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Affiliations offer brand recognition

Local brokers and national executives agree, affiliation with companies such as CB Richard Ellis, Coldwell Banker Commercial and Grubb & Ellis give firms instant name recognition

republished from Midwest Real Estate News

Staff Writer REJournals.com

By Jeff Beals

As local real estate firms consider the pros and cons of affiliating with national companies or networks, the decision often comes down to name recognition.

"When individual companies affiliate with a national firm, they hook up their strong local name with a safe-choice brand, a name that consumers across the country know and believe in," says Jerry Anderson, president of Coldwell Banker Commercial "People will recognize our brand more than some local name."

Peter Krombach, president of Grubb & Ellis Krombach Partners in St. Louis, agrees that name recognition is one of the key benefits of a national affiliation. "Name recognition is definitely a factor especially with corporate real estate directors," he says. "Before we were Grubb & Ellis, we were prominent in St. Louis, but we wanted to become more national."

Like other industries, commercial real estate is going global. Phil Royster, executive vice president and national managing director for Grubb & Ellis Affiliates, says clients' needs often encourage local companies to affiliate nationally. "If your major clients are pushing for more national service, it makes sense to affiliate," he says.

Royster says many investors own real estate in different parts of the country and feel more comfortable knowing their broker has offices in various cities.

"Our affiliates tell us that when they call outside their own market, they don't have to explain who they are," Royster says. "Their phone calls get returned, because they have instant legitimacy. Can independents match this? Most can't."

In addition, local firms have other motives for joining the nationals.

"Anybody who pays a fee to join a national brand expects to get more out of it than just name recognition," Anderson says. "Our corporate office gives out a thousand referrals a year to affiliates."

For Trenton B. Magid, president of Coldwell Banker Commercial World Group in Omaha, Nebraska, affiliation was a path to growth. Since joining Coldwell Banker Commercial in April 2002, Magid's company has expanded both its brokerage and property management departments. "We have already benefited directly from our national affiliation," he says. "We now handle 15 office properties throughout Nebraska for an out-of-state investor, thanks to a referral from another Coldwell Banker affiliate."

Andy Farbman, President of NAI Farbman in Detroit, has been affiliated with New America International for 15 years. Farbman appreciates the access to research data and the advice he gets from his international network. "If I have a 1031 buyer who needs to know about a given property in another city," he says, "I can have detailed information for him within minutes."

Nationals provide a wide range of resources to affiliates such as training, software, marketing support, appraisals and assistance in recruiting new agents. By joining a national organization, affiliates have access to tools they might not be able to afford on their own.

Anderson says Coldwell Banker Commercial provides affiliates with programs such as REIS, CoStar, REA and LoopNet for a fraction of what they would have to pay on their own. The company provides "Instant Client Access," a proprietary, client-management software program free of charge.

While national real estate firms tend to provide similar products and services to their affiliates, their corporate structures and strategies differ.

Both CB Richard Ellis and Grubb & Ellis originally focused on corporate-owned offices in major cities, but are now opening affiliate offices. Neither company franchises, instead opting to "license" local companies.

Royster, who has been in charge of Grubb & Ellis' affiliate program since its inception, says the company decided to add affiliates as a way to enter secondary and tertiary markets. Grubb & Ellis has 46 corporate-owned offices and 47 affiliate offices. In the Midwest, corporate owned offices are in Chicago, Detroit, Cleveland and Minneapolis. All others are affiliates. Grubb & Ellis affiliates pay a flat fee based on the size of their metropolitan area.

CB Richard Ellis' partner firms also tend to be located in smaller markets, where the national company might not want to invest the resources necessary for a corporate office, according to John Strockis, managing director. Instead, the company finds a strong local firm interested in establishing a larger presence. Of the 250 CB Richard Ellis offices worldwide, only 30 are partner offices. The others are corporate owned.

Coldwell Banker Commercial has taken a different approach to building its system of 325 locally owned franchises. Because many national real estate firms were so entrenched in the largest U.S. markets, when Coldwell Banker Commercial began its resurgence a few years ago, Anderson says the company focused on smaller markets first.

"We did a test in 1995," Anderson says. "The goal was to identify strong local companies in smaller markets and turn them into national players. The plan was very successful, so we expanded throughout the country. Now many other companies are doing the same thing."

As national affiliation becomes more common, local companies are positioning themselves in front of the nationals, who are competing with one another to acquire the strongest local firms in each market. The national firms, however, are selective. Strockis says CB Richard Ellis is only interested in taking the premier firm in any given market. "We do some recruiting of local affiliates," he says, "but we're careful who we take."

When recruiting new affiliates Royster says he looks for strong local brokerages with which his company has had past relationships. "The local companies need to mirror us," he says. "They should have a client focus, practice specialties and do both tenant and landlord work."

Krombach says he examined Grubb & Ellis' national platform before deciding to affiliate. "It's expensive to convert to a national system, so you should research exactly what will be required of you."