In the business of brokering commercial real estate, a time-tested adage holds: “All real estate is local.” In other words, if you’re trying to lease office space in Minneapolis, why in the world would you talk to a guy in New York?
But the real estate business is changing amid continuing consolidation with a handful of large, global-reach companies dominating the industry. In May, New York-based Cushman & Wakefield and Chicago-based DTZ announced plans to merge, creating a company with revenue of more than $5.5 billion, 43,000 employees and 4 billion square feet of commercial space under management.
But Minnesota is a unique case: Bloomington-based Cushman & Wakefield/NorthMarq is not a corporate office of Cushman & Wakefield, but a one-of-a-kind joint venture that will remain in place after the larger deal closes.
Veteran local brokers have seen the decks shuffled and reshuffled many times over the years, as commercial real estate firms combine, split and change affiliations. But every round of consolidation seems to inspire some entrepreneurial-minded brokers to start new firms. Although the big companies seem to keep getting bigger, there are still plenty of boutique shops—and sole proprietors—catering to both local and national tenants.
Jim Damiani has been working in the Twin Cities real estate business since 1987. But today he’s got a big name behind him as one of the brokers with the local office of Seattle-based Colliers International, one of the largest companies in the industry.
“Just from my standpoint, I love where we’re at now because we have all the national and global resources,” says Damiani, senior vice president with Colliers International, of the company’s deep research and networking resources. “All of those things, I think, make me a better advisor to my clients. I can just be smarter about the market.”
Damiani is active nationally in a group of 60 Colliers brokers from around the U.S. who meet regularly to trade notes on industry trends and best practices. His national connections have led to local work. Through the Colliers office in Kansas City, Damiani landed an assignment working with Hallmark Cards on a lease renewal and expansion deal for its two small offices in downtown Minneapolis.
Damiani draws important lessons from case studies in other markets around the country that can help his clients locally.
“In some of these markets where the rents are so astronomically high, like Silicon Valley, what are tenants doing about that?” says Damiani. “It’s not just about the real estate. You all have a unique culture. I want to find the real estate that enhances that culture.”
The three largest local players are Cushman & Wakefield/NorthMarq and the local office of Colliers International, which each have about 80 brokers, and the Twin Cities office of Los Angeles-based CBRE Group Inc., which has 75 brokers locally.
Paul Donovan, executive director of Cushman & Wakefield/NorthMarq, says that today a real estate broker is increasingly serving more as a business advisor to clients.
“I believe that it’s really moving away from brokers and more into advisors. That’s what clients are looking for today,” says Donovan. “What is your client’s business objective? Today clients are wondering ‘How do I attract and retain talent? How do I get more people into less square footage?’ ”
Donovan says that with Cushman & Wakefield/NorthMarq he has the advantage of being able to tap a broad network of national research and expertise.
“Real estate still is certainly very local, so you need to have good people on the street, no matter what market you’re working in. We get to merge best practices from across the country,” says Donovan. “I think our clients are very focused on metrics: ‘What’s my cost per square foot? Per employee?’ They want to drive efficiencies through real estate.”
But even in the shadow of the large firms, there’s still room for new companies to hang out a shingle.
In March, Toronto-based Avison Young opened an office in Minneapolis, its 44th U.S. office. The new local office is led by Mark Evenson, who has 30 years of experience as a local broker. For his part, Evenson sees an opening between the big players and the boutiques.
“Our strategy is to remain a privately held company,” says Evenson, principal and managing director with Avison Young. “We’re all shareholders. We don’t have any external shareholders. We think that makes us more collaborative as an organization.”
“We’re never going to be as big as the Big Three,” Evenson says. “We’re hoping to carve out a niche somewhere in the middle.”
Minneapolis-based TaTonka Real Estate Advisors, which has seven brokers, does only tenant representation work. Co-founder Steve Chirhart notes that many of the larger real estate companies often find themselves with listings for a large number of buildings, all of which are competing to land the same tenants. From Chirhart’s perspective, that creates an inherent conflict.
“Sometimes you get so big that there isn’t the independence that some owners are looking for. There are so many conflicts,” says Chirhart. “Every other firm that continues to get larger continues to try to be everything to everybody.”
Similarly, Tom Hauschild recalls co-founding the Minneapolis-based Tegra Group in 1996. “As we looked at the industry, we thought the big Fortune 500 companies were well-served,” says Hauschild. Today the Tegra team of eight serves a client base of companies based in the Upper Midwest, which are not large enough to have their own in-house real estate department.
Over the last five to 10 years there has been accelerating consolidation in the brokerage business, says Hauschild. “What [clients] tell us is they aren’t hiring a company name, they’re hiring a person or a team: They want the best team or the expertise on their project,” says Hauschild.
Chirhart argues that the prospective broker trying to drum up new business with cold calls probably isn’t going to have much luck.
“This market is extremely competitive,” says Chirhart. “Most cold calls go unreturned today. It’s a local market and it’s a relationship business. It’s knowing the intricacies of the market. There is consolidation and yet there’s a lot of independents in this business.”
Burl Gilyard is the senior writer for TCB.