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Fight for Global Real Estate Market Share

The first generation of the international real estate franchise brands are being challenged by new innovative franchisors. In this article, international real estate expert, Bill Hunt and Keller Williams Worldwide President, Chris Heller, discuss the present and the future of real estate franchising.

While the European real estate markets are still fighting their way through the economic recession, characterised by decreasing number of sales, declining prices and the tightening of the credit market, and the majority of real estate agencies downsizing as a consequence, a few key players in the real estate industry are making moves that could change the face of global real estate.

The global financial crisis has certainly had a dampening effect on the expansion of the major residential international real estate brands in the United States, including RE/MAX and Realogy Corporation, the corporate conglomerate that owns Century 21 Real Estate, Coldwell Banker and ERA franchises. In the United States, each of these companies has experienced negative growth numbers in the associate count (Source: Real Trends, 2010).

Bill Hunt, an international franchise real estate expert with 40-years of experience in developing real estate franchise brands in China, New Zealand, Australia, Indonesia and Central/South America, and the author of the book “Memoirs of a Franchise Gypsy”, confirms their decline on the international markets as well: “Even the most pioneering of the real estate companies, Century 21, who entered Canada in 1975 and Japan in 1983; and RE/MAX, who began their international expansion into Canada in 1979 and outside of North America in 1995, have slowed their global expansion.”

It would seem that these, first generation, more traditional international real estate franchise brands are slowly being ousted by new models, such as Keller Williams Realty, which announced last year that it would begin seeking out franchise opportunities overseas. Smaller franchise brands are making a play on the global field as well, such as Intero, who are now established in the United States as well as Asia and the United Kingdom, or HomeSmart, who became international recently, when it sold its first franchise into China.

Hunt believes that the major real estate franchises are growing too complacent and are unable to deliver the marketing and technology tools that the next generation of real estate brokers and associates will need in order to compete, including Internet marketing and virtual support.

“Today’s buyers and sellers are Generations X and Y, and they are demanding to be communicated with on all new platforms – via email and social media outlets such as Facebook and Twitter. A big opportunity exists for a new generation of global franchisors who have built their franchise systems around technology using cloud computing, online education and virtual support. The companies that will flourish are those that focus on the business needs of the agents, instead of just delivering a brand name,” explains Hunt.

Hunt also predicts that future real estate franchisors will have fewer franchise offices and more productive agents at each location, due to increases in mobile and virtual technologies. According to Hunt, it’s a model that’s worked for the franchise titan, Keller Williams Realty. The Austin, Texas-based company, with more than 80,000 associates in 700 offices across the U.S. and Canada is now the second largest company in the United States and it is the only company to post overall growth in North America over the last five years, during which time its competitors have continued to contract.

“Our company is quite a bit different from the other major brands in the global real estate space,” says Chris Heller, President of Keller Williams Worldwide. “We always put training and education first and we have developed an extensive training curriculum that addresses every stage of a real estate agent’s career – from when they first start out in the business, to growing a team and leadership training.”

Another key component of the Keller Williams model is a philosophy that puts agents and brokers on the same side of the table and gives agents a stake in their brokers’ business by sharing the financial rewards. As the company expands worldwide, it plans to put in place a Growth Share fund, which will financially reward associates for helping grow the company.

When asked why Keller Williams has only recently started its international expansion, Heller replies: “Unlike the other U.S.-based brands who expanded early on in their development, we waited until we were at the peak of our growth momentum in North America. Now that we’re well on our way to becoming the largest franchise in North America, the timing is right.”

He adds: “We are not a franchise sales organisation, we are a business developing organisation, so we’re not just looking to sell franchises; we are looking to get into business with the right leaders and partners. We are willing to take the time to do it right and find the right people.”

Keller Williams Realty is betting that the combination of their globally-respected brand, coupled with proven models and systems, adapted and localised by strong local leadership will be the key to success.

However, according to Bill Hunt, only 70 to 80 percent of any foreign service/product offering will be relevant in each new country and a level of adaptation and localisation must occur for the brand to reach a dominant position.

Chris Heller also confirms this by saying: ”We are well aware that our systems and models, our training and education, need to be culturalised and customised and we plan to do that on country-by-country basis, in partnership with the local leadership, to ensure they are relevant and appropriate for the market.”

In times when international companies seem to have limited interest in European market as such, Keller Williams considers Europe as a key market with great potential. “At this point, we are closely following the situation in several European markets, Western, Central and Eastern Europe in particular. After the long period of real estate markets experiencing general slowdown in activity, we believe that the real estate business all over Europe will experience a strong up-cycle. We want to be ready for that moment and together with our local leaderships, seize the market,” says Heller.

He also believes that a downturn in the market presents more opportunity than any other. “In a downturn, agents and owners begin looking for a better way to do business – we know we can offer them just that with our tools, technology and marketing platform.”

With the global property sales being brisk again after two years of stagnation, according to various industry analyses, the opportunity is clear – interest rates which are at an all-time low and prices which are never going to be better indicate that the future of real estate is bright again. On the other hand, franchising as such, a proven model that in many countries represents more than 40 percent of all goods and services sold, according to the portal franchiseek.com, enables joining the large scale business. What remains to be seen is which real estate franchise company will eventually rise to global dominance.