Who survives, and how, in the business world of the 21st century? Globalization has made the world smaller but corporations bigger. People go everywhere, do business everywhere, take their businesses everywhere. Real estate firms travel to Hong Kong, to Paris, to Buenos Aires in search of international buyers. For us, like the denizens of so many other industries, this broader reach requires broader outreach: more marketing in more diverse locations, more trips taken by global agents and their support staff, more staff on the ground at home. At the same time agents have higher expectations: bigger ad budgets, bigger splits, bigger teams, bigger offices. As with so many industries before ours, this expansion of outreach and expectations drives an erosion of per capita agent profitability for the firms. In this environment consolidation becomes inevitable; smaller and less profitable companies must either merge or go under. And a new sort of firm, backed by venture money and focusing more on scale than sustainability, accelerates these changes as they build towards a profitable corporate sale rather than focusing primarily on creating a viable long term business.
While we will always be a business in which some agents function solo, small firms of twenty or thirty agents find competing in the current environment more and more challenging. Their agents want a sort of coverage which these smaller owners find increasingly hard to provide. As time passes, we see these firms being acquired by larger companies or gradually seeing their good agents picked off one by one. The same thing has happened with the financial industry over the last few decades: there are giant players and specialty players but not much in between. Increasingly our business looks the same way.
Warburg takes pride in being one of the specialty players, and even for us growth is essential. We grow as new neighborhoods are added to our luxury cachement area (latest hot ticket: Long Island City.) We grow because the constantly changing demographics of our city create new constituencies for our services every year. And we grow because in this ultra-competitive environment, staying the same is moving backwards.
For agents, this is both the best of times and the worst of times. Every month, hundreds of new agents graduate from real estate school, eager to make the big money they see on TV. From the outside our business appears easy, and top agents do make a terrific living. In fact, however, few of these new agents will succeed. Competition for listings is fiercer than ever, and new agents need great social skills, negotiating savvy, fluency with spreadsheets, good business judgment, and the confidence to sell themselves to prospective clients. Even with all that they will be competing against more experienced, or better connected, or more charismatic agents on every pitch they do and with every customer they meet.
The world around us moves faster all the time. In every industry, technology and changing client expectations are forcing an almost daily re-evaluation of corporate practices. The importance of a distinct identity matters more than ever, for both companies and individuals, in the noisy and crowded global marketplace.
While the fundamentals of what real estate agents do remain the same, the environment in which they do them evolves at an accelerating 21st century pace. Some agents, like top investment bankers, jump from ship to ship, as competing firms vie for their services with sweeter and sweeter deals. Others wait, like frogs in a gradually heating pot of water, shell shocked as their companies atomize around them.
In this environment, we have found that sticking to our core values makes the difference. Prospective recruits, buyers, and sellers know what we stand for regardless of how things change around us. Integrity and expertise never go out of style.
