President of REAL Trends, Steve Murray, and Chief Foreign Correspondent, Peter Gilmour meet to discuss the growth of real estate brand globalization. Peter’s career is an illustrious one. He was chairman and co-founder of Remax of South Africa, which is the largest residential brokerage company in that country. Prior to that, he spent many years as the senior VP of international franchising for Remax International, in Denver, Colorado. Peter has over 40 years of experience in the residential real estate industry, both in the U.S and South Africa.
If you would rather listen to the discussion click the audio player below.
There’s been a lot of news over the last 10 or 15 years about the growth of Remax, Century 21, Keller-Williams, into global markets. What have you observed in your years in the business, has happened?
I think the last 10 years has seen tremendous growth of North American brands throughout the world. Franchising, master franchising internationally is not an easy thing, because countries differ widely in the way real estate is done, in the sophistication of real estate, and just also the cultural practices. So it is something that has to be focused on, and a number of companies are doing extremely well internationally, particularly Century 21 and Remax, who are the leaders in global expansion.
And I believe that a lot has been learned over the last ten years, and that this will just increase in the next five years, as globalization continues. So the world is getting smaller, and international movement is getting greater, and international referrals will become more and more important, as brands grow globally.
I read somewhere doing some research that estimates the number US real estate brands overseas are somewhere on the order of 10,000 to 12,000 offices now, globally.
Well, that’s correct, and that’s a tremendous amount of offices. Certainly, Century 21 with more than 70 countries, and Remax with over 100 countries lead the pack. But Coldwell Banker with more than 50 countries and ERA with more than 25, have been international operators for many, many years. And ERA particularly, are very strong in the Asia-Pacific area and doing extremely well. Keller-Williams is advancing rapidly, certainly over the last three to five years, and are now represented in more than 30 countries, and growing rapidly. And I see that that will continue.
But as always, duplicating the culture of a company is the most important thing to maintain the company culture, and the companies that succeed in doing that are the ones that are really going to impact the international growth.
In terms of one of the last questions on US brands before we shift to others, I guess we could say there are two basic ways for companies to approach this. One is to set up franchising operations and sell franchises direct to brokers, but I think many have sold what we call master franchises, sometimes an entire country, to local owner-operators, who know the culture and the people and the way business is done.
Have you seen one approach over the other that has succeeded better than the other?
Well certainly master franchising, in my opinion, is by far the most successful way to go. You do need local operators. A lot of the countries around the world are very, as we have spoken about, unsophisticated from a real estate point of view, with very few multiple listing services. Some countries even are very low on licensing and compliance, so you really do need a local operator. You need somebody that understands the local market, and that has got great ability because in growing the brand you need to build the trust. And a local operator who has been successful and has got the trust of the realtors on a local level is somebody that is going to take that particular brand forward.
And most of the companies that you have spoken about exactly in that position, selling master franchises on a country basis, perhaps sub-franchising regions in the larger countries like Brazil, India, China. There’s an opportunity to sell sub-regions because of the greater population in those countries. But running individual offices from North America is not really an option.
Peter, you’ve had a lot of experience in this. You know, from time to time it can be said that American companies, and I’m sure other times, Russian companies or German companies aren’t looked upon all that favorably when they’re in Africa or South America or Asia. Have you noticed any resistance to the fact that most of the dominant global residential brands are American-based? Has that caused any real resistance or reluctance for local owner-operators to be involved?
Well, we see this in a lot of countries, Steve. There is initially some resistance, but it’s very important for the local operator to localize the brand. So certainly I know within our country, and I know within other first world and third world countries, the importance is taking a brand which is not necessarily North American, but international, and localizing it. So you still have the brand recognition on an international basis, but it’s a local company run by local individuals with local advertising and obviously language, et cetera, which is one of the big challenges for North American companies because most of their material is in English.
But most of the companies we’ve mentioned have overcome that, and the local people are able to bring it down to a local language and cultural level. And their success in doing that will dictate their growth, and we’ve seen some countries grow extremely quickly, others a lot slower. But it’s up to the local operator and to the franchiser to assist in whatever way possible to overcome the impact of being based in North America.
Last question about this, then I’m going to ask you about global brands based or headquartered overseas, or in different countries.
So in South Africa, you built a couple hundred Remax offices across the country. What I’ve learned is in many other countries, the thing in the US and Canada we call cooperation, is not a long-term inherent trait of brokers within other countries. Do you see lastly that, are these, you have local operators that culturize the brand to that area? Do they bring or attempt to bring some American practices in terms of different Remax offices in Germany, South Africa or Australia, that do cooperate with each other where they might not have in the past?
We certainly find that, and there are certain influences, a lot from a tech point of view, where we are getting lots of input from the United States. Things like distressed properties, going back a number of years, was some tremendous input from the United States, the original franchises. And we see that cooperation is growing, yes, you’re exactly right. Industries outside of North America are very fragmented because of the lack of multiple listing services.
So our operation is something which is not inherent in real estate, and brands tend to bring a culture of team together. We’re able to encourage real estate officers and agents to work very much closer together. And when the agents and brokers come to the US for national conventions, international conventions, they see what the benefits are and they listen to their compatriots, and it has certainly made an impact in many countries across the world.
Let’s now talk about brands that are based in Europe or Asia. What can you tell us they’re up to these days? We have seen, the ones I have noticed of course are Harcourts has come into the US, Engel & Völkers obviously has some presence. Purple Bricks, the discount firm recently landed from the UK and landed in Southern California. What can you tell us about these companies, and what do you think their challenge is, hitting the US or Canadian markets?
Well, we see a number of international companies that are growing. Certainly, the leading brand I think is the Sotheby’s brand which is in over 60 countries right now. But you have others, as you’ve mentioned, Harcourts, who are mainly based in Australia, New Zealand, South Africa and then China, Indonesia, but also represented in USA and Canada. Knight Frank who are in 60 countries around the world with 400 offices, Savills in 60 countries with over 700 offices, and companies like Christie’s, in more than 40 countries, but only 100 offices.
Engel & Völkers is out of Europe, they’re in 38 countries with 600 offices. So a lot of them have been very successful in moving their brand into many countries, but also on a master franchising basis, where local operators are involved and very much dominant in driving that particular brand forward.
Some of them are very particular, and look to take only certain offices and certain independents, what’s in their country, so it’s not as if they are perhaps as extensive as the master franchising model that we have with North American based companies. But certainly are dominant, and can offer great services, particularly the companies coming out of Brooklyn to countries like South Africa, Australia, New Zealand and the previously colonial countries.
I think some of the numbers you just told us about, I’m not sure people in the US know how very strong and well distributed some of these franchisers are. I didn’t realize that Savills had that kind of penetration. We don’t see them much in the US, but it sounds like they are extensive throughout the rest of the world.
They’re very dominant and take a position in most of the luxury markets, and have a very good marketing engine that promotes luxury brands in many countries.
And they’re still growing, and so what it also tells us is they already have also a very strong network in other countries, and yet for some of them we don’t see them much here yet. Do you think that’s going to change?
That may well change. And as you correctly say, there is competition for the North American brands, not just from brands in North America but brands around the world who are all competing for the top 20 percent of the real estate industry in many countries.
Do you see similarities in people like Harcourts and Saville and Knight Frank, do you see them offering many of the same services, marketing, and technology, education as the US-based brands do?
Certainly, marketing is very much up there. Technology is up there. And they’re offering some excellent services to their officers around the world. And a company like Knight Frank, for instance, is very strong in research and international property research. And that’s of great value to their offices around the world, because they have a dominant research engine in their head office that looks at property trends and that does ratings of property markets around the world. And that’s a tremendous service for them and their affiliates.