IAN'S PREDICTIONS FOR THE REAL ESTATE INDUSTRY

IAN'S PREDICTIONS

It's time to say high again and to keep you up to date with what I've been doing and with some of my thoughts about the real estate industry, now I've had a bit of a national sample.

It's been incredibly fascinating travelling around the country working with some dynamic business owners and their sales teams. Throughout New Zealand there are some fascinating strategies being implemented to gain that elusive competitive advantage.

The most notable is the move to drop the costly strategy of "bums on seats" to get market share. The new entreprenurial operators have quickly realised the huge cost of lost opportunity, marketing and space provision for people who are simply not productive. Rather there is a move to greater individual productivity through close management, coaching, accountability and by recruiting your best people away from you. That also implies a new recruitment strategy, but more of that later.

There is also a move away from letting sales consultants have their own personal assistants. These operators see the need to control both the quality and quantity of what leaves their offices. So they are seeking to reduce payouts to sales consultants, to improve internal systems, to provide positive and innovative work environments and to ensure sales consultants are not tied up with paper and administration. This means more support personnel but the sales consultants are free to focus on productive tasks and the business owner has control of what's going on.

In some towns the market share is being captured by independent entrepreneurs. They know their destiny is their hands and they are acting accordingly. It appears they see a danger in abdicating the responsibility for the "latest idea" or the "success recipe" to any marketing or franchise group. These independents seem to possess an ability to change quickly and their internal culture reflects the need to challenge some of the industry's traditions. They lack the national brand power and networks of the national groups but they appear to make up for that with energy and passion.

Whether the law is changed or not I predict a drastic drop in the numbers of sales consultants over the next three years. This will come from 2 strategies. The one I mentioned earlier regarding more productive people in more managed environments. This will leave less business for those who persisit in the mediocre levels of much present individual productivity. The other is the change in how we recruit being brought about by two phenomena.

1 The traditional sources of recruits are drying up. Traditionally we recruited plenty to find a few good ones as there were plenty of people willing to give real estate a try. More about this in a later communique.

2 We will have to compete with other industries now to get the new breed of productive and skilled people. The people we need don't have real estate on their list of career options yet. It will take a change of recruitment strategy and perhaps method of remuneration to obtain these people.

Once they are on board and work at new levels of productivity that will simply not leave room for the traditional sales consultant.

In the meantime everyboby is trying to recruit everybody elses top people .

The average buyer and seller (aged 38) is generally more techno-literate than the average sales consutant (aged 52). This means the client may know more about what's on the market than the average sales consultant.
This gives the client the ability to eliminate contact with sales consultants for the purpose of sorting to a short list. This may avoid some contact totally and reduce the income of those sales consultants who still rely on leads from floor time and any remaining company paid advertising for property.

It's clear too that there will be more acquisitions and mergers with the beginnings of parallel branding already evident. This provides a scale of economy by reducing total overheads whilst increasing the gross fee pool. It has to watched though to ensure there is a continual growth in
sales consultants productivity and incomes otherwise the recruiting wheel will have to keep turning. There will also be more co-operation between companies rather than the tendency to compete with exclusion at all costs. Indeed there will be marketing (master list) or even local MLS groups appear as a strategy to replace competence on obtaining good stock.

I suspect too that there will be more closures and none of the groups will be insulated from this. The distiinctly average operators will simply be left too little business by those who adopt the competence/productive combination.

The challenge will be whether the national groups will replace their losses with the strong independent entrepreneurs or whether they will take the next cab off the rank. The other question is whether the strong independents will continue to grow their businesses on their own or whether they will see a value in belonging to a national franchise or marketing group. Could be a bidding war here.

There is also a rush to start new property management divisions. Perhaps the lessons of 1998 which showed the value of having other revenue streams have been remembered. However over the last 18 months the strong have built their propery manangement portfolios by acquisitions from those operators who needed the cash. This field will show increasing competition as the new entrants seek to make this aspect profitable and the strong operators use their marketing muscle to compete for additional business. Accordingly the value of property managements could rise.

So those are my thoughts for now.

I'm taking a break from the 3rd Sept until Friday 17th Sept because I'm getting married again on Sat Sept 4th. Yep Darrel and I are doing the right thing and we will be away for a couple of weeks somewhere warm.

Darrel finishes with Colliers Jardine this Friday and will be working with me in the business from the middle of Sept.

I'll be in touch as soon as we get back, but don't forget I'm here until the end of next week if you'd like a chat.

regards

IAN KEIGHTLEY