Do regional real estate service providers still have a future?

BY RAINER KUNDÖRFER

The necessary refurbishment of many existing properties still has not reached the possible or necessary dynamics. The number of expansive retail concepts has shrunk.

International and institutional investors, investment companies, and banks ask about track records and for international references when choosing partners to accompany them through still-booming real estate transaction processes. The administration and management of commercial real estate now requires extensive know-how and resource deployment for marketing, facility management, security issues, and many other functions—in sum, the tasks are becoming ever more complex.

The objective today is not to discuss the reasons for these developments but to wonder what this market situation means for the positioning of local and regional brokers and real estate services. The first points above of course shrink the portion of the pie available for brokers’ traditional space-renting business.

Having an internationally-active service provider to accompany real estate transactions is obviously an advantage. Its reputation; global network; extensive, centrally-maintained database; and other economies of scale provide the decision-makers in the institutional sector with an ostensibly safer choice. What can go wrong if a landlord or seller of a property entrusts it to one of the top international providers?

In managing shopping centers and retail parks, international providers are probably also ahead by a nose. The facility management benefits include size and volume advantages on service contracts and the centralized structure of legal departments. The latter have dealt with almost every problem already and can solve daily issues with ease. Individual operators can struggle even with routine issues. At first glance, then, everything seems pretty bleak for local specialists. How can we give them hope without denying reality?

Local service providers should take a look at their colleagues in local retail. Their market situation is similar. They, too, face headwinds and must compete against seemingly all-powerful international chains. Just like such merchants, local advisors and brokers have to rethink their processes and consistently comply with their customers’ needs. Their demands and concrete situation are the starting point for the services consultants offer.

Agents’ clear communication, combined with a unique exposition of their range of services and personal attention to customers may provide the necessary security. The service provider as a brand—a brand that delivers this security. These can be good arguments for trusting an expert on the regional scene even under the stringent conditions described above.

It also makes little sense for the niche players to provide standard products in a price war with the big players. As in retail, this is where differentiation is key. There needs to be flexibility to provide customers with customized solutions. These must be aligned with individual needs and not provided according to schematic generalizations. This is not to doubt or downplay the quality provided by the “big guys” but to draw attention to the slow reaction times of the large “battleships,” often caused by structural factors. Local service providers can score points here with flexibility and agility.

They are also not alone in the jungle of the international real estate market. No, local service providers have like-minded people with whom they can offer tailored services on a project basis even across country borders. As a colleague of mine says, “better a shared business than no business.”

Made-to-measure services and a balance between stakeholders, rather than rapidity, are the key factors in the current market. This will allow small, regional real estate service providers to remain competitive and make their benefits to customers plausible. Because just as in retail and everywhere else: The customer decides and his satisfaction is his measuring stick.

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