention in Las Vegas, The Realty Resources booth occupied 8,000 sq. ft. in the middle of the convention floor - a dominant position in a convention that is very important for our business," he says. "No firm of our size, or any other member firm, would be able to get that kind of positioning and visibility on its own - but collectively with Realty Resources, we get it."

Network membership offers a firm another benefit that is hard to find anywhere else in today's competitive business world, adds Barrueta. "I'm talking about camaraderie," he notes, "namely, the ability to openly exchange information and develop relationships based on trust with people who would otherwise be your competitors. It is wonderful. You can talk with your fellow network members about your mistakes, your ideas, your experiences, and you have people listening who understand very well what it is that you do, and will be open with you in the same manner."

The most important benefit of network membership is that "it enables a firm to understand the culture, the values and the relationships that exist in any market it goes into," adds Baraf. "When I'm representing a client in another marketplace, there is no way I can possibly establish the relationships in six months that my local Oncor affiliate has been building for 15 years," He notes. Local affiliates "can provide tremendous insight into who's who in their market," say Baraf. "You can learn some things about a market in a short period of time, but you can't get to know the players the way the local affiliate does."

Bridging international differences

Today's commercial real estate networks are instrumental in enabling their members to expand their reach to include overseas markets, a benefit that is of increasing importance in an age where business is conducted on an increasingly global basis.

Colliers International "has a substantial foreign presence," says network president Stewart Forbes. "We are strong in Asia, strengthening our organization in Europe, and building it in Latin America."

The role of the network in the international arena, fundamentally, is that of bridging differences in how business is conducted, while recognizing the similarities that exist.

"What you're trying to do is work with the differences in the practice of real estate and the variances of skill levels in foreign markets," he notes, and "move the office leasing expertise you have available in New York City to Mexico City, or the property management/tenant retention program from St. Louis to Buenos Aires."

Central and South America are prime emerging markets over the short term, according to New America Network executive director Jeffrey Finn. "We have expanded to include companies in Mexico and Brazil, as well as adding several new offices in Canada," he says, in response to activity by "U.S. companies expanding existing facilities and looking for new locations."

The Commercial Network "is planning to be a presence in Asia and Europe over the next two years," adds executive director Pat Moultrup. Effectively building international relationships is a great challenge for real estate networks, he adds. "It is basically uncharted territory - and the big challenge will be making a corporate client happy working with an affiliate who has an entirely different business agenda, and is located some 7,000 to 10,000 miles away."

Recognition of the increasing need for an international real estate perspective led to the expansion of International Commercial Realty Services (ICRS). According to the network, ICRS is one of the largest professional service organizations in the real estate industry, with more than 40 offices in 16 countries on three continents. The organization is designed to cater to major space users and property owners, regardless of location.

Rand Diamond, ICRS president and president of corporate services for Stein & Co., says the network has expanded into Western Europe and Southeast Asia. Diamond says he sees "a trend toward globalization of real estate and using a fewer number of service providers on a larger basis." He says that there is a lot of growth and activity in countries such as Singapore, Vietnam and China. Vigers, a large real estate service company based in Hong Kong, with a number of offices in Southeast Asia, joined the network a couple of years ago.

Oncor International recently expanded its presence worldwide through a partnership with United Kingdom-based Hillier Parker International and Bourdais SA from France, according to Oncor's president and CEO Stephen Jaggard. This partnership creates a 61000-professional, full-service commercial real estate organization, serving the United States, Europe, the United Kingdom, Australia, Canada, Mexico, Eastern Europe, South Africa and 10 Asian countries, "more than doubling our global reach," he notes.

As a result of this network expansion, "We see a lot of opportunities for international transactions in the future," says CBS Investment Realty's Wyss. Much of this activity will come from U.S. manufacturers looking for offshore locations, he notes, along with American companies that may have real estate needs in China, Vietnam and Australia.

"The ways in which business is done in these countries are obviously vastly different from how U.S. companies operate here," says Wyss. In much the same fashion as networks facilitate real estate activity across different markets in the United States, "when American corporate real estate directors venture into unfamiliar territory," he adds, "we'll have an affiliate there who is part of the local economy, and can help translate the local ways of conducting the real estate business for them."

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