In South Florida, larger firms have been pursuing boutique firms in the area as a result of its strong growth in the commercial real estate market. According to National Real Estate Investor, mergers and acquisitions in the brokerage sector continue to occur, but with a more focused aim, and are not forecast to reach the high water marks seen in previous years.
Pike Rowley, principal and managing director of Avison Young Florida recently spoke at a keynote panel of the Realtors Commercial Alliance Miami Super Conference at the Biltmore Hotel in Coral Gable and said they are targeting such small firms. “These small owners want to chase institutional work but don’t have the size to do it. Now, the window is open and the time is right.” Other firms also remain bullish on the industry and in South Florida’s CRE market.
Thomson Reuters indicated that on real estate mergers and acquisitions, encompassing both residential and commercial firms of all sizes, that there was significant year-to-date drop-off compared to last year. In 2015, 52 deals totaling $4.0 billion occurred. In 2014, 74 mergers and acquisitions took place, totaling about $2.4 billion. Mergers and acquisitions in the sector peaked in 2006, with approximately 37 deals valued at $8.7 billion, according to Thomson Reuters.
“There’s no question that the rate of large-scale M&A has slowed down. However, this doesn’t mean that the era of commercial real estate mergers is over,” says Solomon Poretsky, vice president of organizational development with commercial real estate services firm SVN International Corp. “A steady undercurrent of small-scale M&As is continuing to happen. Independent brokerages, successful practices operating under a residential flag and the like are all realizing that aligning with a strong national or global brand is in their best interest.”
According to Josh Harris, Ph.D., director of the Dr. P. Phillips Institute for Research and Education in Real Estate at the University of Central Florida. smaller family firms are on the radar of big brokerage players and these companies are willing to pay substantial amounts for the smaller brands. “There may not be much left to do for big combination deals, but we could see a full-out war to get smaller family firms,” Josh Harris stated.
“These buyouts are an exit strategy for those who have built up their local real estate firms and are getting up in age. As part of the deal they often get to remain on the payroll of the company that bought them in a manager role. In this field it is expensive to train from new, so this also gives the buying firm the benefit of hiring experienced talent.”