LeadingRE firms prepare to operate in real estate’s new environment
By Maria Patterson
RISMEDIA, January 8, 2009-Make no mistake, the real estate downturn has affected brokers across the board…from luxury firms to long-time independents alike. Who better to draw collective wisdom from, therefore, than Pam O’Connor, president and CEO of Leading Real Estate Companies of the World (LeadingRE). Representing nearly 700 independent firms with 5,500 offices and 170,000 associates, LeadingRE members collectively average 1.2 million transactions valued at over $370 billion annually. As we confront the challenges of 2009, O’Connor shares her advice and strategies for tackling the year ahead and preparing for the real estate market of tomorrow.
Maria Patterson: Generally speaking, how are today’s market conditions affecting LeadingRE companies?
Pam O’Connor: So far-knock wood-our members have fared relatively well. Our retention has been comparable to other years, and most of the consolidation that has occurred has been within our ranks; i.e., Howard Hanna purchasing Realty One. That said, virtually everyone is managing resources carefully, contracting where necessary, and right-sizing to ride out the remainder of this challenging market.
MP: What are the specific challenges in the upper end of the market?
PO: The uber-high end ($5 million-plus) had been fairly steady until September’s financial meltdown. Now, even those clients who have great wealth are assuming a wait-and-see posture until they see where the economy is headed. The “regular” high end has been flat or down-depending on the market-for some time and is worsening in the New York metro area as Wall Street jobs have been impacted.
MP: What are some of the most effective cost-cutting/budgeting strategies brokers are employing to safeguard revenue?
PO: Reducing brick-and-mortar by closing/consolidating offices or moving to less expensive space with fewer offices and more common work/conference areas, trimming staff or job-sharing with part-time office staff, renegotiating equipment leases, eliminating phone lines and telephone hardware-since most associates use cell phones even when in the office-reducing travel, and generally managing every line item.
MP: What role should brokers play with their agents now?
PO: Reaching out to them when they don’t come into the office, making them feel significant, coaching them on what to do and how to do it so they have a plan and a sense of purpose, and holding them accountable, since doing those things will ultimately produce results.
MP: How involved do they need to be in their agents’ day-to-day activities and in their handling of clients?
PO: Today’s environment requires more hands-on management support, but this effort needs to be with the associates who are committed. Now is the time to lose the bottom quartile of associates who probably do not have the desire and talent to succeed in this business long term.
MP: How should brokers adjust their messaging to connect with today’s wary consumers?
PO: By giving them the facts and not allowing the sound-bite media to define the conversation. For buyers, associates should have a buyer’s presentation showing local sales and pricing trends, housing market data and opinions from third-party sources like PMI, Global Insight, OFHEO, and even some business media sources, and showing the impact of waiting to act…price vs. interest rates. For sellers, brokers and associates have an obligation to be candid about true value and the cost of not pricing to the current market…a wide spread between listing and sales prices is a huge red flag.
MP: How can brokers truly differentiate their firms and genuinely stand out from the competition?
PO: The best way is with their people…by being selective in their recruiting and proactive in their “de-cruiting” when necessary, so that their brand is synonymous with “experts.” Brokers can help make the home-buying/selling process as user-friendly as possible with various tools and programs, but it is ultimately up to their associates to use those resources on behalf of clients.
MP: What approach should brokers be taking to marketing and advertising in today’s economy?
PO: They need to measure every bit of advertising and marketing to see what works and what doesn’t. The migration from offline to online should be accelerated, given all the data. That doesn’t mean print goes away, but it should be more brand-oriented and strategic; i.e., institutional rather than classified, designed to drive Web traffic, longer shelf life, targeted to specific audiences, etc.
MP: How can they save money without diminishing their presence in the marketplace?
PO: Yard signs continue to be the best barometer of offline market presence, and there are many strategies for reducing print advertising spend without compromising visibility, while making the company’s Web presence, search engine rankings, and social networking presence much more compelling at a substantially reduced cost over traditional print. For example, a property ad can be placed by our members in our Luxury Portfolio full-page Wall Street Journal ads for under $200 because of the way we have leveraged our advertising dollars.
MP: Are acquisitions always out of the question?
PO: No, but values will have to be realistic, and acquirers will have to be more conscious of how cultures mesh and how assets complement, rather than being comfortable with a certain amount of “breakage.”
MP: When are mergers a smart strategy?
PO: True “mergers” are mostly a misnomer since there are usually buyer/seller roles, regardless of how the transaction is presented. Regardless of semantics, putting two companies together hinges on whether the contributions of each are greater than the sum of the parts (i.e., leadership, technology, market share or specialization, brand/reputation, geographic coverage) and whether the cultures and core philosophies are compatible.
MP: Looking into your crystal ball, when will the market begin to trend upward again?
PO: Before mid-September (2008), I would have said Q2 2009, but there are so many unknowns now, due to recent events, that it’s hard to say. There is pent-up demand, so if credit is available to qualified borrowers and affordability continues to improve, unit sales will increase in 2009, but the real key is employment. I think we’re in for at least two or three more quarters with rising unemployment, and when people don’t have jobs, they don’t buy houses.
MP: Even once we’ve recovered, has the real estate landscape changed for good?
PO: I hope so! As great as the boom was, it fed a lot of excesses and an “order-taker” mentality. Just as restructuring and changing the culture of the auto industry is essential to its long-term health, I believe that a different mindset in real estate-a flight to quality and productivity, a smaller but more select industry, a redeployment of resources on people and programs rather than brick and mortar-will only be good for consumers and real estate professionals in the long run. RE
For more information, visit www.leadingre.com.
