Despite the consolidation and sizable deals that have occurred, most respondents expect more M&A activity. Nearly three-fourth of respondents (76 percent) said they expect more consolidation among larger firms, while 16 percent were unsure and only 8 percent said they do not anticipate more consolidation.
One of the big drivers behind consolidation is an industry that remains fragmented, with a mix of top global firms, regional and local firms, independent brokers and “do-it-yourselfers” ranging from corporations to mom-and-pop firms that manage their own real estate in-house. Many brokerage firms see that fragmentation as an opportunity for continued strategic growth. Yet there is increasingly a shift away from being the biggest to taking a strategic approach to expanding the service platform.
Historically, brokerage firms have boasted their leadership in terms of size —number of offices, employees and dots on a map. Clients and potential clients take that size for granted, and will want to know how a brokerage firm differs from its competitors, such as expertise in a particular service area or market, says Robinson. “One of the challenges we will face increasingly is how we differentiate ourselves,” he says.
Ultimately, the pressure to improve the depth, breadth and quality of services shows no signs of letting up. As such, brokerage firms will continue to expand their platforms through both M&A activity and organic growth. That activity is raising the bar on the talent and services that brokerage firms are bringing to bear for their clients.
“The business is a highly sophisticated machine these days. We have moved from the era of doing deals on cocktail napkins at a bar to structuring transactions in the most sophisticated way,” says Steir. He estimates that half of the professionals at Savills Studley have MBAs and law degrees or are graduates from some of the top universities in the country. In addition, brokers are increasingly serving clients through the entire life cycle of the real estate process, from initial strategic consulting and workplace analysis to location analysis and transaction management. “So, this is a business of highly skilled subject matter experts,” he says.