One question that rises to the top amid the flurry of M&A activity is whether bigger is better, and whether or not smaller local and regional firms can survive and thrive in that new marketplace. “The consolidations are probably positive for the bottom lines for the service providers, but I’m not so sure it will be positive for ownership of commercial assets,” says Clay Wommack, director of the office and industrial services group at Franklin Street, a real estate services firm serving the southeastern U.S. with offices in Tampa, Fort Lauderdale, Jacksonville, Miami and Atlanta. “The consolidations have the potential to create conflicts of interest within service providers considering the myriad of clients they serve,” he adds.
When asked what kind of brokerage organization clients typically work with when buying, selling or leasing commercial real estate, more than half of respondents (58 percent) said a full-service real estate company compared to 41 percent who said they use a boutique or independent firm. In addition, 17 percent also said they use a member firm of a brokerage network and 5 percent also would use a franchise.
For clients, size may not matter as much as a firm’s ability to get the job done. On a scale of 1 to 5 with 5 being the highest, respondents rated certainty of closing deals as the most important quality with a mean score of 4.5. Other factors that rated high at 4.2 included familiarity/relationships; a broker’s track record; access to markets; and quality of deals.
Wommack expects to see more consolidation and acquisitions in the future. Yet he also believes that smaller firms can gain traction as niche specialty players, as well as be able to deliver services at equal or greater value. “We see this as a great opportunity for our firm to penetrate markets and accounts that are currently being poorly served,” he says. “We are finding many institutional owners that prefer partnership arrangements over true third party servicers, which is one of our major strengths as a partner/operator.”