My Take on the Current State of Affairs in the CRE Brokerage Arena

A transcription of the above video:

When I think about the current state of affairs in the commercial brokerage arena, it really is quite fragmented. You have three companies, all public companies, all hundred year-old companies - CBRE, JLL, and Cushman Wakefield - who are the big three by far. I estimate that they collect 50% of all commercial real estate commissions in the industry. I lay out this logic in the book (Adapt). The reason for their domination is because they have very powerful national account salespeople. So, they are able to acquire all of the business of a company on a national or global basis. That's hard to compete with.

Then you've got the second tier franchise organizations - NAI, Sperry, Coldwell Banker Commercial, Colliers, and others, that have been able to build profitable networks on a much smaller basis. The big difference between the first tranche and the second tranche, though, is that there's no comparison on the national accounts front or “global corporate services,” as it's often known.

So you've got the top tranche with lots of intra-network business. You've got the second tranche where there's been collections of powerful brokers in different markets. And then you've got the third tranche, which is either standalone firms or the small regional firms that oftentimes are like boutiques, actually. So you've got three different tranches in terms of the service providers. That's one way of thinking about sort of the fragmented industry. 

I think the second thing that we continue to struggle with as an industry is this average age question. I've talked about this before in the sense that we've got a very Baby Boomer oriented sales force. As those Baby Boomers choose to age out (and they may age out quicker if they're induced to do so, either because there are opportunities for them to enjoy the wealth they've created or they get chased by a pandemic), there's going to be a pretty radical demographic shift.

Finally, as we are now seeing, the onset of technology is really pounding down the door. To this end, we have seen the rise of Michael Beckerman's organization, CRETech, which has thousands of people attending tech conferences. We hear speakers detail the millions, almost billions of dollars, that are being invested in technology for the purpose of making the commercial real estate arena either more transparent, more efficient, or more data rich. A lot of that has not been done over the last several years.

In summary, we've got a pretty interesting thing going on here. Demographic change is at play. We've got technologies at play, if you will. And because we have these three large, 100-year old players, all of whom are big enough to be candidates to merge or to be acquired by another consulting firm. In Adapt, I offer the premise that they could be acquired by someone like Amazon. Amazon can effectively do whatever it wants. It owns a lot of real estate. It might acquire one of these big players for the purposes of servicing their real estate. So we're in an industry that is just trembling with change, in my opinion.

Visit HBS-Resources.com to buy your copy of Adapt and Thrive.

Blaine Strickland is a 40-year veteran of the commercial real estate industry. He’s held leadership positions in national companies and companies he started himself. He’s worked as a producer, manager, broker, consultant, coach and instructor. He’s raised money for his projects through both debt and equity sources. Blaine’s vast experiences, along with his thirst to learn, enables him to bring a broad perspective to the issues he addresses. Connect with Blaine here on LinkedIn and visit his website for resources, webinars, and to sign up for his newsletter. Think coaching can help? Take the assessment.