The CEO of a local real estate giant has explained how the company will form strategic partnerships with other franchise groups to build scale on a level similar to that of Realogy in the US and Countrywide in the UK.
Speaking to Real Estate Business, LJ Hooker CEO Grant Harrod explained that the company’s recent decision to form a strategic partnership with the Barry Plant group was driven by a mutual interest in building a real estate business with scale.
“There is really no dominant group in the Australian marketplace like there is in the US and the UK,” Mr Harrod said. “Realogy in the US owns multiple brands, as does Countrywide in the UK.”
US-based Realogy is a listed real estate company that owns Century 21, Coldwell Banker, Sotheby’s International Reality, ZipRealty, The Corcoran Group and many others.
Countrywide PLC is the UK’s largest real estate group with a diversified offering including strong financial services units with mortgage and insurance services.
“The reality is that the market here is quite demographically defined now in terms of brands and brand offering,” Mr Harrod said.
“The days of a single brand being able to have massive market share are just not possible. Certainly we see the concept of a couple of brands coming together like what we have announced with Barry Plant as being strategically meaningful.”
On Thursday LJ Hooker announced that it had entered into a strategic partnership with Barry Plant. Collectively LJ Hooker and the Barry Plant group would account for 8.8 per cent national market share (sales volume) throughout Australia.
In the 12 months to November 2015, the two networks collectively sold $28.6 billion in real estate. They would be Australia’s largest property managers with a combined portfolio of more than 180,000 properties under management valued at $102.3 billion, equating to a market share of 13.8 per cent.
LJ Hooker and Barry Plant franchise owners attended a meeting last week to discuss the ability to continue operating as distinct brands while being able to enjoy competitive advantages resulting from the partnership. Such benefits would include collective buying power, cost efficiencies, business support services and cutting-edge technology, as well as training for franchise owners and their staff.
“Our objective from here is to now look at a range of initiatives that will provide our franchisees additional opportunities,” Mr Harrod said.
“When our people are in the lounge room of their vendors, our scale will deliver competitive advantages. It is about creating more opportunities for our people and our customers because we have the capacity now to collectively invest, whether it is in technology or additional resources for our agents or digital tools. Our collective scale will deliver incremental benefit to agents, agencies and consumers.”
The LJ Hooker boss confirmed that the group is currently in discussions with other networks with the aim of developing similar partnerships.
“We are very keen to emulate the Realogy model in the US,” Mr Harrod explained.
“They now have 20 per cent market share. I think the key thing here is being able to get to a sufficient size where you can invest, attract the best people to create services and capability which are probably just not possible to achieve when you are a smaller group.
“When you compare a group like Realogy with 20 per cent market share, Countrywide in the UK has about 18 per cent market share, Brookfields in Canada is up around 20 per cent. When you get to that size you are able to utilise your resources and capabilities far more effectively.”
Mr Harrod said the partnership with Barry Plant now puts the combined group “on par” with market leaders Ray White in terms of market share.
“They are in and around the high 8 per cent market. Certainly up there as one of the leading groups. LJ Hooker was a clear number two. I think what is more relevant is that when you look at who is number three or four it drops away very quickly,” he said.
“It is interesting that we have a real estate market that is still fragmented. When you look at other consumer markets, whether you look at retail or banking or travel, they are all equally mature markets but have developed strong market leadership positions.”
LJ Hooker has a close working relationship with former Countrywide chairman and CEO Grenville Turner, as well as the US-based Realogy group.
“We are drawing on our engagement with those groups because we genuinely believe that what they have accomplished in their markets is suitable for us, with some variations,” Mr Harrod said.
“We feel that ‘house of brands’ approach makes the most sense.”
[Related: Major real estate networks joins forces]