COMMERCIAL REAL ESTATE, ONCE a local business in which knowledge of traffic patterns on specific streetcorners could make or break a deal, has become a worldwide industry in which brokers may need to know what is happening in every corner of the globe.
To remain competitive in the growing international market, and to avoid spending a mint on air travel, U.S. brokers are creating or joining networks with overseas counterparts to share local expertise across continents.
Since the late 1980s, global expansion has been pursued by such Chicago-based brokerages as Bennett & Kahnweiler Inc. (B&K), Hiffman Shaffer Anderson Inc. (HSA) and Frain Camins & Swartchild (FC&S). Corporate clients that have used these firms for local, regional and national real estate service now have them handling international leasing and consulting needs through such networks.
Before 1985, B&K had no international business and few foreign resources, said Donald W. Schaumberger, B&K president. ”Today, international represents 5 percent of our volume and is projected to be 10 percent by 1998.
”We now virtually can handle any market anywhere in the world,” he said. ”It has become part of our daily routine to go beyond U.S. borders.”
Schaumberger explained, ”The 1990s business climate is marked by change, and nowhere is this more evident than in the commercial real estate industry. Corporations are downsizing, restructuring and seeking new ways of managing their real estate.
”At the same time, the democratization of Eastern Europe, unification of Germany and the emergence of a united European common market have opened a huge, untapped market for U.S. companies. And as more European companies come to the U.S., business in the `90s will flow both ways.”
To meet the broader needs of such clients as General Electric, Campbell Soup, Northrop, Baxter Healthcare Corp., AT&T and Ford, in 1985 B&K became a founding member of Colliers International Property Consultants. The commercial real estate consortium has 128 offices in 22 countries stretching across four continents. It manages 214 million square feet of space and annually generates more than $12 billion in value of transactions and services, according to Gregory J. Pacelli, B&K principal.
”Even though there is tremendous potential in Europe, all of us are still trying to sort it out,” Pacelli said, adding that Colliers just opened an office in Budapest. ”We`re engaged in a major fact-finding and informational effort. Eastern Europe, for example, is not even acquainted yet with the concept of property ownership.”
Hiffman Shaffer Anderson has been part of a worldwide consortium since 1988, when it became a member of the New America Network (NAN), made up of 140 independent commercial and industrial brokerage firms in 210 markets.
NAN BECAME THE FIRST U.S. REAL estate organization with an operation in Russia in May, when Moscapstroi/Westminster/New America in Moscow was accepted as a member. The firm is Russia`s first independent, full-service commercial real estate brokerage with a staff trained in Western real estate principles. ”This new office means our clients can have real estate assignments in Russia carried out by Russian brokers, while the client deals directly with HSA here,” explained Dennis J. Hiffman, HSA vice chairman.
In addition to its involvement with NAN, HSA this summer opened its own office in Hamburg ”to generate more business and get firsthand knowledge and contacts,” he said. ”We need to learn about problems unique to Europe, such as land titles and financing.”
Local expertise overseas is imperative for U.S. clients, stressed James L. Dieter, principal and head of the industrial brokerage groups for Frain Camins & Swartchild.
”Europe is different, and although our senior managers have spent time to get a grasp of that marketplace, European offices are essential,” Dieter said. ”The differences are far-reaching: architecture, compensation, exchange rates, leases, interior space regulations, parking, lack of sites outside central cities, even the nomenclature.
”Local insight is essential because cultural differences can trip up the uninitiated.”
FC&S has become a major international player since 1985, when it joined ONCOR International, a real estate consortium owned by 35 independent firms in 165 major markets in 16 countries. FC&S won all major performance awards at the 1992 ONCOR International sales meeting. Dieter recently was elected to its board of directors.
Overseas work has been Dieter`s primary responsibility for the past 18 months. He is negotiating eight deals with major corporations looking to acquire or dispose of real estate in the United Kingdom and Germany.
”U.S. corporations are on the verge of exploding on global business as exports become increasingly important,” Dieter said. ”These companies see their only real profit growth in the next 10 years coming from the European community. As their needs grow, so must our capability to serve them.”
Dieter cited client Federal Express, which needed office space in Cologne, Germany.
”Because they had been working with us around the U.S., Federal Express came to us, and we introduced them to ONCOR partners in Cologne for market information,” he explained. ”We helped to analyze the local data and then worked with the ONCOR partner on finalizing the deal.”
Like other brokerages with network links, FC&S services include leasing and sales, acquisition and disposition, financial services, tenant
representation, corporate facilities management, asset and property management and corporate and institutional consulting.
”And the advantage of networks is that they also bring European clients to the U.S., including Chicago,” Dieter added. ”Although Japanese investment in the U.S. has cooled somewhat, European investors are becoming more active.”
”Most U.S. corporate interest is in Western Europe, with West Germany of top interest to these firms,” according to James M. Swartchild Jr.
”Americans are in a wait-and-see posture toward Eastern Europe, although it`s the target of research for electronics and communications industries in particular,” he said. ”Both areas now are a disaster in those countries. There`s tremendous opportunity for cellular phone systems and computers.”
He said major environmental problems are emerging in Eastern Europe, and they pose additional opportunities for U.S. companies.
B&K`s David R. Kahnweiler says much of the U.S. brokerage activity in Europe to date has been more informational than transactional.
”Companies are still trying to understand business customs that change, not only by country, but by region within a country,” he said. ”This is the crucial value of a local network.”
Walter H. Zegers, B&K principal, has been especially active in the firm`s growing international real estate service.
”A lot more U.S.-based corporations are getting more involved in multinational joint ventures,” he said. ”Gerber Products, for example, is entering in joint ventures with established companies overseas or making acquisitions rather than starting from scratch in those markets.”
Zegers added, ”From a real estate services standpoint, the global economy is still in its infancy, but there is no question it will blossom.
”American firms have maximized the domestic market, and they now must look overseas for growth.”
